Afro-Asian J. Finance and Accounting, Vol. 6, No.

3, 2016 241

Accessibility to credit of small medium enterprises in

Vietnam

Ha Thi Thieu Dao*

International Economics Faculty,
Banking Technology Review,
Banking University of Ho Chi Minh City,
36 Ton That Dam District 1,
Ho Chi Minh City, Vietnam
Email: daohtt@buh.edu.vn
*Corresponding author

Nguyen Thi Mai

Basic Scientific Department,
Foreign Trade University,
15 D5 Street, Binh Thanh District,
Ho Chi Minh City, Vietnam
Email: trucmai1911ftu@gmail.com

Nguyen Thien Kim

Faculty of Finance,
Banking University of Ho Chi Minh City,
36 Ton That Dam Street, District 1,
Ho Chi Minh City, Vietnam
Email: kimnt@buh.edu.vn

Abstract: The growth prospects of a SME highly depend on its potential

to invest in restructuring and innovating, which in turn, needs capital. Access to
financial resources, therefore, becomes a significant factor of the growth of a
SME as well as economic growth in developing countries. This paper examines
determinants of credit accessibility of SMEs in Vietnam. Both quantitative and
qualitative approaches are applied, in which logit model is employed to
investigate possibility of credit accessibility of 756 SMEs in Vietnam. Also, a
semi-structured questionnaire is used to investigate the causes of poor
connections between SMEs and banks in Ben Tre province. The results express
that the factors including education of enterprises’ managers, collaterals and
asset values of enterprises, loans of enterprises taken from Vietnam Bank for
Social Policies (VBSP), state banks or even private banks and the distances
between enterprises and credit institutions will increase the probability of credit
accessibility of SMEs. A number of recommendations are introduced to
promote the credit accessibility of SMEs such as providing unsecured loans and
cooperating loans, improving the roles of state banks of Vietnam and
decreasing the regional differences.

Keywords: accessibility to credit; small and medium enterprises; SMEs; lack

of financing.

Copyright © 2016 Inderscience Enterprises Ltd.

242 H.T.T. Dao et al.

Reference to this paper should be made as follows: Dao, H.T.T., Mai, N.T. and
Kim, N.T. (2016) ‘Accessibility to credit of small medium enterprises in
Vietnam’, Afro-Asian J. Finance and Accounting, Vol. 6, No. 3, pp.241–257.

Biographical notes: Ha Thi Thieu Dao is an Associate Professor in

Economics. She is currently the Dean of International Economics Faculty,
Banking University of Ho Chi Minh City and Editor-in-Chief of Banking
Technology Review. Her research interest is monetary policy, microfinance
and development economics.

Nguyen Thi Mai is currently a Lecturer at Foreign Trade University Campus 2

in Ho Chi Minh City and PhD student at University of Economics and Law.
Her research interest is finance and development economics.

Nguyen Thien Kim is currently a PhD student in finance and risk at

Nottingham University Business School, University of Nottingham. She is
also a Lecturer at Banking University of Ho Chi Minh City. Her research
interest includes corporate finance, financial markets, behavioural finance and
development economics.

This paper is a revised and expanded version of a paper entitled ‘Accessibility

to credit of small medium enterprises in Vietnam’ presented at The Seventh
Vietnam Economist Annual Meeting, Ho Chi Minh City, June 2014 and
‘Accessibility to credit of small medium enterprises in Vietnam’ presented at
The Fifth Regional Network on Poverty Eradication, Ho Chi Minh City,
October 2014.

1 Introduction

It is presented that SMEs can easily adapt to different market conditions, ensure high
incomes, create jobs and contribute to the process of accelerating economic growth in
low-income countries. It is also confirmed that finance accessibility can assist SMEs to
reduce transaction costs, maintain daily activities, create opportunities for investments
and growth in long-run (Lawless and McCann, 2011; Kira, 2013; Nkuah et al., 2013).
According to OECD (2006), SMEs can be efficiently operated unless they do not
experience restraints in credit. Recent empirical studies show that SMEs can be
jeopardised because of financial constraints (Beck et al., 2005; Aghion and Marinescu,
2007; Fatoki and Assah, 2011). However, accessibility to credit still remains a challenge
to most SMEs, especially in developing economies. Therefore, this is an important issue
in both private and public sectors (Advani, 1997).
In Vietnam, the report of CIEM et al. in 2012 shows that about 39% enterprises have
difficulties in credit access. Similarly, the results of an investigation carried out by
DANIDA concluded that the key constraint of business development is the financial issue
(credit), 6/10 (GSO, 2013). According to the president of SMEs association in Vietnam,
the most important challenge to SMEs’ operation is lack of credit access. In the period
from 2010 to 2013, the proportion of credit of SMEs accounts for 21.4% in comparison
with the whole economy, in which, 70% is short term. However, only 24.4% SMEs in
Vietnam have access to credit. Also, in a survey conducted by SMEs association, only
 Accessibility to credit of small medium enterprises in Vietnam 243

