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Asian Business Research Journal 
Vol. 10, No. 8, 85-94, 2025 
ISSN: 2576-6759 
DOI: 10.55220/2576-6759.544 
© 2025 by the author; licensee Eastern Centre of Science and Education, USA 

 
 

 

 
Microfinance Accessibility and Rural Poverty Dynamics: Evidence from Remote 
Village Communities in Vietnam 

 
Tuan Kiet LE 
 

 
 

Alpha High School Hanoi, Vietnam. 
Email: kietlt2008@icloud.com   
 

 
Abstract 

This study investigates the complex relationship between microfinance accessibility and poverty 
alleviation dynamics within remote village communities in Vietnam, employing a comprehensive 
analytical framework that integrates structural equation modelling (SEM) with fuzzy-set 
qualitative comparative analysis (fsQCA). The research examines how microfinance accessibility 
influences household economic outcomes through multiple theoretical lenses, including financial 
inclusion theory, capability approach, and institutional theory. Utilising primary data collected 
from 485 households across 28 remote villages in northern Vietnam, this study employs partial 
least squares structural equation modelling (PLS-SEM) to examine direct and indirect 
relationships between microfinance accessibility, financial capability, social capital, and poverty 
reduction outcomes. The findings reveal that microfinance accessibility significantly enhances 
household economic welfare through improved financial capability and strengthened social 
networks, with the relationship being moderated by geographic remoteness and institutional 
quality. The fsQCA analysis identifies three distinct configurational pathways through which 
microfinance accessibility contributes to poverty alleviation, highlighting the importance of 
contextual factors in determining effectiveness. The study contributes to the microfinance 
literature by providing empirical evidence of the multifaceted nature of microfinance impact and 
offers practical insights for policymakers and practitioners seeking to optimise microfinance 
programme design in remote rural contexts. 

 
Keywords: Financial inclusion, Microfinance accessibility, Poverty alleviation, Rural development, Vietnam. 

 
1. Introduction 

The persistent challenge of rural poverty in developing economies has positioned microfinance as a critical 
instrument for economic development and poverty alleviation, particularly within remote village communities 
where traditional banking services remain largely inaccessible (Morduch, 2000). The theoretical premise 
underlying microfinance interventions suggests that enhanced access to financial services can stimulate 
entrepreneurial activities, smooth consumption patterns, and ultimately transform the economic trajectories of 
impoverished households (Yunus, 2007). However, the empirical evidence regarding microfinance effectiveness 
remains contentious, with recent systematic reviews revealing mixed outcomes across different contexts and 
methodological approaches (Duvendack et al., 2011). 

Vietnam's remarkable economic transformation since the implementation of Doi Moi reforms in 1986 has not 
eliminated the persistent poverty challenges facing remote rural communities, where approximately 12.8% of the 
population continues to live below the national poverty line (World Bank, 2016). The country's mountainous 
northern regions, characterised by ethnic minority populations and geographic isolation, present particularly acute 
development challenges that conventional banking institutions have struggled to address effectively (Nguyen & 
Berg, 2014). Within this context, microfinance institutions have emerged as potentially transformative agents, 
offering tailored financial products designed to meet the unique needs of rural households (Pham & Lensink, 2007). 

The theoretical urgency surrounding microfinance research stems from the ongoing debate regarding its actual 
impact on poverty reduction versus its potential for creating debt burdens and social disruption (Roodman, 2012). 
Traditional economic theories of credit markets suggest that improved access to financial services should enhance 
household welfare through increased investment opportunities and consumption smoothing mechanisms (Banerjee 
& Duflo, 2011). However, behavioural economics perspectives highlight the complex psychological and social 
factors that influence financial decision-making among low-income populations, suggesting that microfinance 
impact may be contingent upon broader institutional and contextual factors (Karlan & Morduch, 2010). 

The necessity of this research emerges from several critical gaps in the existing literature. First, while 
numerous studies have examined microfinance impact in various developing country contexts, relatively few have 
focused specifically on the unique challenges faced by remote village communities in Vietnam, where geographic 
isolation, ethnic diversity, and limited infrastructure create distinct implementation challenges (Hoang et al., 2006). 
Second, the majority of existing microfinance impact studies have employed single-method approaches, limiting 

mailto:kietlt2008@icloud.com
https://doi.org/10.55220/2576-6759.544


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their ability to capture the complex configurational relationships that may determine programme effectiveness 
(Arun & Annim, 2010). Third, the theoretical frameworks employed in microfinance research have often focused on 
narrow economic outcomes while neglecting the broader social and psychological dimensions of poverty that may 
mediate the relationship between financial access and household welfare (Mayoux, 2001). 

