Farmers behavioral intention to use formal credit a study in cantho city, vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- Pham Thanh An FARMER’S BEHAVIORAL INTENTION TO USE FORMAL CREDIT: A STUDY IN CANTHO CITY, VIETNAM... Th

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business -

Pham Thanh An

FARMERS’ BEHAVIORAL INTENTION

TO USE FORMAL CREDIT:

A STUDY IN CANTHO CITY, VIETNAM

Ho Chi Minh City – 2016

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Pham Thanh An

FARMER’S BEHAVIORAL INTENTION

TO USE FORMAL CREDIT:

A STUDY IN CANTHO CITY, VIETNAM

ACKNOWLEDGMENTS

Firstly, I would like to express my deepest appreciation to my supervisor Dr Tran Phuong Thao for her professional guidance, valuable advices, continuous encouragement, and support that made this thesis possible

I would like to extend deep senses of gratitude to Prof Nguyen Dinh Tho, Dr Tran Ha Minh Quan, and lecturers who have taught and transferred me valuable knowledge and experiences during my time taking Master of Business courses at International School

of Business, special thanks to all of my dear friends in Mbus4 class who gave me useful materials, responses and experiences to conduct this study

I would also like to express my grateful thanks to my associates, my friends, and my colleagues who participated in filling the questionnaires and/or helped send the questionnaires to the famers, and provided valuable information and comments for this study

Personally, I wish to express my deep gratitude to my colleagues and friends working

at State Bank of Vietnam, Cantho City; MBBank Cantho; Vietcombank Cantho; Sacombank Cantho; Eximbank Cantho; BIDV Cantho; Agribank Cantho

Ho Chi Minh City, Vietnam

ABSTRACT

Exploring motivation for accessing formal credit is increasingly receiving interest from researchers and practitioners However, few of their works have specifically investigated in the context of Vietnam on empirical basis This paper aims to empirically examine the determinants of farmer‟s behavioral intention towards using formal credit in Vietnam Drawing on Theory of Reasoned Action (TRA) model, this study suggests a modified TRA model associated with other constructs (i.e perceived service quality, and perceived value) Using a data set of 250 cases in a survey and multiple regressions, the analyses indicated that formal credit‟s usage is enabled substantially by perceived service quality and subjective norm following by perceived value and attitude The results imply that to facilitate the farmer‟s behavioral intention

to use formal credit, banking authorities and commercial banks need to continuously improve quality of lending service which focuses on simplifying procedures of approving and disbursing fund, and to consider educating the farmers and local associations the promotion of ease of use and usefulness of formal credit as well as its distinct advantages compared with informal credit or “black credit” The findings suggest several implications for leadership of commercial banks and banking authorities

Keywords: Formal credit, Theory of Reasoned Action (TRA), perceived service

quality, perceived value, behavioral intention

TABLE OF CONTENTS

ACKNOWLEDGMETS i

ABSTRACT ii

TABLE OF CONTENT iii

LIST OF FIGURES v

LIST OF TABLES vi

LIST OF ABBREVIATIONS vii

CHAPTER 1: INTRODUCTION 1

1.1 Research background 1

1.2 Research problem 3

1.3 Research objectives 5

1.4 Research scope 6

1.5 Research contribution 6

1.6 Research structure 7

CHAPTER 2: LITERATURE REVIEW 8

2.1 Foundational theory 8

2.2 Review on Behavioral intention 10

2.3 Hypotheses Development 12

2.3.1 Attitude 12

2.3.2 Subjective norm 13

2.3.3 Perceived service quality 14

2.3.4 Perceived value 15

2.4 Conceptual model 16

2.5 Chapter summary 17

CHAPTER 3: METHODOLOGY 18

3.1 Research process 18

3.2 Questionnaire design 19

3.3 Sampling method 22

3.4 Research method 22

3.4.1 Reliability measure (Cronbach‟s Alpha) 22

3.4.2 Validity measure by exploratory factor analysis 22

3.4.3 Multiple Regressions 23

3.5 Chapter summary 24

CHAPTER 4: DATA ANALYSIS 25

4.1 Respondent‟s demographics 25

4.2 Reliability Analysis 26

4.3 Exploratory factor analysis (EFA) 28

4.3.1 EFA for Independent constructs 28

4.3.2 EFA for Dependent variable 30

4.4 Multiple Regressions 30

4.4.1 Results of testing assumptions 31

4.4.2 Results of multiple regressions analysis 32

4.5 Discussion of research findings 35

4.6 Chapter summary 38

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 40

5.1 Conclusion 40

5.2 Implications 41

5.2.1 For bank‟s Managers 41

5.2.2 For government authorities 42

5.3 Recommendation for further studies 42

REFERENCE 44

APPENDICES 55

Appendix A: List of in-depth interview participants 1

Appendix B: In-depth interview‟s refinement measurement scale 2

Appendix C: Questionnaire (English Version) 3

Appendix D: Questionnaire (Vietnamese Version) 5

Appendix E: Descriptive statistics 7

Appendix F: Reliability test 9

Appendix G: Exploratory factors analysis 11

Appendix H: Regressions Results 13

LIST OF FIGURES

Figure 4 The research model tested by Multiple Regressions 35

LIST OF TABLES Table 2.1 Representative studies utilizing TRA and bank selection criteria 11

Table 4.3 KMO and Bartlett's Test of Independent variables 28

Table 4.4 Total variance explained of Independent variables 29

Table 4.6 KMO and Bartlett's Test of Dependent variable 30

Table 4.8 Total variance explained of Dependent variables 30

LIST OF ABBREVIATIONS

CHAPTER 1: INTRODUCTION 1.1 Research background

Vietnam‟s economy has been converting from a centrally planned economy to a market - oriented economy as from the Doi Moi policy being initiated in the late 1980s The policy resulted in a steady annually economic growth of 4.6% in the 1980s, 7.6% in the 1990s and 7% in 2008 (Duy, D‟Haese, Lemba, Hau & D‟Haese, 2012) For instance, the contribution of agriculture to total gross domestic production

on average at 3.68% per annum for the period of 1986 to 2014, of which growth rate

of farming, forestry and fishery production stably increase by 5.5% per annum within the same period (Ministry of Foreign Affairs, 2016) After 20 years since Doi Moi policy, agricultural production has been steadily grown, in which food production had

a significant rise since 1989 Yet, poverty levels remain relatively high in countryside areas, with the inequity in development between rural and urban regions still being large