32% enterprises can access bank credit, 35% can access with difficulty and 33% cannot
get a bank loan (Hoàng, 2014).
Measuring and analysing the accessibility to credit of SMEs becomes considerably
important not only for the SMEs themselves but also for the whole economy. In the
blueprint of ASEAN policy for SME development (APBSD) 2004–2014, strategic work
programs, policy measures and indicative outputs are comprised to accelerate the pace of
SMEs’ development, enhance the competitiveness and dynamism of the SMEs in
ASEAN, strengthen the resilience of the SMEs and increase the contribution of the SMEs
to the economic growth and the development of ASEAN community, in which
accessibility to finance is among the most significant concerns. This research is
conducted to provide a brief survey of theoretical and empirical basis as well as construct
a model to estimate the accessibility to credit of SMEs in Vietnam. The research, then,
includes some recommendations to improve the situation.

2 Literature review on credit accessibility of SMEs

SMEs are private enterprises with small number of employees and low amount of
revenues. Currently, there is no unique definition for this type of enterprise because of
various viewpoints in different countries. These enterprises vary on the level of capitals,
businesses and jobs. Consequently, some opinions identify SMEs basing on the size
(number of employees, revenues, profits and asset values). These approaches can be
divided into two aspects, including economics and statistics. From the economic
perspective, an enterprise is considered as a SME when it meets three following criteria:
1 it has a relatively small share in their market place
2 it is managed by an owner, or part owners, in a personalised way but not through the
medium of a formalised management structure
3 it is independent, in other words, it is not a part of a larger enterprise (Abor and
Quartey, 2010).
From the statistical perspective, SMEs are defined basing on three key issues:
1 size of the small firm sector and its contribution to GDP, employment and export
2 the extent of changing the contribution of small firm sector to the economy over time
3 in a cross country comparison regarding the contribution of small firm sector to the
economy (Abor and Quartey, 2010).
Each country has different criteria for the classification of SMEs. According to European
Commission (2003), SMEs are using fewer than 250 thousand employees and/ or revenue
not exceeding 43 million EUR (Taylor and Adair, 1994). Other organisations such as
World Bank, African Development Bank, Asian Development Bank, UNDP classify
SMEs based on maximum number of employees, maximum revenues or turnovers,
maximum assets (Gibson and Vaart, 2008). In Vietnam, according to Decree 56/2009/
(2009) NĐ-CP SMEs are the registered businesses established under the law, divided into
three levels: micro, small and medium on the size of total capital and annual average
number of employees (in which, total capital is priority criteria).
244 H.T.T. Dao et al.