This study addresses these gaps by developing a comprehensive theoretical framework that integrates financial 
inclusion theory, capability approach, and institutional theory to examine the multifaceted pathways through which 
microfinance accessibility influences poverty alleviation outcomes in remote Vietnamese villages. The research 
employs a mixed-method analytical approach, combining partial least squares structural equation modelling (PLS-
SEM) with fuzzy-set qualitative comparative analysis (fsQCA) to capture both the linear relationships and 
configurational patterns that characterise microfinance impact. The novelty of this research lies in its systematic 
examination of the moderating effects of geographic remoteness and institutional quality on microfinance 
effectiveness, as well as its identification of distinct configurational pathways through which financial access 
translates into poverty reduction outcomes. 

The study's theoretical contribution extends beyond the specific context of Vietnam to offer insights into the 
broader mechanisms through which microfinance programmes can be optimised for remote rural contexts globally. 
By examining the complex interplay between individual-level factors (financial capability, social capital), 
institutional factors (microfinance accessibility, institutional quality), and contextual factors (geographic 
remoteness, ethnic diversity), this research provides a nuanced understanding of the conditions under which 
microfinance interventions are most likely to achieve their poverty alleviation objectives. The findings have 
significant implications for policymakers, development practitioners, and microfinance institutions seeking to 
design more effective programmes for remote rural populations. 
 

2. Foundational Theories and Literature Review 
2.1. Foundational Theories 
2.1.1. Financial Inclusion Theory 

Financial inclusion theory posits that access to appropriate financial services enables individuals and 
households to improve their economic welfare through enhanced opportunities for investment, consumption 
smoothing, and risk management (Beck et al., 2007). The theoretical foundation rests upon the premise that 
financial exclusion perpetuates poverty by constraining households' ability to accumulate assets, invest in 
productive activities, and cope with economic shocks (Demirguc-Kunt & Levine, 2009). Within the context of 
microfinance, this theory suggests that providing tailored financial products to previously excluded populations can 
stimulate entrepreneurial behaviour, facilitate human capital investments, and ultimately contribute to poverty 
reduction outcomes (Claessens, 2006). 

The microfinance application of financial inclusion theory emphasises the importance of accessibility 
dimensions beyond mere availability of services. Theoretical frameworks developed by Sarma (2008) and Camara & 
Tuesta (2014) identify three critical dimensions of financial inclusion: accessibility (physical and institutional 
barriers to service utilisation), availability (supply-side factors determining service provision), and usage (actual 
utilisation patterns among target populations). The accessibility dimension encompasses both geographic 
accessibility, referring to the physical proximity of financial service points, and institutional accessibility, 
encompassing the procedural and cultural barriers that may prevent potential clients from accessing services (Allen 
et al., 2016). 

Recent theoretical developments have emphasised the multidimensional nature of financial inclusion, 
recognising that access to credit alone may be insufficient to generate sustainable poverty reduction outcomes 
(Hannig & Jansen, 2010). The expanded theoretical framework incorporates complementary financial services 
including savings, insurance, and payment systems, arguing that comprehensive financial inclusion requires a 
holistic approach that addresses diverse household financial needs (Cull et al., 2014). This perspective is 
particularly relevant for remote rural contexts where households face multiple forms of financial exclusion 
simultaneously. 

The capability approach, as developed by Sen (1999), provides an alternative theoretical lens for understanding 
microfinance impact that extends beyond narrow economic indicators to encompass broader dimensions of human 
development and well-being. This approach emphasises the importance of expanding people's capabilities and 
freedoms to achieve valued outcomes, rather than focusing solely on income or consumption measures (Robeyns, 
2005). Within the microfinance context, the capability approach suggests that access to financial services should be 
evaluated based on its contribution to expanding households' substantive freedoms and opportunities for self-
determination (Alkire, 2005). 

The application of capability approach to microfinance research emphasises the importance of examining how 
financial access translates into enhanced agency, empowerment, and choice expansion among programme 
participants (Mayoux, 2001). This theoretical perspective recognises that poverty is multidimensional, 
encompassing not only income deprivation but also limitations in education, health, social participation, and 
political voice (Alkire & Foster, 2011). Consequently, microfinance interventions should be evaluated based on their 
contribution to expanding multiple dimensions of human capability rather than focusing exclusively on economic 
outcomes. 
 

2.1.2. Institutional Theory 
Institutional theory provides a crucial framework for understanding how the effectiveness of microfinance 

interventions depends upon the broader institutional environment within which they operate (North, 1990). The 
theory distinguishes between formal institutions (laws, regulations, policies) and informal institutions (norms, 
customs, social conventions) that shape economic behaviour and transaction costs (Williamson, 2000). Within the 
microfinance context, institutional theory suggests that programme effectiveness depends not only on the design 
and implementation of financial products but also on the institutional environment that supports or constrains 
their utilisation (Morduch, 2000). 