Additionally, there is a wide gap in wealth between rich and poverty-stricken households Rural economies in Vietnam therefore deserve more attention and support, if rural poverty is to be contained (Scott & Brassard, 2005) Known as a country of high proportion of rural population, 66.9% of the peasant households of Vietnam live in rural areas mainly attached to farming (General Statistics Office of Vietnam, 2014) Peasant household, nevertheless, does farming business without right direction and with being in shortage of finance (Phan Huy Duong, Bui Duc Tung & Phan Anh, 2010) Credit, hence, is considered to be an essential resource to improve farm household welfare and production In rural development programs, the government uses credit programs in an attempt to provide the rural poor with access to cheap credit, in order to increase productivity, living standards Access to formal credit is considered to be an important tool for promoting production and quality of life (Duy et al., 2012)

Formal credit, which is also widely named as agricultural credit, rural credit, is generated from formal lenders (i.e commercial banks, cooperative banks) being institutions regulated by the government and operated within the regulatory framework of the financial systems while informal sources are money lenders,

pawnshops and family or friends (Campero & Kaiser, 2013) It is believed that informal credit is easy to access due to its convenience, quickness, widespread presence (i.e market, neighboring places) However, the government‟s failure to intervene agriculture credit led to the existence of informal lending activities in Vietnam, which is similar to many developing countries Informal credit exposes some features such as by far higher rate of interest than formal one which is usually verbally agreed, short lending period which is commonly agreed on monthly basis, and at the due date violence might be applied if the borrower fails to repay (State Bank of Vietnam [SBV], 2016) Lack of collateral, weak credit contract enforcement and underdevelopment of insurance service discourage bank creditors to serve this market (Ghosh, Mookherjee, & Ray, 2000) It is asymmetry information that formal financial institutions ruled peasant household out the access of formal credit (Hoff & Stiglitz, 1990)

Agricultural credit involves giving out of credit to small scale farmers for the purpose of farming (Oladeebo & Oladeebo, 2008) This was also argued by Muhongayire, Hitayezu, Mbatia and Mukoya-Wangia (2013) that farm credit enhances productivity and promotes standard of living by breaking vicious cycle of poverty of small scale farmers It is usually also considered as an essential input for increasing agricultural land and labor productivity, boosting food production and income levels, encouraging employment and alleviating rural poverty

Generally, farm credit is provided for relief of distress and for purchasing productivity-enhancing inputs such as seeds, fertilizers, and farm implements The importance of credit for rural development is even more pronounced for developing countries with largely subsistence farming systems According to World Bank (2014), number of adults in Vietnam owning bank account and using financial services is rather moderate, approximately 31% compared to world average number at 62% While agriculture contributes significantly to the country‟s economic growth, the sector continues to be characterized by very low levels of input use Currently the supply of formal credit to agriculture sector is sharply increasing of that many institutions get involved in providing formal credit other commercial banks, and the agricultural credit balance has been growing dramatically (Nguyen & Nguyen, 2011)

Further, KPMG (2013) indicated that corporate lending is the main activity of the banks in Vietnam and it accounts for almost half of total loans while only 28% are loans to individuals By contrast, informal credit in Vietnam has been increasingly growing, and reached an amount of US$ 50 billion equivalent to 30% of total lending balance provided by commercial banks (SBV, 2013) This implies that very few farmers in Vietnam in general and in Mekong Delta in particular actually accesses formal credit from commercial banks Thus, exploration of motivation for farmer‟s usage of formal credit instead of “black credit”, “cut-throats loans” (Lainez, 2014) is increasingly carried out by researchers and practioners

It is challenging for farmers to grow out of poverty without being provided with adequate and affordable financial services (Papias & Ganesan, 2010) Credit accomplishes this developmental task by enabling risk-averse smallholder farmers to overcome their liquidity problem and to make farm investments, particularly in improved farm technology and inputs that could lead to increased agricultural production (Fuentes, 1996) Thus, agricultural credit is very essential if economic growth is to be achieved in developing countries and emerging markets

1.2 Research Problem

Can Tho city is the primarily rice growing region of Vietnam In 2015, Cantho City transformed approximately 12,000ha of rice-growing land into aquaculture land, which increased average value of production per 1 ha at 153 million VND per annum much greater than other regions in Mekong Delta (Ministry of Agriculture and Rural Development, 2016) Yet, most of Vietnam‟s commercial banks seem to be not paid much attention to lend this segment of customers (Vietnam Farmer‟s Union, 2016)

As the result, there is no a specifically designed lending product for the farmers, and the existing lending procedures and processes failed to meet the real demand, even restraint the farmers from accessing the lending All of commercial banks with the intervention from the Government are carrying out lending package to this segment of customers, but the practical effectiveness of these credit promoting programs is still very limited

Consequently, 62.1% users of informal credit in Mekong Delta are farmers and family-sized businesses (Bui, 2016), there have been many credit delinquents resulted

from informal credit occurred over Vietnam in general and in Mekong Delta in particular In other words, the questions on rationales of farmers willing or reluctant to use formal credit and factors influencing their behavioral intention to access formal credit in Vietnam have received increasing concerns of researchers

Many prior studies on agricultural lending have been conducted with regard to the bank lending for farmers For example, Betubiza and Leatham (1995) indicated factors affecting commercial bank lending to agriculture, Oladeebo and Oladeebo (2008) conducted study on farmers‟ loan repayment, and Frangos, Fragkos, Sotiropoulos, Manolopoulos and Valvi (2012) indicated factors affecting customer‟s decision for taking out bank loans In Vietnam, most of the studies were conducted to investigate farmers‟ access to bank credit in Hai Duong province (Chau et al., 2012), rural credit market in the Mekong River Delta (Phan, 2012), household‟s accessibility

to formal credit in the suburb of Hanoi (Nguyen & Nguyen, 2011), formal and informal credit in four provinces of Vietnam (Barslun & Tarp, 2008), access to credit and borrowing behavior of rural households in a transition economy (Cuong, 2007), credit use in farm households (Marsh, MacAulay & Hung, 2004), intention of peasant household to apply loans in Nam Dinh province (Pham & Dong, 2013); factors affecting the access to formal credit in An Giang province (Tran & Huynh, 2013) Those studies in Vietnam, however, were not empirical analyses in Can Tho City and failed to indicate the rationales for farmers to use formal credit, which factors affecting their behavioral intention As such, to fulfill the gap in the context of Vietnam, this study aims to investigate the factors influencing the Vietnamese farmers‟ behavioral intention to access formal credit from commercial banks in Vietnam that is empirical evidence from Can Tho city in which demand of financing the farming activities is increasingly important