There are many causes of constraints in credit accessibility of SMEs, in which the
most popular one is risk profile differences and information asymmetries between the
enterprises and the credit institutions (OECD, 2006). Also, SMEs usually lack collaterals
(Atanasova and Wilson, 2004; European Central Bank, 2007; Tonin et al., 2007; Tuyến,
2009; Cung, 2012; Phương, 2012). In fact, total assets and financial capacity play
important roles in credit accessibility of SMEs because there are good collaterals from
the bank perspective (Ajagbe, 2012; Tuyến, 2009; El-Said et al., 2013; Phương and
Wang, 2013). In addition, Coco (2002) proved that collaterals can reduce information
asymmetries and moral hazard problems between banks and enterprises. Meanwhile,
Fernando et al. (2002) revealed that ownership characteristics of SME are the most
crucial determinant of accessibility to credit. However, this is not the only factor (Stein,
1998). Socially, good interaction between banks and enterprises can contribute to
increase the credit line (Uzzi, 1999).
In addition, Sharpe (1990) suggested that interest rate is a tool to differentiate
borrowers (good/ bad borrowers). However, SMEs are not willing to pay high interest
rates, since they are aware of the possibility that they cannot repay their loans. Stiglitz
and Weiss (1981) argued that credit constraints can occur when banks increase the
requirements for collaterals as a condition to provide a loan. As a result, low interest
borrowers (including SMEs) may be removed from the list of potential customers and
banks may skip these customers. Also, selecting credit resources and credit values may
considerably affect to credit accessibility (Beck et al., 2007).
Most credit institutions set stern requirements to SMEs, in which, the most important
factor is ownership characteristics (Fernando and Griesshaber, 2011). Regarding gender,
female managers are found to have more constraints in credit accessibility, mainly
because women hold fewer assets, which can be used as collaterals for loans, than men
(Tonin et al., 2007; Ajagbe, 2012; Nikaido et al., 2012). Educational attainment and skills
of business owners (typically expressed by the participation in courses of business, credit
procedures, or the possibility to provide business plans) have a positive impact on access
to credit (Messah, 2011; Ajagbe, 2012; Nikaido et al., 2012; Lucey et al., 2006). In
addition, a survey on determinants of credit access by SMEs in the ECB and the
European Commission (Canton et al., 2010) exhibited that age of the business owner also
affects to the credit accessibility (Mukiri, 2008; Messah, 2011; Musamali and Tarus,
2013). The number of years a business is operated also has a positive impact on access to
finance, which means the older the business is, the easier it can reach to finance resources
(Musamali and Tarus, 2013; El-Said et al., 2013; Kira, 2013; Phương and Wang, 2013).
Regarding firm size, El-Said et al. (2013) considered the total workforce has positive
impact on credit accessibility. Meanwhile, other authors emphasise the ratio of export to
turnover (Bebczuk, 2004; Phương and Wang, 2013), or export activities (Bebczuk, 2004)
significantly affect to the possibility of credit.
The next variable can be considered is geography (Tonin et al., 2007; Ajagbe, 2012;
Nikaido et al., 2012; Phương, 2012). In specific, businesses located in the northern and
eastern regions of India have limited access to formal credit than the southern region. The
reason is that industrial regions are mainly distributed in the western and southern
regions; therefore, accessibility to formal credit by small businesses is more convenient
than the north and the east (Nikaido et al., 2012). Similarly, Phương (2012) proved that
enterprises in the Red River Delta region and north central faced considerably difficulty
in credit accessibility. Similarly, enterprises in the Mekong Delta and the south-east also
 Accessibility to credit of small medium enterprises in Vietnam 245

experienced obstacles in accessing loans from banks, but less than the two mentioned
regions in the north.

3 Data and methodology

3.1 Data collection

The main data source in this study is from the 7th survey of SMEs in 2011 by Central
Institute Economic Management (CIEM). The survey is executed by depth interviews of
2,552 SMEs in ten provinces and cities in Vietnam, in which the SMEs are mainly
located in four provinces including Ho Chi Minh City (603 enterprises), Nghe An
(354 enterprises), Ha Tay (350 enterprises) and Hanoi (393 enterprises). This data set
refers to different aspects of enterprises, however, within this paper, the authors focus
only on the characteristics of enterprises related to credit issues. The research uses 30
questions relating to common characteristics and credit accessibility of enterprises from
the total 142 questions, including both common characteristics of SMEs and specific
information such as production nature, technology, sales structure, costs, fees and taxes,
credit, employment, environment, network, obstacles and economic potential. In
2,552 surveyed enterprises, there are 756 enterprises applied for loans, mainly bank loans
(86.90%), in which 206 enterprises (27.78%) experience difficulties in credit access.
In addition, to understand the causes of lacking connection between banks and
businesses, the authors apply a semi-constructed questionnaire and send it to specialised
staff in charge of IFAD project in all branches of Vietnam Bank for Agriculture and
Rural Development (Agribank) in Ben Tre province.

3.2 Methodology
This research applies a mixed method which includes both quantitative and qualitative
techniques to measure the credit accessibility of SMEs in Vietnam.
Qualitative method is implemented through a survey to investigate the reasons why
there is a lack of connections between banking sectors and enterprises. A semi-structured
questionnaire is conducted in 13 branches of Vietnam Bank for Agriculture and Rural
Development (Agribank) in Ben Tre province.
Meanwhile, quantitative method is employed to examine determinants of credit
accessibility of SMEs. Based on literature and data in Vietnam, the authors use logit
model expressed as follows:

⎛ P ⎞
ln ⎜ i ⎟ = β0 + β j X j + u j
⎝ 1 − Pi ⎠

where β0 and βj represent the coefficients containing effects of the exogenous variables
while uj is the random error representing the effect of the omitted variables. The
independent variables are described in Table 1.
246 H.T.T. Dao et al.