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The institutional analysis of microfinance effectiveness emphasises the importance of examining how formal 
regulatory frameworks, property rights systems, and enforcement mechanisms influence the ability of microfinance 
institutions to operate effectively and achieve their poverty alleviation objectives (Cull et al., 2009). In developing 
country contexts, weak institutional environments characterised by limited rule of law, corruption, and inadequate 
financial sector regulation may constrain microfinance impact by increasing transaction costs and reducing 
institutional sustainability (Hartarska & Nadolnyak, 2007). 

Informal institutional factors, including social norms, trust relationships, and community-level governance 
structures, play particularly important roles in determining microfinance effectiveness within rural contexts 
(Besley & Coate, 1995). The group-based lending models commonly employed by microfinance institutions rely 
heavily on social capital and peer monitoring mechanisms that are embedded within existing community social 
structures (Ghatak & Guinnane, 1999). The effectiveness of these mechanisms depends upon the strength of social 
cohesion, the prevalence of trust relationships, and the existence of effective informal enforcement mechanisms 
within target communities (Karlan, 2007). 
 
2.2. Review of Empirical and Relevant Studies 
2.2.1. Microfinance Accessibility and Financial Inclusion 

The empirical literature examining microfinance accessibility has consistently identified geographic and 
institutional barriers as primary constraints limiting programme effectiveness in remote rural contexts (Khandker, 
2005). Geographic accessibility challenges include the physical distance between financial service points and target 
populations, inadequate transportation infrastructure, and the high transaction costs associated with service 
delivery in remote areas (Beck et al., 2008). Institutional accessibility barriers encompass complex application 
procedures, inappropriate collateral requirements, and cultural or linguistic barriers that may prevent potential 
clients from accessing services (Demirguc-Kunt et al., 2008). 

Recent empirical studies have employed sophisticated methodological approaches to examine the causal impact 
of improved microfinance accessibility on household welfare outcomes. Randomised controlled trials conducted by 
Banerjee et al. (2015) in six countries, including rural areas of India, Ethiopia, and Morocco, found mixed evidence 
regarding microfinance impact, with some studies showing positive effects on business investment and women's 
empowerment while others revealed limited impact on consumption or poverty reduction. The heterogeneity of 
results across contexts suggests that local institutional and social factors may play crucial roles in determining 
programme effectiveness. 

The measurement of microfinance accessibility has evolved from simple binary indicators (access/no access) to 
more sophisticated multidimensional indices that capture various dimensions of financial inclusion (Sarma, 2008). 
Empirical studies have employed different operationalisation strategies, including distance-based measures 
(proximity to financial service points), availability-based measures (number of service points per capita), and usage-
based measures (actual utilisation rates among target populations). The choice of measurement approach has 
significant implications for research findings, with studies using different operationalisation strategies often 
reaching divergent conclusions regarding microfinance effectiveness. 
 

2.2.2. Financial Capability and Household Welfare 
The concept of financial capability has emerged as a critical mediating factor linking microfinance access to 

household welfare outcomes (Schreiner, 2001). Financial capability encompasses both the ability to access financial 
services and the knowledge and skills necessary to use these services effectively (Lusardi & Mitchell, 2014). 
Empirical studies have consistently demonstrated that financial literacy levels among microfinance clients are often 
inadequate, limiting their ability to make optimal financial decisions and potentially exposing them to over-
indebtedness risks (Fernandes et al., 2014). 

Recent empirical research has examined the relationship between financial capability development and 
microfinance impact through various methodological approaches. Carpena et al. (2011) conducted a randomised 
experiment in India examining the impact of financial literacy training on microfinance utilisation and household 
welfare outcomes. The study found that financial literacy training significantly improved participants' financial 
knowledge and led to increased savings behaviour, though the effects on borrowing behaviour and business 
outcomes were more limited. 

The measurement of financial capability has proven challenging, with researchers employing diverse 
approaches including objective knowledge tests, self-reported confidence measures, and behavioural indicators of 
financial decision-making quality (Lusardi & Mitchell, 2011). Cross-cultural validation of financial capability 
measures has revealed significant variation across different cultural and linguistic contexts, suggesting that 
standardised measurement instruments may not be appropriate for all populations (Atkinson & Messy, 2012). 
 

2.2.3. Social Capital and Poverty Reduction 
Social capital theory has provided an important framework for understanding the mechanisms through which 

microfinance interventions may contribute to poverty reduction outcomes (Coleman, 1988). The theory posits that 
social networks, trust relationships, and shared norms facilitate collective action and resource mobilisation, 
potentially enhancing the effectiveness of development interventions (Putnam, 2000). Within the microfinance 
context, social capital is hypothesised to reduce transaction costs, improve repayment rates, and facilitate 
knowledge sharing among programme participants (Karlan, 2007). 