This study is about to adapt the modified TRA (theory of reasoned action) model, which includes two original constructs (i.e attitude, subjective norm) and two newly added constructs (i.e perceived service quality, perceived value), to find the positive effects on behavioral intention In literature, TRA model has been widely employed in testing (behavioral) intention to accept/use internet/mobile banking, financial service/product (Ismail, Azmin & Thurasamy, 2014; Amin, 2012; Amin,

Ghazali & Supinah, 2010; Nor, Shanab & Pearson, 2008) Additionally, for the sake

of managerial and marketing strategies, perceived service quality and perceived value have been widely used to test the acceptance of, to test the preference of customer/consumer in selecting a certain service/product, and to test the customer loyalty (Lien, Wen, Huang & Wu, 2015; Zameer, Tara, Kausar & Mohsin, 2014; Akdag & Zineldin, 2011; Yang & Peterson, 2004) Research on many service industries also suggests that perceived value plays a more important role than perceived quality in influencing customer satisfaction and loyalty (Shamdasani, Mukherjee & Malhotra, 2008) which drive to customer‟s behavioral intention Previous studies suggest that customers‟ positive behavioral intentions come from their satisfaction, while satisfaction is the result of good service quality (Ali, Leifu, YasirRafiq & Hassan, 2015; Alqasa & Balhareth, 2015; Ladhari & Ladhari, 2011; Abedniya & Zaeim, 2011) Thus, the concept of perceived value has been also proposed, which simultaneously combines the benefit and cost aspects to explain customer behavioral intentions (Monroe, 1991; Zeithaml, 1988)

1.3 Research Objectives

The overall objective of this study is to examine factors influencing the farmer‟s behavioral intention to use formal credit Specifically, four factors are considering in this study includes Attitude, Subjective norm, Perceived Service quality, and Perceived Value affecting Behavioral Intention of farmers in Can Tho city, Vietnam Specifically, four questions are given as follow:

Question 1: whether does attitude affect the farmer‟s intention to use in CanTho city? If yes, how is the effect?

Question 2: whether does subjective norm affect the farmer‟s intention to use in CanTho city? If yes, how is the effect?

Question 3: whether does Perceived Service quality affect the farmer‟s intention

to use in CanTho city? If yes, how is the effect?

Question 4: whether does Perceived Value affect the farmer‟s intention to use in CanTho city? If yes, how is the effect?

Results from the study are expected to show the subsidized credit that penetrates rural farm households in Can Tho City, which is considered to be one of the key agricultural regions in Vietnam

1.4 Research scope

Can Tho City, located in the Centre of the Mekong Delta, is a city directly under the Central authorities It is known as “the capital city of the Southwestern Vietnam” more than one hundred years ago (Vietnam Trade Promotion Agency, 2015) Can Tho city has advantages concerning agriculture and aquatic products, as well as in geographical position that helps the city develop in areas such as urban infrastructure, traffic infrastructure, hi-tech agriculture, agricultural–aquatic products and the seafood processing, tourism and supportive industries

The formal credit provided by formal financial institutions mentioned in this study

is within the extent of licensed banks (i.e both state-owned banks and private commercial banks, cooperative bank) As such, for the purpose of convenient sampling, this study focuses on the farmers who live in Can Tho City and who are borrowers and (would-be) borrowers of banks (i.e Vietcombank, BIDV, Agribank, MBBank, Sacombank, Agribank, Kienlong Bank, PVCombank, Martimebank, Eximbank) are selected for this study

1.5 Research Contribution

Since the study is to fill the gap in literature associated with farmer‟s behavioral intention to use formal credit in the setting of Vietnam in which few empirical research on the same field were conducted The findings of this study, therefore, make

a few following contributions

Firstly, the TRA models were demonstrated its applicability to in predicting intention over the world, but only few TRA-based researches were conducted in the context of formal credit in Cantho, Vietnam Specially, the research model was built

up on the combination of two TRA constructs and two new constructs (i.e perceived service quality and perceived value) to evaluate farmer‟s behavioral intention, which has not ever investigated in acceptance of formal credit On the basis of the feedback from the respondents in Vietnam, the empirical evidence of this study will indicate

that the consumer intention can be significantly explained by the modified TRA As a result, this work is to demonstrate the validity and generalizability of TRA in the context of intention to use formal credit in Cantho, Vietnam This enriches extant researches on TRA and makes substantial contribution to the literature

Secondly, while previous studies were conducted in Cantho City and by Vietnamese researchers associated with the microfinance and/or rural credit, but exploring farmer‟s behavioral intention to use formal credit by using empirical data was just a few

Finally, as mentioned above informal credit accounts for around 30% of total lending balance, this study provides some managerial recommendations in order for the leadership of commercial banks to reduce this figure

1.6 Research structure

This study includes four chapters after chapter 1 Introduction, as below:

The first chapter introduces about background, research problems, research objectives, scope of research and research structures

The second chapter covers literature review of the previous research and shows hypotheses, as well as the conceptual model of the research

The third chapter presents the research process, sampling size, measurement scale, main survey, and data analysis method

The fourth chapter concentrates on preparation data, descriptive data, and assessment measurement scale hypotheses testing

The fifth chapter points out conclusion, implications, and directions for future research

CHAPTER 2: LITERATURE REVIEW

Chapter 1 introduced overview of research including research background, statement

of problem, research objectives, research scope, research contribution, and research structure The chapter 2 presents the TRA theory associated with farmer‟s behavioral intention to use formal credit, and the models testing the farmer‟s behavioral intention

to accept a certain financial products over the world Moreover, a conceptual model is built resulting from the hypotheses generating from extant literature, simultaneously, its constructs and relationship hypothesized among these constructs are also discussed