Table 1 Variables in the logit model

Symbol Variable Estimated method

Loan Enterprises experienced = 1 enterprises experienced difficulties in access
difficulties in access to credit. to credit.
= 0 enterprises have no difficulty in credit access
Gender Gender of business owner = 1 business owner is male
= 0 business owner is female
Age Age of business owner = 2011 – year of birth of business owner
Eduj Education of business owner (j = 1,4) including: not completed elementary,
graduated from elementary, graduated from
secondary school, graduated from high school.
Qualj Highest technology qualification (j = 1,4) including elementary worker, technical
of enterprises’ owners worker without certificate, technical
worker/professional secondary and
college/university/post-graduate.
Age firm Number of year in operation of = 2011 – established year of a business
a business
Labour Total employees Number of employees in a business
Asset Total assets (million dong) = physical assets + financial assets
Export Export rate/total revenue (units) = export rate/100
Scale loan Total market value of major (Million dong)
official loans
Rate Interest (%/year) of the major = (interest month/100) +1) ^ 12 – 1
official loan
Coll Collateral = 1 enterprise gets a loan with collateral
= 0 enterprise gets a loan without collateral
Distanj Distance from enterprise to Dummy variable, j = 1,4: under 5 km, from 5 to
official credit institution 10 km, 11 – 20 km, over 20 km
location
Bankj Credit sources of enterprise Dummy variable, j = 1, 7 including stated owned
joint stock commercial banks, private joint stock
commercial banks, foreign banks, bank for
social policy, development assistance fund and
others
REGIONj Located region of enterprise J = 1, 6: red river delta, Northern Midlands and
mountainous, north central area and central
coastal area, central highlands, south-eastern
region and Mekong Delta

4 Research findings on SME’s credit accessibility

4.1 Credit accessibility from supplier’s point of view

The results obtained from the semi-structured questionnaire tailored for nine branches of
Agribank in Ben Tre province to examine the causes of difficulties in credit access are
expressed in Table 2.
 Accessibility to credit of small medium enterprises in Vietnam 247

Table 2 Causes of difficulty in credit access from banks’ point of view

Quantity Proportion
Causes
(person) (%)
Macroeconomic environment 1/9 11.1
Unsecured collateral 6/9 66.7
Inappropriate financial statement 8/9 88.9
Unclear invoices and documents 4/9 44.4
Low scale of counterpart funds 2/9 22.2
Being aware of using capital for appropriate purposes. 3/9 33.3
Others (Uninformed credit officers, competition between banks, 1/9 11.1
high interest)
Source: Results obtained from the survey
From Table 2, it is observed that although macroeconomic difficulties make the market
go down, inventories increase and non-performing debts expand which play as the
constraints for both banks and enterprises to accelerate credit, this circumstance is not
considered as the key factor affecting credit accessibility. This is also the conclusion of
general statistic organisation in Vietnam (GSO, 2013) and business association in
An Giang (Dep, 2013).
The results of this survey are also consistent with previous qualitative researches
regarding the following issues:
1 66.7% of survey respondents concluded that unsecured collateral is the main reason
for credit accessibility difficulty of SMEs. As a matter of fact, applying price
framework provided by the provincial committee to value agricultural land makes
the land value become considerably lower than its market price. As a result, the
value of approved loan is low. Although, house associated with land has high
collateral value, this asset ownership has not been recorded in land certificate yet.
Also, other assets of enterprises such as factories, machineries and equipment cannot
be certified by the ownership. Due to the fact of lacking of legal ownership
certification for the mentioned assets, enterprises cannot use these assets as
collaterals; therefore, they cannot get loans with higher value. This issue is also
consistent with empirical evidence and statements of GSO (2013). Accordingly,
small scale, low capital, fragmental business process, low quality and diversified
products and low level of flexibility make enterprises easily affected from outside.
2 Education of business owners is the main factor affecting to the credit accessibility
of enterprises. In fact, 88.9% of survey respondents declared that enterprises fail to
perform complete accounting reports because of limited knowledge. As a result, their
balance sheet is relatively simple and incomplete which makes it hard for the banks
to evaluate the financial situation of enterprises.
In addition, apart from the evaluation capacity of credit officers and complying circular
09/2012/TT-NHNN about using payment instruments to disburse credit value (when
SMEs are still familiar with cash payment), difficult economic situation and decreasing
credit rating points also affect credit accessibility. These issues are consistent with the
research of GSO (2013).
248 H.T.T. Dao et al.