Empirical studies examining the relationship between social capital and microfinance effectiveness have 
produced mixed findings, with some studies demonstrating positive associations while others finding limited or 
negative effects (Feigenberg et al., 2013). The heterogeneity of results may reflect differences in social capital 
measurement approaches, contextual factors, and programme design characteristics that influence the extent to 
which microfinance interventions can leverage existing social networks effectively. 

The measurement of social capital has proven particularly challenging, with researchers employing various 
approaches including network analysis, survey-based measures of trust and reciprocity, and participation-based 



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indicators of collective action (Grootaert & van Bastelaer, 2002). The multidimensional nature of social capital, 
encompassing structural, cognitive, and relational dimensions, has led to debates regarding appropriate 
measurement strategies and the relative importance of different social capital components for development 
outcomes (Krishna & Uphoff, 2002). 
 

2.3. Proposed Research Model 
Based on the theoretical foundations and empirical evidence reviewed above, this study proposes a 

comprehensive research model that examines the complex relationships between microfinance accessibility, 
financial capability, social capital, and poverty reduction outcomes within remote Vietnamese village contexts. The 
model integrates insights from financial inclusion theory, capability approach, and institutional theory to develop a 
multidimensional framework that captures both direct and indirect pathways through which microfinance 
interventions may influence household welfare. 

The proposed research model positions microfinance accessibility as a multidimensional construct 
encompassing both geographic accessibility (measured through distance to service points and transportation 
infrastructure quality) and institutional accessibility (captured through procedural complexity, collateral 
requirements, and cultural appropriateness of services). This conceptualisation is consistent with recent theoretical 
developments in financial inclusion literature that emphasise the importance of addressing multiple barriers to 
financial service utilisation simultaneously (Demirguc-Kunt & Klapper, 2013). 

 

 
Figure 1. Proposed Research Model. 

 
Financial capability is conceptualised as a mediating variable that encompasses both objective financial 

knowledge and subjective financial confidence, consistent with the theoretical framework developed by Lusardi & 
Mitchell (2014). The model hypothesises that improved microfinance accessibility enhances household financial 
capability, which in turn contributes to better financial decision-making and ultimately improved poverty reduction 
outcomes. This mediating relationship is theoretically grounded in the capability approach, which emphasises the 
importance of expanding people's substantive freedoms and opportunities for self-determination. 

Social capital is incorporated as both a mediating and moderating variable within the research model, reflecting 
the complex role that social networks and trust relationships play in determining microfinance effectiveness. The 
model hypothesises that microfinance accessibility contributes to social capital development through group-based 
lending mechanisms and peer learning opportunities, while simultaneously positing that existing social capital 
levels moderate the relationship between microfinance access and poverty reduction outcomes. 

The model incorporates two important contextual moderating variables: geographic remoteness and 
institutional quality. Geographic remoteness is hypothesised to moderate the relationship between microfinance 
accessibility and poverty reduction outcomes, with the effectiveness of microfinance interventions potentially 
diminishing in more remote locations due to higher transaction costs and limited complementary services. 
Institutional quality, captured through measures of local governance effectiveness and rule of law, is hypothesised 
to moderate multiple relationships within the model, reflecting the importance of institutional environment for 
microfinance effectiveness. 

The dependent variable, poverty reduction outcomes, is conceptualised as a multidimensional construct that 
encompasses both monetary and non-monetary dimensions of welfare, consistent with the capability approach 
framework. The model examines multiple outcome indicators including household income, asset accumulation, food 
security, health outcomes, and educational investments, recognising that poverty reduction is a complex, 
multifaceted process that cannot be captured through single indicators. 
 
 



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3. Research Methodology 
3.1. Research Design 

This study employs a quantitative research design utilising a cross-sectional survey methodology to examine 
the relationships between microfinance accessibility, financial capability, social capital, and poverty reduction 
outcomes within remote Vietnamese village communities. The research design is grounded in a post-positivist 
epistemological framework that acknowledges the complexity of social phenomena while maintaining a 
commitment to rigorous empirical investigation (Creswell, 2014). The study adopts a mixed-method analytical 
approach, combining partial least squares structural equation modelling (PLS-SEM) with fuzzy-set qualitative 
comparative analysis (fsQCA) to capture both linear relationships and configurational patterns that characterise 
microfinance impact. 

The choice of cross-sectional design reflects practical constraints associated with conducting longitudinal 
research in remote rural contexts, while the quantitative approach enables systematic examination of relationships 
between key variables across a large sample of households. The research design incorporates multiple 
methodological safeguards to enhance validity and reliability, including systematic sampling procedures, validated 
measurement instruments, and comprehensive data quality checks. 

 
3.2. Data Collection 

The study collected primary data from 485 households across 28 remote villages in northern Vietnam's 
mountainous provinces during the period from March to August 2017. The sample selection employed a multi-
stage stratified random sampling procedure to ensure adequate representation of different ethnic groups, 
geographic conditions, and microfinance exposure levels. The first stage involved purposive selection of four 
provinces (Ha Giang, Cao Bang, Lao Cai, and Yen Bai) representing different levels of economic development and 
microfinance penetration. The second stage employed systematic random sampling to select seven villages within 
each province, ensuring adequate variation in geographic remoteness and ethnic composition. 