2.1 Foundational theory

Studies on credit borrowers‟ acceptance and use have been conducted extensively because bank credit have been in wide usage, and several models originated from different theoretical disciplines (i.e psychology, sociology and information systems) have been developed to explain the acceptance and usage There exist a rising number of literatures pertaining to the applicability of the TRA to bank marketing context, especially in the context of finance (Amin, 2012; Amin et al., 2010; Lada, Tanakinjal & Amin, 2009) The TRA is selected as foundational theory in this study because it receives rich empirical supports in behavioral intention This explains that the selection of the TRA is based on its parsimony and predictive power which makes it easy to apply in different context of study (i.e banking service, banking technology, online purchase)

First introduced by Fishbein and Ajzen (1975) in effort to found a relationship amongst beliefs, attitudes, intentions, and behavior (Taib, Ramayah & Razak, 2008), TRA asserts that attitude towards formal credit and subjective norm are the antecedents of performed behavior To gain deeper understanding of the factors influencing behavior, it is required to look into beliefs that individuals hold about themselves and their environment Therefore, beliefs are viewed as underlying a person‟s attitude and subjective norm, and ultimately determine the intention and behavior The TRA also leads to marketing strategies as formal credit subject to individual‟s attitude and social influence This implies one‟s attitude is appeared as an intrinsic force which generate favorable an outcome for adoption, whilst good subjective norm for formal credit will build better “environment” for individuals to

choose formal credit These behavioral psychology components have tendency to explain one‟s consumption for a particular product is largely sourced from his attitude and other people influence around him The research model stems from Fishbein and Ajzen (1975) model of TRA and is shown in Figure 2.1

Figure 2.1: TRA model

To better describe the intention to use financial services and/or products in banking sector, number of studies of which the TRA was modified to fit with the research context have been conducted by Zameer et al (2015), Taib et al., (2008), Ramayah and Suki (2006), Tarkiainen and Sundqvist (2005), Yuserrie, Noresma, and Ramayah (2004) The modification effort stems from the fact that TRA provides a general justification only of the determinants of non-information system (IS)

acceptance

In the settings of banking industry, the factors affecting a customer‟s bank

selection have received significant attention in recent years In this study, TRA model

is employed to predict intention to use bank credit because of its increasing applicability to marketing context in banking industry and rich empirical supports (Amin, 2013) The usage intention is the main dependent variable of the model, derived from the TRA which posits that behavioral intentions, rather than attitudes, are the main predictors of actual usage of bank credit amongst farmers

Vietnam‟s banking market faced increasingly fierce competition amongst commercial banks comprising of local and international banks This competition, coupled with market saturation and low Emerging markets in general and particularly Vietnam offers greater growth potential and have thus attracted the attention of internationalizing banks (Diallo, 2012) Historically, emerging markets were highly fragmented banking markets characterized by limited infrastructure of information

Behavioral beliefs and

evaluation of outcomes

Normative beliefs and

motivation to comply

Attitude toward behavior

Subjective norm

Behavioral intention

Actual behavior

technology, security, dichotomous consumer societies and a lack of regulation (Sternquist, 2007 as cited in Diallo, 2015)

However, as these countries have developed, local banks began to realize economies of scale in purchasing and operations, and modern banking systems and strategic approaches have emerged As the competition is becoming more intensive among the bank operators, it is becoming mandatory for them to monitor the awareness of customers based upon quality of services, and values received by its customer in return

Like the extant studies conducted in surrounding countries, this research, therefore, integrates other variables in which it is classified as a new “independent variables” namely “perceived value” and “perceived service quality” in addition to

“attitude”, “subjective norm” explaining “behavioral intention” Contrarily, the present study omits “actual behavior” and other two original external constructs of TRA This is essential since the study is interested to highlight the typical factors affecting famers‟ usage intention of bank credit only Thus, behavioral intention of TRA model is changed to “intention to use bank credit” This approach is similar to that of Chiu, Lin, and Tang (2005)

2.2 Review on behavioral intention

Behavioral intention is defined as “the degree to which a person has formulated conscious plans to perform or not perform some specified future behavior” (Warshaw

& Davis, 1985, p 214) Consistent to all models portraying from psychological theories, which argue that individual behavior is predictable and influenced by individual intention

Parasuraman, Zeithaml, and Berry (1994) and identified five dimensions of behavioral intentions: loyalty to the company, propensity to switch, willingness to pay more, external response to problem, and internal response to problem Studying the relative influence of service quality on the five behavioral intention dimensions, they found positive effects with loyalty to company and willingness to pay more, negative effects with propensity to switch and external response to problem, and non-significant effects with internal response to problem (Parasuraman et al., 1994)

Bloemer, De Ruyter, and Wetzels (1999) found different dimensions for behavioral intentions: repurchase intentions, word-of-mouth communication, price sensitivity, and complaining behavior They also found that relationships between

service quality and behavioral intentions had notable differences across industries

Behavioral intention may change owing to unforeseeable events or time intervals High service quality and a positive experience often lead to favorable behavioral intention toward the service provider, and to the customer willingly paying

a higher price (Hoch & Deighton, 1989) Furthermore, loyal customers are more likely

to recommend friends, relatives or other potential customers to a product/service by

acting as free word-of-mouth advertising agents (Shoemaker & Lewis, 1999)

It could be seen that studying behavioral intention to use service was widely studied across the world in a wide range of service

Table 2.1: Summary of the literature on behavioral intention

Lada et al (2009) Halal product TRA Malaysia Amin (2013) Credit card TRA Malaysia

Liu, Furrer, and

Sudharshan (2001)

studying the relationship between culture and behavioral intentions in a service quality context

United States, Asian countries

Alqasa1 and Balhareth

(2015) Financial service Yemen

Jen, Tu, and Lu (2011) Transportation

management

integrated framework from the attitudinal perspective

(2016)

Low-carbon economics Quadrifid graph model China Agudo-Peregrina,

Hernández-García, and

Pascual-Miguel (2014)

Electronic learning system TAM3 Spain Rho, Young-Choi, and

Lee (2014) Telemedicine TAM Korea

2.3 Hypotheses development

2.3.1 The effect of attitude on farmer’s behavioral intention to use formal credit

Attitude is referred as the evaluative effect of positive or negative feeling of individuals in performing a particular behavior (Fishbein & Ajzen, 1975) Attitude toward behavior reflects a person‟s beliefs that the behavior leads to certain outcomes and the person‟s evaluation of those outcomes, favorable or unfavorable The more positive the attitude, the stronger the behavioral intention and, ultimately, the higher the probability of a corresponding behavior should be Attitude toward using a particular system is a major determinant of the intention to use that system, which in turn generates the actual usage behavior The underlying premise is that individuals make decisions rationally and systematically on the basis of the information available

to them (Ajzen, 1991)