4.2 Assessment of credit accessibility from SMEs’ characteristics

4.2.1 Descriptive statistics
In 757 SMEs requesting a loan, 210 enterprises experience credit constraint of which
69.05% difficulties originate from banks. There are 85 companies (40.48%) access credit
from state-owned commercial banks, 22.86% from joint stock commercial banks and
5.71 from Vietnam Bank for Social Policies (VBSP). The size of SMEs loans spreads
from seven million Vietnam dong (VND) to 42.748 billion VND. The loans which
experienced constraints mostly concentrated from 100 million to 500 million VND. The
offered interest rates range from 0.07% to 9.87% per year, in which credit constraints
usually happen to the loans with interest rates above 0.22%.
Table 3 Correlation matrix of the variables in the model

Loan Age Age firm Asset Export Scale loan Rate

Loan 1
Age 0.0201 1
Age firm –0.0217 0.3233* 1
Asset –0.0266 0.0236 –0.0411 1
Export –0.0072 0.0083 –0.0129 0.1742* 1
Scale loan –0.0144 0.0656 –0.0497 0.3471* 0.0855* 1
Rate 0.0421 0.0011 –0.0243 0.0213 –0.0245 –0.0106 1
Note: *significant level of 5%
Source: Estimation of authors based on SMEs, CIEM (2012)
Regarding characteristics of the SMEs, the number of years that SMEs are in operation is
from two to 57 years, in which, young businesses (2 to 13 years old) often experience
difficulties in credit accessibility. The size of SMEs is also diversified from one
employee and total assets (including both tangible and financial assets) of 18 million
VND to 496 employees and 425.604 billion VND. This shows that the average value of
variables such as ages of business owners, age of enterprises, values of loans, total assets
and number of employees is significantly different from the min and max values. Also,
the kurtosis and skewness of data are unevenly distributed. Therefore, we take the
logarithm form of these variables. The authors also examined the correlation between the
dependent variable and the independent variables. The results in Table 3 show that all
independent variables do not correlate with dependent ones, in which, all correlation
coefficients of variables is lower than 0.4. Therefore, applying OLS model with logit
regression will reduce multicollinearity (Verbeek, 2004). In addition, Pearson chi-square
is used to examine the correlation between variables. The results exhibit that existing the
correlation between variables such as enterprises experienced difficulties in access to
credit, enterprises accessed credit from state banks, enterprises located in Red River
delta, midland and northern mountainous region, north central and central coast with the
significance level of 1% (Appendix 1). The variables such as enterprises accessed credit
from VBSP, enterprises located in south east of Vietnam correlated with the dependent
variable with the significance level of 10%. To get more basis to choose appropriate
variables, covariance matrix and t-test are also employed. The results show that total
values of major official loans, total employees are correlated with the dependent variable.
 Accessibility to credit of small medium enterprises in Vietnam 249

Also, the interest rate of the major loan is correlated with access to official credit of
enterprises but strongly correlated with collateral causing multicollinearity in the model.
VIF test expresses the same result. Moreover, there is no difference in groups of interest
rate, labour, loan size and exporting rate between SMEs experiencing credit constraints in
comparison with the others. The coefficients in the model with all variables and model
omitting four variables are not significantly different, therefore, best linear unbiased
estimators (BLUE) characteristics of regressed variables is maintained (Wooldridge,
2012). As a result, the authors exclude the mentioned variables in the model.