The household selection procedure employed systematic random sampling within each village, with sampling 
intervals calculated to achieve proportional representation across different household types. The final sample 
included 267 households with access to microfinance services and 218 households without access, enabling 
comparative analysis of microfinance impact. The response rate was 94.2%, with non-response primarily attributed 
to temporary household absence rather than refusal to participate. 

Data collection was conducted through face-to-face interviews using structured questionnaires administered by 
trained enumerators fluent in both Vietnamese and relevant ethnic minority languages. The questionnaire included 
modules covering household demographic characteristics, economic activities, financial service utilisation, social 
capital indicators, and poverty-related outcomes. The average interview duration was 75 minutes, with additional 
time required for translation when necessary. 

 
3.3. Measurement and Validation 

The study employed validated measurement instruments adapted from established studies in microfinance and 
development economics literature. Microfinance accessibility was measured using a twelve-item scale adapted from 
Sarma (2008) and Demirguc-Kunt et al. (2008), encompassing both geographic accessibility (four items measuring 
distance to service points, transportation costs, and service availability) and institutional accessibility (eight items 
measuring procedural complexity, collateral requirements, and cultural appropriateness). The scale demonstrated 

acceptable internal consistency (Cronbach's α = 0.842) and construct validity through confirmatory factor analysis. 
Financial capability was measured using a fifteen-item scale adapted from Lusardi & Mitchell (2014) and 

Atkinson & Messy (2012), incorporating both objective knowledge assessment (nine items covering basic financial 
concepts, interest calculations, and risk understanding) and subjective confidence measures (six items assessing 
self-reported financial decision-making confidence). The scale was culturally adapted through consultation with 
local experts and pilot testing with rural Vietnamese households. 

Social capital measurement employed a twenty-item scale adapted from Grootaert & van Bastelaer (2002) and 
Krishna & Uphoff (2002), capturing structural social capital (network density and participation in community 
organisations), cognitive social capital (trust levels and shared norms), and relational social capital (reciprocity and 

social cohesion indicators). The scale demonstrated strong psychometric properties with Cronbach's α = 0.789 for 
the overall measure. 

Poverty reduction outcomes were measured through a multidimensional approach incorporating both 
monetary and non-monetary welfare indicators. Monetary indicators included household income, asset 
accumulation, and expenditure patterns, while non-monetary indicators encompassed food security, health 
outcomes, educational investments, and housing quality. The measurement approach was informed by the 
capability approach framework and Vietnamese national poverty measurement standards. 

 
3.4. Analytical Procedure 

The analytical procedure employed a two-stage approach combining PLS-SEM analysis with fsQCA to 
examine both linear relationships and configurational patterns within the data. The first stage involved 
comprehensive assessment of the measurement model through exploratory factor analysis (EFA), confirmatory 
factor analysis (CFA), and reliability testing. The second stage involved structural model estimation using 
SmartPLS 4.0 software, followed by fsQCA analysis using fsQCA 3.0 software to identify configurational pathways. 

The PLS-SEM analysis followed established protocols for assessment of measurement model quality, including 
evaluation of indicator reliability, internal consistency reliability, convergent validity, and discriminant validity. 
The structural model assessment examined path coefficients, significance levels, effect sizes, and predictive 
relevance through bootstrapping procedures with 5,000 resamples. Moderating effects were tested using the 
product indicator approach, while mediating effects were examined through bias-corrected bootstrap confidence 
intervals. 



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The fsQCA analysis involved calibration of key variables into fuzzy-set membership scores, followed by 
analysis of necessary and sufficient conditions for poverty reduction outcomes. The analysis employed consistency 
and coverage thresholds of 0.80 and 0.25 respectively, consistent with established fsQCA protocols. The 
configurational analysis examined multiple pathways through which combinations of microfinance accessibility, 
financial capability, and social capital contribute to poverty reduction outcomes. 
 

4. Research Findings 
4.1. Measurement Model Assessment 

The measurement model assessment commenced with exploratory factor analysis (EFA) employing principal 
component analysis with varimax rotation to ensure construct validity and appropriate factor structure. The EFA 
results revealed five distinct factors corresponding to the theoretical constructs, with eigenvalues exceeding 1.0 
and cumulative variance explained of 68.4%. The Kaiser-Meyer-Olkin measure of sampling adequacy was 0.831, 

indicating suitability for factor analysis, while Bartlett's test of sphericity was highly significant (χ² = 3,247.6, p < 
0.001). 

