What Determines the Access to Credit by SMEs? A Case Study in Vietnam

Abstract

Using World Bank Enterprise Survey in 2009, we investigated which factors determined SME access to credit in Vietnam. This database includes not only small and medium enterprises but also large enterprises. The scope of data is very wide but in measure of determinants of SME credit availability, the data is rather limited. Due to the characteristics of data, our paper could not aim at in-depth specific problems, but at looking for general picture of SMEs financing including endogenous and exogenous variables.

The binominal logit model is used to assess the influence of firm and financial characteristics, credit worthiness, industry and region dummy on the probability that firms access credit. We added discriminant and cluster analysis to contribute to the findings that logistic model could not reach.

Basing on logistic model, we found that besides conclusions that were consistent with other studies, there were also interesting unprecedented conclusions. Our study showed that in general, businesses in Vietnam depended too much on real estate, land as collateral compared with other Asian countries. As a result, this might cause problems for small businesses in accessing bank loans. However, this did not apply with Central North where it was extremely easy for small business to access capital. From the findings, our study suggests that more research be focused on this area in order to have deeper understanding of the factors that facilitate bank loans for SMEs which can be applied for SMEs in other areas.