4.2.2 Results
Based on the descriptive statistics of variables and correlation analysis between variables,
the authors regressed three models. However, initial testing results show that introducing
too many variables reduce the statistical significance of main variables (noise). The
heteroscedasticity is also tested in this research. The results (Appendix 2) show that
heteroscedasticity exists in the model. To overcome this issue, option ‘robust’ in Stata is
applied.
Table 4 Selecting the appropriate model

Log pseudu Waldchi2

_cons Observations Pro > chi2
likelihood (24)
Dependent variable loan
1.527
757 –356.8 146.04 0.0000
(1.610)
Explainable Gender Ln (Age) Ln (age firm) Edu2 Edu3 Edu4
variables
–0.274 0.697 –0.138 –0.228 –0.755* –0.694**
(0.212) (0.425) (0.181) (0.659) (0.447) (0.273)
Qual1 Qual2 Qual3 Qual4 Ln (asset) Coll
–0.262 –0.399 –0.492* –0.121 –0.276*** –1.888***
(0.487) (0.481) (0.272) (0.294) (0.0726) (0.435)
Bank1 Bank2 Bank4 Bank5 Distan2 Distan3
–1.258*** –0.981** –2.482*** –0.766 –0.125 –0.319
(0.397) (0.442) (0.500) (0.605) (0.214) (0.338)
Distan4 REGION1 REGION2 REGION4 REGION5 REGION6
–1.009** 1.582*** –0.764* –0.401 1.172*** 0.420
(0.507) (0.298) (0.456) (0.511) (0.359) (0.453)
Notes: In parentheses: standard errors-se, ***, **, *respectively express significant level
of 1%, 5%, 10%.
Source: Estimation of authors based on SMEs CIEM (2012)
The model presented in Table 4 is the most appropriate one since variables being strongly
correlated with the others are eliminated. In other words, multicollinearity is eliminated
as well as change of variance phenomenon because of the choice ‘robust’ in Stata. This
choice contributes to minimise the errors in OLS, putting its value closer to the true value
(Gujarati, 2003). Regression results from this model provide a more accurate conclusion
compared to initial discussions based on descriptive statistics. In addition, the model
exhibits a high level of significance of 77.15% (Appendix 3).
250 H.T.T. Dao et al.

Table 5 Interest rate and form of collateral of SMEs

Rate of collateral Asset value (million Averag interest

Collateral form
(%) dong) rate/year (%)
Land 51.29 9,288.45 24.79
House 19.52 6,135.29 27.12
Machinery and equipment 11.04 23,752.16 20.59
Personal asset 15.43 8,100.62 39.30
Others 2.72 32,677.05 19.43
Difficulty in credit access 71.43 8,905.62 30.72
Source: Estimation of authors based on SMEs, CIEM (2012)
In Table 5, Wald chi2 = 146.04 (Prob = 0.0000) exhibits appropriateness of the model.
Estimated coefficients of independent variables have positive signs expresses every unit
increase of the mentioned variables will raise the probability of having difficulties in
credit access, when other variables are constant. In contrast, negative coefficients
represent for factors reducing the probability of credit access limitations. It can be
observed from the model:
The main reasons leading to difficulties in credit access of SMEs are procedures and
bank officials (39.05%), lack of collateral (30.48%), complexity of government
regulations (18.57%) and failing in proving the potential of enterprise (7.14%). The
results show that simplifying procedures, improving relationship between bankers and
SMEs, diversifying types of collaterals play a significantly important role in enhancing
the ability of credit access for SMEs (CIEM et al., 2012).
First, the sources of credit strongly affect to the probability of credit access of SMEs,
in specific, compared to foreign banks, the difficulty in credit accessibility of SMEs will
decrease from 2.48% to 0.98% when the enterprises access credit from VBSP, state bank
or even private banks. In which, the role of VBSP and state banks is emphasised.
In fact, from total numbers of enterprises requesting loans, 61.9% apply for loans
from state owned joint stock commercial banks; 19.71% from private joint stock
commercial banks and only 9.13% of SMEs apply for loans from VBSP. Noticeably,
57.62% of enterprises experience limitations in access to credit from state owned joint
stock commercial banks, 23.33% from private joint stock commercial banks and only
5.17% from VBSP (CIEM, 2012). The main causes of difficulties in credit accessibility
from the former two are bank procedures and bank officials (38.84% and 38.78%
respectively); collateral (28.1% and 30.61% respectively) and complexity in Government
regulations (22.31% and 18.37% correspondently) (CIEM, 2012).
Since collateral is very important to credit accessibility of SMEs, banks should relax
regulations and lower evaluating standards of collateral to solve the problems.
Second, collateral considerably influenced the credit accessibility. This makes
collateral the most important constraint of credit accessibility, which is consistent with
the previous researches. In addition, enterprises having large total assets can reduce
1.89% likelihood of facing limitation in credit accessibility when other variables are
constant. Therefore, access to credit of SMEs in Vietnam could be improved if banks
relax the conditions relating to collateral and total asset to enterprises.
Data shows that 28.57% SMEs do not have collateral and experience difficulty in
credit accessibility while 71.43% have the same limitation despite they still have
 Accessibility to credit of small medium enterprises in Vietnam 251