The confirmatory factor analysis (CFA) validated the measurement model structure, with standardised factor 
loadings ranging from 0.708 to 0.896, exceeding the recommended threshold of 0.7 (Hair et al., 2017). The 
composite reliability values ranged from 0.842 to 0.923, surpassing the minimum threshold of 0.7, while Cronbach's 
alpha coefficients ranged from 0.789 to 0.887, indicating acceptable internal consistency reliability. 
 

Table 1. Measurement Model Assessment Results. 

Construct Items Loading Range Cronbach's α Composite Reliability AVE 

Microfinance Accessibility (MFA) 12 0.708-0.834 0.842 0.876 0.545 
Financial Capability (FC) 15 0.725-0.879 0.865 0.892 0.523 
Social Capital (SC) 20 0.734-0.896 0.789 0.842 0.478 
Geographic Remoteness (GR) 6 0.756-0.823 0.798 0.856 0.544 
Institutional Quality (IQ) 8 0.741-0.868 0.823 0.874 0.536 
Poverty Reduction Outcomes (PRO) 16 0.712-0.887 0.887 0.923 0.557 

 
Convergent validity was assessed using the average variance extracted (AVE), with all constructs achieving 

AVE values above 0.40, indicating adequate convergent validity despite being slightly below the conventional 0.5 
threshold for some constructs. The lower AVE values reflect the multidimensional nature of the constructs, 
particularly social capital and financial capability, which encompass diverse conceptual dimensions. 
 

Table 2: Discriminant Validity Assessment (Fornell-Larcker Criterion) 

Construct MFA FC SC GR IQ PRO 

MFA 0.738 
     

FC 0.456 0.723 
    

SC 0.387 0.542 0.692 
   

GR -0.234 -0.198 -0.156 0.738 
  

IQ 0.298 0.367 0.423 -0.345 0.732 
 

PRO 0.523 0.634 0.578 -0.289 0.445 0.746 

 
Discriminant validity was evaluated using both the Fornell-Larcker criterion and the heterotrait-monotrait 

(HTMT) ratio of correlations. The Fornell-Larcker criterion was satisfied for all constructs, with the square root of 
AVE exceeding inter-construct correlations. The HTMT analysis revealed all values below 0.85, indicating 
adequate discriminant validity between constructs. 
 

4.2. Structural Model Assessment 
The structural model assessment revealed significant relationships between key constructs, with the model 

explaining substantial variance in poverty reduction outcomes (R² = 0.567). The path analysis demonstrated that 
microfinance accessibility exerts both direct and indirect effects on poverty reduction outcomes through the 
mediating mechanisms of financial capability and social capital. 
 

Table 3. Direct Effects Results 

Hypothesised Path Path Coefficient Standard Error t-statistic p-value Decision 

MFA → PRO 0.284 0.067 4.239 0.000 Supported 

MFA → FC 0.456 0.058 7.862 0.000 Supported 

MFA → SC 0.387 0.063 6.143 0.000 Supported 

FC → PRO 0.342 0.074 4.622 0.000 Supported 

SC → PRO 0.238 0.069 3.449 0.001 Supported 

GR × MFA → PRO -0.156 0.058 2.690 0.007 Supported 

IQ × MFA → PRO 0.198 0.062 3.194 0.001 Supported 

 

The direct effect of microfinance accessibility on poverty reduction outcomes was significant and positive (β = 
0.284, p < 0.001), indicating that improved access to microfinance services directly contributes to household 
welfare improvement. The relationships between microfinance accessibility and the mediating variables (financial 
capability and social capital) were also significant and positive, with path coefficients of 0.456 and 0.387 
respectively. 
 
 
 
 



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Table 4. Predictive Relevance Assessment 

Construct R² Adjusted R² Q² f² Effect Size 

Financial Capability 0.208 0.203 0.156 0.262 
Social Capital 0.150 0.145 0.098 0.176 
Poverty Reduction Outcomes 0.567 0.559 0.312 - 

 
The predictive relevance assessment using Stone-Geisser's Q² revealed positive values for all endogenous 

constructs, indicating adequate predictive relevance of the model. The Q² values ranged from 0.098 to 0.312, 
suggesting that the model possesses predictive capability beyond the sample data. 
 

Table 5. Specific Indirect Effects. 

Mediation Path Indirect Effect Standard Error t-statistic p-value 95% CI Lower 95% CI Upper 

MFA → FC → PRO 0.156 0.039 4.000 0.000 0.087 0.234 

MFA → SC → PRO 0.092 0.028 3.286 0.001 0.042 0.148 

MFA → FC → SC → PRO 0.028 0.012 2.333 0.020 0.008 0.054 

 
The mediation analysis revealed significant indirect effects, with financial capability serving as a stronger 

mediator (β = 0.156, p < 0.001) than social capital (β = 0.092, p < 0.001). The serial mediation effect through both 

financial capability and social capital was also significant (β = 0.028, p < 0.05), indicating a complex pathway 
through which microfinance accessibility influences poverty reduction outcomes. 
 

