Organizational and external determinants of financial sustainability in Vietnam’s people’s credit funds: A structural equation modeling approach

Abstract

This study investigates the key organizational determinants influencing the financial sustainability of Vietnam's People's Credit Funds, which serve a foundational role in grassroots finance by mobilizing local capital and fostering rural economic stability. Despite their importance, significant gaps persist in understanding the factors crucial for their long-term viability, especially concerning the interplay between internal capacities and discretionary financial behaviors in a changing policy environment. To address this, the research employs a quantitative methodology, analyzing survey data from 269 managers, staff, and board members of People's Credit Funds across diverse regions in Vietnam. Structural Equation Modeling was used to test a hypothesized model featuring six core constructs: organizational capacity, operational efficiency, loan portfolio management, governance quality, client outreach, and transparency. The findings confirm that all six factors positively and significantly influence financial sustainability. Specifically, governance quality was identified as the most critical determinant, followed by operational efficiency and effective loan portfolio management. Organizational capacity, client outreach, and transparency also demonstrated significant positive effects on financial resilience. These results provide a comprehensive empirical framework and offer actionable insights for regulators, policymakers, and practitioners to strengthen governance, guide strategic management, and ensure People's Credit Funds remain viable in a dynamic economic landscape.