It is the extent to which a person likes or dislikes an object and a person‟s attitude toward a behavior is determined by the set of salient beliefs he holds about performing the behavior In order to predict attitude from beliefs, there are four steps First, we have to elicit a subject‟s salient beliefs then we need to measure how a subject evaluates the outcome of each salient belief Third, we measure the belief strength by asking a subject to indicate the likelihood that performing a behavior will result in a given outcome and lastly, to get the outcome by multiplying the product of each outcome evaluation by the corresponding beliefs strength to predict a subject‟s attitude In the present study context, the acceptance of bank credit is influenced by attitude toward the financing facility Pham Hong Manh and Dong Trung Chinh (2012) indicated that attitude has positively influence on intention to borrow loans by households in Nam Dinh province of Vietnam Taib et al (2008) found that there was

a significant relationship between “attitude” and “Musharakah Mutanaqisah” use, and Gopi and Ramayah (2007), in Malaysian setting; found that attitude was significantly associated with online trading system use

Ramayah and Suki (2006) who examined Master of Business Administration students‟ intention to use mobile personal computer (PC) by the use of convenience sampling, found that attitude was significantly related to behavioral intention Tarkiainen and Sundqvist (2005), on the other hand, asserted that consumers‟

intentions to buy organic food can be predicted with their attitude This means, attitude is a good driver to explain behavioral intention Correspondingly, the present study infers that attitude is considered as the key determinant influencing farmer‟s behavioral intention to use formal credit Hence the following hypothesis was proposed:

Hypothesis 1: Farmers‟ attitude positively associates with behavioral intention to

use formal credit

2.3.2 The effect of subjective norm on farmer’s behavioral intention to use formal credit

Subjective norm refers to the individual‟s perception of the likelihood that the potential referent group or individuals approve or disapprove of performing the given behavior (Fishbein & Ajzen, 1975) A subject‟s attitude can be predicted by multiplying the product of each normative belief by the subject‟s corresponding motivation to comply This subjective norm has been applied in different contexts ranging from technology adoption to non-technology adoption researches

Rouibah, Thurasamy, and May (2009) found that the subjective norm was the most significant factor that influenced intention to accept Internet banking In other words, the greater the subjective norm pressures the higher the intention to accept Internet banking Tarkiainen and Sundqvist (2005) asserted that consumers‟ intentions

to buy organic food can be predicted with their subjective norm Gopi and Ramayah (2007) found that subjective norm had a direct positive relationship towards behavioral intention to use internet stock trading Lada et al (2009) found that subjective norm was significantly related to halal products use among consumers in Labuan Taib, et al (2008) also found a significant relationship between subjective norm and Musharakah Mutanaqisah acceptance These studies, on the other hand, are

in line with Venkatesh and Davis (2000), Teo and Pok (2003) who reported a significant relationship between subjective norm and behavioral intention Correspondingly, this study infers that subjective norm is considered as the key determinant influencing farmer‟s behavioral intention to use formal credit Hence the following hypothesis was proposed:

Hypothesis 2: Farmers‟ subjective norm positively associates with behavioral

intention to use formal credit

2.3.3 The effect of perceived service quality on farmer’s behavioral intention to use formal credit

Perceived service quality is defined as a consumer‟s judgment or attitude pertaining to the overall excellence or superiority of a product or a service (Berry et al., 1988; Parasuraman el al., 1988; Zeithaml, 1988) The recent credit crises have affected the financial institutes globally Apart from the global credit crunch, the Vietnam‟s financial institutions and bank are going through a very challenging environment, where they need to secure and sustain their products and services by

gaining and retaining a greater number of clients to affirm their survival

In today‟s competitive economy, success of businesses is comprehensively dependent upon high-quality services Consequently it will result in high profitability, customer loyalty and goodwill of the companies (Ishaq, 2012) In the context of the service industry, perceived service quality has become one of the top issues, particularly in the dynamic and competitive marketing of the banking services Service quality is what sets a bank aside from its counterparts, where the services offered should go over the expectations of consumers (Gill, Flaschner & Shachar, 2006)

Quality of services is an essential element to increase customer satisfaction and

to measure consumer perception toward banking products and services Many studies have indicated that perceived value more accurately measures banking client‟s perceptions of service quality than service quality (Adil, 2013; Vanpariya, 2010) Accordingly, the perceived service quality is used in this study to measure the service quality perceptions of farmer‟s behavioral intention to use formal credit in Cantho City, Vietnam Several prior studies showed that poor services lead to bank switching (Garland, 2005) Specifically, Schmidt and Bergsiek (2009) reported that in the U.S., 40% of consumers switched banks owing to ineffective services Similarly, Allred and Addams (2000) also reported that 50% of their total respondents switched banks owing to issues regarding service The quality-intention to use products relationship has been investigated in literature, and quality was reported to antecede consumer‟s

behavioral intention (Gottlieb, Brown & Drennan, 2011) where positive perceptions of service quality was known to be related to service/product use via intention to use Contrastingly, negative perceptions of it lead to lack of intention to purchase service/product (Kouthouris & Alexandris, 2005) As such, the following hypothesis was proposed

Hypothesis 3: Perceived service quality positively associates with farmers‟

behavioral intention use formal credit

2.3.4 The effect of perceived value on farmer’s behavioral intention to use formal credit

Perceived value, as defined by Zeithaml (1988), is “the consumer‟s overall assessment of the utility of a product based on perceptions of what is received and what is given” (p.14) According to this definition, value is identified through four distinct meanings: value can mean (1) low price; (2) what a customer might desire in a product; (3) the quality that one obtains for the paid price; or (4) what a customer receives for what a customer gives In other words, perceived service value is a tradeoff of visitors‟ perceptions between what they, the visitors, give for the service they receive Perceived value has become an important criterion in the development of managerial strategies to create, communicate, and deliver value to the customer (Kotler & Keller, 2011) It is defined as the consumer‟s overall assessment of the utility of a product based on perceptions of what is received and what is given (Zeithaml, 1988), and also as recognizing the rationality of price in comparison with quality (Livesey & Lennon, 1978)