collateral. Undiversified and low value of collaterals is the reason for this issue. In fact,
51.29% enterprises use land as collateral while land value (9,288.45 million dong) is not
higher than other assets. Also, when conducting a test to examine the difference between
interest rates of loans with and without collateral, we find that the difference is
statistically significant at 10%. Table 5 describes in details the difference in interest rate
relating to types of collaterals. It means personal assets bear a remarkably high interest
rate of 39.3% per year while the rate for land collateral is 24.79%. The average interest
rate for SMEs experiencing difficulty in credit accessibility is 30.72%.
Third, education and technology qualification of business owners is also a concern.
However, the outcome shows that probability of credit constraint will decrease when the
households’ heads are educated (elementary level or higher) and have qualified technical
expertise. Well-educated business owners can accurately understand the procedures and
well prepare documents to apply for a loan. Therefore, bank officers should
enthusiastically consult and instruct SMEs’ representatives in details.
Fourth, distance between and credit institution over 20km can decrease probability of
facing credit constraints of 1.01%, other variables remain unchanged. The reality in
Vietnam presents that banks easily offer loans to enterprises located far away due to
information asymmetry. This may happen when SMEs prefer accessing banks with stable
credit relationships and familiar procedures despite the distance. Data shows that
probabilities of enterprises experienced difficulties in credit access with distance below
5 km, 5–10 km, 11–20 km and over 20 km are 80 (42.55%), 85 (45.21%), 18 (9.57%) and
5 (2.66%) respectively.
Fifth, with similar characteristics, compared to SMEs located in north central area and
central coastal area, probability of credit constraints increases 1.58% to SMEs located in
Red River Delta, 1.17% to SMEs located in south-eastern region and decrease 0.76% to
SMEs located in Northern Midlands and Mountainous. This result suggests that the credit
institutions and banks in the mentioned regions should reexamine their policies to support
SMEs.

5 Recommendations

Macroeconomic issues such as inventories and problems related to the disposal of

collateral are being implemented by relevant authorities. For example, Vietnam Banks
Association issued a report named 284/BC-HHNH on 20/08/2013 recommending some
obstacles in legal documents directly related to operations of credit institutions. These
limitations require deep researches for appropriate suggestions. Based on the results
obtained from this paper, a number of recommendations are proposed to increase credit
accessibility of SMEs:
Firstly, collateral is the main determinant of credit accessibility. Therefore, to
overcome this barrier, banks should research for alternative credit policies such as
unsecured loans and product chain-based credit. Meanwhile, enterprises can choose other
institutions besides banks such as Credit Guarantee Fund to connect enterprises and
banks. The cooperation between SMEs and banks is necessary to diversify collateral,
increase collateral value and reduce interest rate to promote credit accessibility to SMEs.
Secondly, education is relatively important to credit access. In the context of general
education of entrepreneurs are considerably low, bank officers can assist by
enthusiastically explaining and guiding to procedures and processes. Experiences from
252 H.T.T. Dao et al.