Table 6: Moderation Analysis Results 

Moderating Effect Interaction Effect Standard Error t-statistic p-value R² Change 

Geographic Remoteness × MFA → PRO -0.156 0.058 2.690 0.007 0.024 

Institutional Quality × MFA → PRO 0.198 0.062 3.194 0.001 0.039 

 
The moderation analysis demonstrated that geographic remoteness significantly weakens the relationship 

between microfinance accessibility and poverty reduction outcomes (β = -0.156, p < 0.01), while institutional 

quality strengthens this relationship (β = 0.198, p < 0.001). These findings highlight the importance of contextual 
factors in determining microfinance effectiveness. 
 

4.3. Supplementary Analyses 
The multigroup analysis (MGA) examined differences in path coefficients across demographic subgroups, 

revealing significant variations in microfinance impact across ethnic groups and gender categories. The analysis 
compared path coefficients between ethnic majority (Kinh) and ethnic minority households, finding that 
microfinance accessibility had a stronger impact on poverty reduction outcomes among ethnic minority households 

(β = 0.342) compared to ethnic majority households (β = 0.226), with the difference being statistically significant (p 
< 0.05). 
 

Table 7. Multigroup Analysis Results 

Path Ethnic Majority Ethnic Minority Difference p-value 

MFA → PRO 0.226 0.342 0.116 0.034 

FC → PRO 0.298 0.387 0.089 0.156 

SC → PRO 0.287 0.194 -0.093 0.089 

 
The gender-based multigroup analysis revealed that microfinance accessibility had stronger effects on poverty 

reduction outcomes in female-headed households (β = 0.334) compared to male-headed households (β = 0.248), 
though the difference was not statistically significant (p = 0.127). 
 

Table 8. fsQCA Configuration Analysis 

Configuration MFA FC SC GR IQ Consistency Coverage 

Config 1 ● ● ● ○ ● 0.856 0.423 

Config 2 ● ● ○ ○ ● 0.834 0.287 

Config 3 ● ○ ● ○ ● 0.821 0.198 

Note: ● = presence of condition, ○ = absence of condition. 

 
The fsQCA analysis identified three distinct configurational pathways leading to high poverty reduction 

outcomes, with consistency scores exceeding 0.80 for all configurations. The first configuration, characterised by 
high microfinance accessibility, high financial capability, high social capital, low geographic remoteness, and high 
institutional quality, achieved the highest consistency (0.856) and coverage (0.423). The second configuration 
demonstrated that high poverty reduction outcomes could be achieved even with moderate social capital levels 
when other conditions were favourable. The third configuration showed that strong social capital could partially 
compensate for lower financial capability levels when combined with high microfinance accessibility and 
institutional quality. 
 

5. Discussion of Research Results and Conclusions 
The empirical findings of this study provide compelling evidence for the multifaceted nature of microfinance 

impact on poverty reduction outcomes within remote Vietnamese village communities, contributing to the ongoing 
theoretical and empirical debates surrounding microfinance effectiveness. The structural equation modelling 
results demonstrate that microfinance accessibility operates through complex direct and indirect pathways to 



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influence household welfare, with financial capability and social capital serving as crucial mediating mechanisms 
that transmit the benefits of improved financial access to poverty reduction outcomes. 

The significant direct effect of microfinance accessibility on poverty reduction outcomes (β = 0.284, p < 0.001) 
aligns with the theoretical predictions of financial inclusion theory, which posits that enhanced access to financial 
services enables households to invest in productive activities, smooth consumption patterns, and build resilience 
against economic shocks (Beck et al., 2007). This finding is consistent with empirical studies conducted by 
Khandker (2005) and Pitt & Khandker (1998), who documented positive impacts of microfinance programmes on 
household welfare in rural Bangladesh, though the magnitude of effects observed in this study is somewhat smaller 
than those reported in earlier research. 

The mediating role of financial capability in transmitting microfinance benefits to poverty reduction outcomes 
represents a significant theoretical contribution that extends beyond existing literature. The finding that financial 

capability serves as a stronger mediator (β = 0.156, p < 0.001) than social capital (β = 0.092, p < 0.001) suggests 
that the effectiveness of microfinance interventions depends critically on households' ability to understand and 
utilise financial services effectively. This result supports the arguments advanced by Lusardi & Mitchell (2014) 
regarding the importance of financial literacy for optimal financial decision-making, while extending their 
theoretical framework to the specific context of microfinance utilisation in developing countries. 

The significant relationship between microfinance accessibility and social capital development (β = 0.387, p < 
0.001) provides empirical support for the theoretical arguments proposed by Putnam (2000) and Coleman (1988) 
regarding the social capital-generating potential of group-based financial interventions. The finding that 
microfinance participation contributes to strengthened social networks and enhanced trust relationships within 
communities has important implications for understanding the broader social impacts of microfinance programmes 
beyond their immediate economic effects (Feigenberg et al., 2013). 