Perceived value is measured by assessing the spectrum of a consumer‟s experience (Sweeney & Soutar, 2001), and by measuring the discrepancy between actual cost and perceived benefit (Gallarza & Saura, 2006) It is the optimum transformer throughout an individual‟s consumption process and it plays an important role in the assessment of service quality, customer satisfaction, and behavioral intention (Dodds, Monroe & Grewal, 1991) More specifically, a high perceived value score indicates that a customer perceives a product or a service offered as providing good value for the money with relatively few detriments, while a low score indicates a deal is perceived as bad, with a low level of benefits and a high level of detriments

The value construct of perceived value has generally received relatively little attention

in the services marketing literature, especially in the service satisfaction literature Studies indicate that perceived value may either lead directly to the formation of feelings of overall satisfaction or may result in the formation of perceptions that a product or service‟s performance is different than expected, which can influence overall satisfaction feelings (McDougall & Levesque, 2000; Swait & Sweeney, 2000; Caruana & Fenech, 2005) Research on many service industries also suggests that perceived value plays a more important role than perceived quality in influencing customer satisfaction and loyalty (Shamdasani et al., 2008)

A number of studies on perceived value and overall satisfaction and intention have been conducted Zeithaml (1988) defines perceived value as the result of the comparison between perceived benefits and perceived sacrifices by the customer Similarly, Buzzell and Gale (1987) use the notion of trade-off to argue that perceived service value is a ratio between perceived total benefits received to perceived total sacrifices taking into consideration the available offerings and perceived cost In addition, the perceived value also helps to explain customer behavioral intentions (Choi et al., 2004; Cronin, Brady & Hult, 2000; Lapierre, Filiatrault & Chebat, 1999; Liu, Leach & Bernhardt, 2005) These studies also indicate that perceived value plays

a very important role in determining customer behavioral intentions This may be because perceived value is a concept which simultaneously integrates customers‟ perception of benefits and costs (Monroe, 1991; Zeithaml, 1988), while satisfaction research only focuses on the benefit aspect Therefore, the following hypothesis will

be explored for each of the corporate associations identified in the field study:

Hypothesis 4: Farmer‟s perceived value positively associates farmers‟ behavioral

intention to use formal credit

2.4 Conceptual model

The foregoing of literature review in this study is discussed as a basis for developing a conceptual framework Consistent with the conceptualization, this study used the Theory of Reasoned Action (TRA) Specifically, a model is developed to study the relationship between attitude, subjective norm, perceived service quality,

perceived value, and behavioral intention Figure 1 below shows a model of the hypothesized relationships investigated in this study

Figure 2.2: Conceptual model

2.5 Chapter summary

This chapter presents theoretical background of each concept in the model Based on discussion of literature review, farmer‟s behavioral intention to use formal credit is affected by four factors, these are: attitude, subjective norm, perceived quality of service, and perceived value Such factors are selected to build the model because their relationship has already tested by many previous researchers through their studies Hence, there are four hypotheses proposed for this research The next chapter will discuss methodology that used to analyze the data and test hypotheses of the

3.1 Research process

The study includes two main phases, (1) qualitative and (2) quantitative In first phases, in-depth interview was used to refine and finalize the questionnaire items and the quantitative survey was used in the main survey The main respondents comprise bank‟s customers and would-be borrowers in Cantho City and surrounding areas After conducting main survey, the SPSS 22 is used to test (i) reliability by Cronbach Alpha, (ii) convergent and discriminant validity of the data by Exploratory Factors Analysis The hypotheses developed basing on theoretical background, then, are evaluated by multiple regressions The research progress is depicted at Figure 3

Figure 3: Research process

3.2 Questionnaire design

Based on the previous research and the Vietnamese context, the draft questionnaire consisted of five (5) measurement scales, which were attitude, subjective norm, perceived service quality, perceived value, and behavioral intention Then, the draft questionnaire was translated from English into Vietnamese The source

of questionnaire items is in Table 3.1 below

In order to test logic of the questionnaires as well as to avoid misunderstanding, and ensure obviousness of Vietnamese wordings prior to conduct collection of data on

a large cover, an in-depth was carried out with six peasant households who have ever been using bank‟s loans to create produces and/or who are agricultural materials merchants They are used to deal with and are familiar with the process and procedure

of agricultural credit All of them have much knowledge and many experience in farming credit in Cantho City

Firstly, the aim of the in-depth interview is to explain to all of them; moreover, the questionnaires and relative documents were sent to them After that, a discussion

Exploratory Factors Analysis (EFA)

- Model fit, item loadings  0.05

- Composite reliability, extracted variances, uni-dimensionality test,

convergent validity and discriminant validity

Multiple Regression

- Theoretical model test

- Model fit, Component fit

- R2

Literature Review

In-depth Interviews

Reliability Test

- Eliminate corrected item - total correlation < 0.4

- Evaluate Cronbach‟s Alpha > 0.6

Main Survey

with each of them was conducted to define which items would be eliminated or which items would be added up or be revised to be suitable to Vietnam context After adjusting the first questionnaire table, the questionnaire was delivered to a small sample size of fifteen convenient colleagues and clients to recognize whether any item

is still unclear to understand, or is susceptible to misunderstand After getting all feedbacks, the final version of questionnaires is available for the main survey

List of participants is depicted in Appendix A All the comments are taken note

in the Appendix B Changes of the Vietnamese version were made for the purpose of accuracy and clarity Although most of the scales were used widely in the previous research, this study was important before launching the quantitative survey due to the differences in the research setting: applying in the Vietnamese context In the end of this study, the modification and revision of questionnaire survey are noticed in Appendix B The official questionnaire surveys are shown in Appendix C for English version and Appendix D for Vietnamese version

Table 3.1: Final measurement scales

No Number of items Content Code Source

Attitude

I prefer applying commercial bank loan to do farming business than borrowing

Nor et al (2008)

Members of local associations in my community like farmer‟s union, women‟s union, youth‟s union, encourage me to use formal credit for farming activities SJN2 People having influence on my decision recommend me borrow bank‟s loans SJN3