Saigon Commercial Bank (SCB) should be learnt in this case. In specific, SCB’s officers
explain liability statement in detail or even complete it for corporation at the beginning,
then, SCB let the corporation make by itself under SCB’s consultation. It may be hard at
first but definitely become easier after several times. SCB even voluntarily completes the
statement and ask the company to certify.
Thirdly, access to credit of VBSP is easier than other institutions. SBV as a
representative of state owned capital in VBSP, state bank governor as chairman of the
board of director of VBSP need to boost lending to SMEs through this channel. SMEs
can apply for loans from VBSP instead of other banks if the credit demand is below 50
million VND.
Fourthly, the banking industry should review these regulations and attitude of bank
officers of branches located in the Red River Delta, south-eastern region and Northern
Midlands and Mountainous as well as in other branches to examine the regional
differences in access to credit. Also, further research should be conducted to figure out
the meaning of distance over 20km between bank and corporation.
Fifthly, apart from the effort of the banking industry, enterprises should be actively
changed:
1 Decrease the level of dependence on external debts and use appropriate sources for
different purposes. For example, short term debts should be used to finance short
term assets while long term debt is used for funding long term assets. With this
principle, enterprises can reduce interest rate risk. Also, enterprises wishing to
employ long-term debts should carefully consider the effectiveness of the project
because of high cost of this fund.
2 Commercial credit policy is also a solution for corporation; however, legal
framework should be completed to force the development of this kind of credit. The
advantage of this policy is supported by researches of Văn (2013) for 248 enterprises
listed in HOSE and HNX. Accordingly, corporation may increase revenue by using
discount policy with appropriate discount rate.
3 Improve management capacity and ability to access information, especially
information supporting business.
Enterprises can find information to support their particular demand, especially
information on training courses for preparing loan applications through the portal to
support SMEs of the Ministry of Trade and Industry.

6 Limitations and suggestions for further researches

This study only expresses preliminary analysis on determinants of credit access of SMEs
from supply side. Other factors such as companies’ financial characteristics and
institutional features can also affect the credit accessibility should be alternatively
considered in the future. Besides, the research does not discriminate between rural and
urban regions in credit access. Also, some results of the regression model do not been
explained in depth since there are lack of evidences in reality (distance from enterprise to
official credit institution location). In terms of the data set, although this is most reliable
data set relating to SMEs in Vietnam, some information is missing such as operation
indicators of enterprises, number of rejected applications, reason of rejection and the
 Accessibility to credit of small medium enterprises in Vietnam 253

basis of the survey. The comparison between SMEs and large enterprises has not been
conducted yet. Finally, depth research for various regions is needed to investigate the
differences in credit access among SMEs. If possible, time series data should be
employed to evaluate the changes of credit accessibility over time.

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Appendix 1

Pearson chi-square test

Biến Giátrị chi-square P-value
Gender 0.0306 0.861
Edu2 0.4140 0.520
Edu3 1.6332 0.201
Edu4 5.8296 0.016
Edu5 7.2813 0.007
Qual1 0.4462 0.504
Qual2 0.1252 0.723
Qual3 1.5865 0.208
Qual4 0.0307 0.861
coll 66.2649 0.000
Bank1 32.1097 0.000
Bank2 1.2615 0.261
Bank3 2.7125 0.100
Bank4 3.5438 0.060
Bank5 2.3604 0.124
Distan1 2.0778 0.149
Distan2 0.0042 0.949
Distan3 0.1581 0.691
Distan4 2.4469 0.118
REGION1 23.8571 0.000
REGION2 18.5052 0.000
REGION3 5.8224 0.016
REGION4 1.9112 0.167
REGION5 3.3549 0.067
REGION6 1.3877 0.239

Appendix 2

White’s test and Breusch-Pagan/Cook-Weisberg test for heteroskedasticity

White’s test for
• Ho: homoskedasticity against
• Ha: unrestricted heteroskedasticity
chi2(253) = 295.31

Prob > chi2 = 0.0348

 Accessibility to credit of small medium enterprises in Vietnam 257

Table A2 Cameron and Trivedi’s decomposition of IM-test

Source chi2 df p
Heteroskedasticity 295.31 253 0.0348
Skewness 313.67 24 0.0000
Kurtosis 7.05 1 0.0079
Total 616.03 278 0.0000

Breusch-Pagan/Cook-Weisberg test for heteroskedasticity

• Ho: constant variance
• Variables: fitted values of khovay.
chi2(1) = 12.08

Prob > chi2 = 0.0005

Appendix 3

Test classification
True Total
Classified D ~D
+ 59 19 78
– 151 528 679
Total 210 547 757
Classified + if predicted Pr(D) >= .5
True D defined as khovay != 0
Sensitivity Pr(+ | D) 28.10%
Specificity Pr(– |~D) 96.53%
Positive predictive value Pr(D | +) 75.64%
Negative predictive value Pr(~D| –) 77.76%
False + rate for true ~D Pr(+ |~D) 3.47%
False – rate for true D Pr(– | D) 71.90%
False + rate for classified + Pr(~D| +) 24.36%
False – rate for classified – Pr(D | –) 22.24%
Correctly classified 77.54%