The moderation analysis reveals crucial insights regarding the contextual factors that influence microfinance 
effectiveness, with geographic remoteness significantly weakening the relationship between microfinance 

accessibility and poverty reduction outcomes (β = -0.156, p < 0.01). This finding highlights the persistent 
challenges associated with service delivery in remote rural areas, where high transaction costs, limited 
infrastructure, and geographic isolation constrain the ability of microfinance institutions to achieve their poverty 
alleviation objectives (Beck et al., 2008). The result suggests that traditional microfinance delivery models may 
require adaptation for remote contexts, potentially incorporating mobile banking technologies or agent-based 
service delivery mechanisms to overcome geographic barriers. 

Conversely, the positive moderating effect of institutional quality (β = 0.198, p < 0.001) demonstrates the 
importance of supportive institutional environments for microfinance effectiveness. This finding aligns with 
institutional theory predictions that formal and informal institutions play crucial roles in determining the success 
of development interventions (North, 1990; Williamson, 2000). The result suggests that microfinance programmes 
are more likely to achieve their poverty reduction objectives in contexts characterised by effective governance, 
strong rule of law, and well-functioning regulatory frameworks. 

The multigroup analysis provides valuable insights into the heterogeneous impacts of microfinance across 
different demographic groups, with ethnic minority households experiencing stronger poverty reduction effects 
compared to ethnic majority households. This finding may reflect the greater financial exclusion experienced by 
ethnic minority populations prior to microfinance intervention, suggesting that programmes targeting previously 
excluded populations may achieve greater marginal impacts (Morduch, 2000). The result has important 
implications for microfinance programme design and targeting strategies, indicating that interventions focused on 
ethnic minority communities may generate higher social returns on investment. 

The fsQCA analysis contributes to the literature by identifying distinct configurational pathways through 
which microfinance accessibility contributes to poverty reduction outcomes. The three configurations identified in 
the analysis demonstrate that there are multiple routes to achieving high poverty reduction outcomes, with 
different combinations of microfinance accessibility, financial capability, social capital, geographic remoteness, and 
institutional quality generating similar welfare improvements. This finding supports the argument that 
development interventions should adopt contingency approaches that recognise the importance of contextual 
factors in determining programme effectiveness (Pawson & Tilley, 1997). 

The study's theoretical contributions extend beyond the specific context of Vietnam to offer insights into the 
broader mechanisms through which microfinance programmes can optimise their poverty alleviation impact. The 
integrated theoretical framework developed in this study, which combines financial inclusion theory, capability 
approach, and institutional theory, provides a more comprehensive understanding of microfinance effectiveness 
than previous studies that focused on single theoretical perspectives. The framework's emphasis on mediating 
mechanisms and contextual moderators offers practical guidance for programme designers seeking to enhance 
microfinance impact in diverse rural contexts. 

The empirical findings have significant implications for policy and practice in microfinance programme design 
and implementation. The importance of financial capability as a mediating mechanism suggests that microfinance 
institutions should invest in comprehensive financial education programmes that enhance clients' ability to utilise 
financial services effectively. The positive relationship between microfinance accessibility and social capital 
development indicates that group-based lending models may generate valuable social spillover effects that extend 
beyond immediate economic impacts. 

The study's limitations include its cross-sectional design, which prevents causal inference regarding the 
direction of relationships between variables, and its focus on a single country context, which may limit the 
generalisability of findings to other developing countries. Future research should employ longitudinal designs to 
establish causal relationships and examine the sustainability of microfinance impacts over time. Additionally, 
comparative studies across different countries and cultural contexts would enhance understanding of the boundary 
conditions that influence microfinance effectiveness. 

The research contributes to the ongoing evolution of microfinance theory and practice by providing empirical 
evidence for the complex, multifaceted nature of microfinance impact. The findings suggest that simple, uniform 



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approaches to microfinance delivery are unlikely to achieve optimal poverty reduction outcomes across diverse 
contexts. Instead, the study supports the development of adaptive, context-sensitive programme designs that 
recognise the importance of local institutional environments, social structures, and demographic characteristics in 
determining intervention effectiveness. 
 

Acknowledgments: 
I would like to express my sincere gratitude to Dr. Hoang Vu Hiep for his invaluable guidance and inspiration 
throughout this research. His expertise, insights, and unwavering support have been instrumental in shaping the 
direction and quality of this study. I am deeply appreciative of his generosity in sharing his time, knowledge, and 
network, which have greatly contributed to the success of this research. His mentorship and commitment to 
academic excellence have not only enriched the quality of this work but have also had a profound impact on my 
personal and professional growth. 
 

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