Bank staff offers more detailed information/knowledge of customers‟ accounts,

Bank‟s account and transaction is accurately and carefully PSQ5

Compared to informal credit, the bank charges me fairly for similar loans PVL2 Compared to informal credit, the bank provides more free services PVL3 Comparing what I pay to what I might get from other informal sources, I think

I would come back to a bank to borrow loans in the future BEH2

I would encourage my friends, relatives to borrow loan from bank BEH3

3.3 Sampling method

After getting all feedbacks, the final version of questionnaires is available for the main survey The quantitative in-depth interview was used to evaluate the items resulted from in-depth discussions prior to conduct main survey The main survey was conducted in Can Tho from May to June of 2016 With the prior notice, the questionnaire which is formatted in Google Docs was emailed to both borrowers and would-be borrowers, after that they filled out the answers through Internet platform (total number of questionnaire were 118) while 300 questionnaires were put at aforementioned banks‟ transaction offices Further, at-site interviews with participants (82) were also conducted by retail bankers mostly being staffs of MBBank Cantho City Due to limited time, the convenience sampling approach was conducted

The reliable and validity of variables will be tested by using Cronbach‟s Alpha and EFA, after that the multiple regression was applied to test model and hypotheses First of all, the sample size was required to have enough quantity for the analysis The minimum sample size was 100 and not less than five times of items (Hair et al 2010), thus: n > 100 and n = 5k (where k is the number of items)

With expectation to obtain a sample size of about 300, about 500 questionnaires were delivered to participants

3.4 Research method

Total 250 responses were used for data analysis SPSS 22 is used to test the model In the first part, while Cronbach‟s Alpha tested the reliability for each measurement component separately, EFA tested the validity for all items scale Considering the convergent and discriminated validity, the inappropriate items would

be removed if necessity In second part, multiple regressions is used for purpose of enhancing the value of the model

3.4.1 Reliability measure

In order to assess reliability of each of scales with particular sample, as well as consider the internal consistency of the scales, it is necessary to use Cronbach‟s Alpha coefficient which should be above 0.7 (Devellis, 2003) Also, the corrected item - total correlation values should be at least 0.4 to ensure each of items was measuring the same from the scale as a whole (Gliem and Gliem, 2003; Hair et al., 2006)

3.4.2 Validity measure by EFA (Exploratory Factor Analysis)

In order to evaluate the validity and the correlation among variables to identify underlying factors or define number of extracted factors, EFA was applied with the oblique approach using the Promax method However, some requirements of EFA should be satisfied (Pallant, 2011):

- The minimum of sample size should be at least 100 and rate of observations per items of models should be five cases for each of the items

- The correlations of r of the correlation matrix should show at least 0.3

- Kaiser-Meyor-Olkin (KMO) test must be equal or above 0.6 (Tabachnick and Fidell, 2007)

- Barllett‟s test of sphericity should have significant less than 5%

- To extract factors, the eigenvalue of factors must be greater than 1 (Kaiser, 1956)

3.4.3 Multiple Regressions

To explore the relationship between independent variables (i.e behavioral intention) and dependent variable (i.e attitude, subjective norm, perceived service quality, perceived value), as well as to evaluate the importance of those independent variables in the framework model, the multiple regression analysis will be conducted The multiple regression analysis required that some following conditions should be

satisfied:

- The minimum sample size based on the formula:

n > 50 + 8m = 50 + 8x5 = 90 samples, where m: number of independent variables

in the conceptual model

- The multicollinearity did not exist, so r value, the correlated score was less than 0.9

- The collinearity test on variables was via two values “tolerance” and “VIF”, particularly the VIF should not be less than 0.1, or above 10

- The Normal probability plot (P-P) was required with most of the scores concentrated in the centre (along the 0 point)

- The presence detection of outliers was considered from the Scatterplot

The multiple regressions then is used to test hypotheses, to explore the relationship between five independent variables (i.e attitude; subjective norm; service quality; pricing and reputation and image) and usage intention of bank credit The generalized equation (Donald and Pamela, 2006) is as follow:

Y = β0 + β1X1 + β2X2 + β3X3 + … +βnXn + ε

Where:

Y = is the value of the dependent variable (usage intention of bank credit)

Xi = ith independent variable (i.e attitude; subjective norm; service quality; pricing and reputation and image) that is explaining the variance in Y

β0 = a constant, the value of Y when all X values are zero

β1 = the slope of the regression surface (the β represents the regression coefficient associated with each Xi)

ε = an error term, normally distributed about a mean of 0

3.5 Chapter summary

In summary the survey was designed based on previous measurement scales Specifically, scales of attitude and subjective norm consist three items for each adopted from related prior studies Modifications for the Vietnamese version and English version of questionnaire were conducted due to the necessary of accuracy and clarity The respondents are selected with a sample of 500 SPSS 22 is used to test the measurement and theoretical model

CHAPTER 4: FINDINGS AND DISCUSSION

Chapter 3 presented research methodology to examine scale validation and analyze the collected data In chapter 4, results of study would be shown and analyzed with sample n=250 First, respondents‟ demographics were analyzed by using the SPSS – Statistical software package Secondly, results of scale validation were presented In this section, the data of this research was evaluated through two steps Step 1 used Cronbach‟s Alpha and Exploratory Factor Analysis (EFA) to examine reliability and validity of the scale measurement In step 2, multiple regressions were employed to test four hypotheses Finally, results of hypotheses testing were discussed

4.1 Respondents’ demographics

After data collection, total 287 responses were collected; the response rate was approximately 57.4% percent Then, total 37 questionnaire was eliminated because they were invalid (respondents just chose one option for all questions or their answers were implausible) Finally, 250 questionnaires were used as valid data for this research In comparison with minimum sample size, this number of data was satisfactory

The collected data were analyzed using the SPSS – Statistical software package This part aimed to provide the general information of respondents The results of the demographics analysis were summarized in table 4.1 Initial analysis of data indicated that gender was not equally between female and male Male was dominant with 67.2%

of respondents and female only seized 32.8% of respondents Majority of respondents who took part in this study (74%) were in employment age (26-45) while age greater than 55 accounted for 11.6%, age ranged from 46 to 55 was 8.4%, and age from 18 to

25 only accounted for 6%

Remarkably, most of respondents were high-school graduates (65.6%), those have vocational level occupied 23.6% and collegiate level was 10.8% More than half

of respondents (54.8%) have ever borrowed bank‟s loan, and 76.4% out of those loans were used for the purpose of agricultural production

Table 4.1: Demographic Profile

Demographic Profile Category Frequency Percentage (%)

Gender

Male 168 67.2 Female 82 32.8 Total 250 100

Age

18-25 15 6 26-35 95 38 36-45 90 36 46-55 21 8.4

>55 29 11.6 Total 250 100

Educational Level

Collegiate level 27 10.8 Vocational level 59 23.6 Highschool 164 65.6 Total 250 100 Ever borrowed loan

Yes 137 54.8

No 113 45.2 Total 250 100 Ever borrowed loan for

farming business

Yes 191 76.4

No 59 23.6 Total 250 100

Descriptive statistic was run to test whether variables distribute in normal distribution or not The variables had Skewness value within (-1.180 to 0.109), and the value of Kurtosis was within (-1.390 to 1.106) Examining the individual factor as shown in Appendix E, all items had values of Kurtosis and Skewness smaller than |2|,

so 19 observed items were moved to the next step of analysis

4.2 Reliability Analysis

To ensure the reliability of the instrument developed for this research, Cronbach‟s Alpha had been conducted as an indicator for internal consistency of scales Beside Cronbach‟s Alpha, the Corrected Item – Total Correlation was also very important Normally, if the correlation of each specific item with total of the other items in the scale was quite high or higher than 0.4 (Gliem and Gliem, 2003; Hair et al., 2006), such item was assumed that most likely correlated with most of other scale items and would become a good part of this total rating rate

On the other hand, if the Corrected item – Total correlation of any item was negative or too low (less than 0.4), it was necessary to re-consider the item in terms of wording problems and conceptual appropriateness (Leech et al., 2005) A

modification or deletion for such items in this case was essential The results of reliability test for each construct in the model were summarized in the table below (Table 4.2)

Table 4.2: Reliability test result

Items Scale Mean if

Item Deleted

Scale Variance if Item Deleted

Corrected Total Correlation

Item-Cronbach's Alpha if Item Attitude – ATT (ATT1 – ATT3) Cronbach’s Alpha = 0.785

ATT1 7.75 2.599 0.659 0.669 ATT2 7.66 2.908 0.578 0.756 ATT3 7.62 2.776 0.635 0.696 Subjective Norm - SJN (SJN1 – SJN3) Cronbach’s Alpha = 0.769

SJN1 7.42 2.671 0.588 0.706 SJN2 7.31 2.624 0.609 0.683 SJN3 7.34 2.426 0.613 0.679 Perceived Service Quality - SEQ (PSQ1 – PSQ6) Cronbach’s Alpha = 0.738

PSQ1 16.31 14.665 0.644 0.660 PSQ2 16.30 15.253 0.615 0.671 PSQ3 16.28 15.080 0.625 0.668 PSQ4 17.26 15.486 0.326 0.753 PSQ5 16.37 15.006 0.498 0.695 PSQ6 17.24 14.976 0.320 0.761 Perceived Value – PVL (PVL1 – PVL4) Cronbach’s Alpha = 0.926

PVL1 11.06 8.996 0.807 0.911 PVL2 11.04 9.191 0.802 0.913 PVL3 10.87 8.549 0.847 0.898 PVL4 10.95 8.813 0.859 0.894 Behavioral Intention – BEH (BEH1 - BEH4) Cronbach’s Alpha = 0.891

BEH1 7.48 2.837 0.774 0.856 BEH2 7.48 2.837 0.788 0.843 BEH3 7.49 2.861 0.797 0.836

As shown in Table 4.2, the results indicated significantly high or very high internal reliability for most tested item scales including attitude, subjective norm, perceived service quality, perceived value, and behavioral intention toward using formal credit with the value of Cronbach‟s Alpha greater than 0.7 Corrected Item-Total Correlation column also exposed significant values for four items of five measurement scales of the questionnaire except for PSQ4 and PSQ6

Remarkably, amongst six items of perceived service quality (PSQ), corrected item-total of PSQ4 (i.e Bank offers speed of services and decision process) and PSQ6 (i.e correcting mistakes in bank is efficient) were 0.32 and 0.35 lower than 0.4, respectively, so these two item were eliminated

In summary, all five measurement scales were reliable in measuring the research concepts because they had the Cronbach‟s Alpha greater than 0.7 The Corrected item- Total correlation of seventeen out of nineteen scale items (excluded PSQ4 and PSQ6) was also satisfied the standard (greater than 0.4), this indicated that seventeen scales fit the requirements for reliability As a result, these measures were used in establishing the main survey to test the research hypotheses For the next step, the author conducted the exploratory factor analysis (EFA) to clarify the validity of measurement scales.

4.3 Exploratory Factor Analysis (EFA)

4.3.1 EFA for Independent constructs

EFA had been employed for confirming the construct validity EFA could be described as orderly simplification of interrelated measures The main aim of EFA was to investigate a large number of relationships among interval variables (Leech et al., 2005) By performing EFA, the researcher could see how a large set of items group together under a cluster (Leech et al., 2005) For this study, EFA would be conducted with Promax rotation was employed in order to take out the items on the same scale but exposed low loadings on the construct This research followed a strict criterion to delete factors that their loadings were lower than 0.4 and the components with Eigenvalue higher than 1 were retained

Table 4.3: KMO and Bartlett's Test of independent variables

Kaiser-Meyer-Olkin Measure of Sampling Adequacy 0.829

Bartlett's Test of Sphericity Approx Chi-Square 1.999E3

Sig 0.000

As shown in Table 4.3, KMO value was 0.829 greater than 0.7 (Leech et al., 2005) indicated that sufficient items to measure each construct The Bartlett‟s test was

also significant (significance value was less than 5%) indicated that the variables were correlated highly enough to become a good basis for factor analysis In summary, both acceptances for diagnostic tests emphasized that the data were suitable for factor analysis

All factors have eigenvalues greater than 1, and that there are four factors extracted and total variance extracted were 66.090% (greater than requirement of 50%) Thus, it meant that more than a half of variance could be explained by four initial factors (see Table 4.4)

Table 4.4: Total Variance Explained

Factor

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of

Squared LoadingsaTotal % of

Variance Cumulative % Total

% of Variance Cumulative % Total

Table 4.5: Pattern Matrix

Factor

1 2 3 4 PVL4 0.903