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Abstract
A key target of Small and Medium sized Enterprise (SME) development is facilitating their access to finance, therefore drivers in SME credit decision making by banks are important to understand in every region and country. This paper provides an empirical analysis of the factors affecting the availability and affordability of SME loans in Vietnam. We use Ordinary Least Squares (OLS) and Logit as measures for analysing results from a survey of 20 banks and 180 SMEs conducted in 2012. The results indicate that collateral and relationship lending have positive impacts on successful access. In addition, developing relationships with lenders or seeking a guarantee from a third party can help firms mitigate stringent terms and conditions for credit approvals. On the demand side, the sector where firms operate has an influence on barriers to finance. From the supply side, with various sizes and ownerships, has different perceptions about legal uncertainties and requirements in SME lending.
Keywords: SMEs; Banks; Access to credit; Relationship lending; Collateral
© Nguyen S, 2016
INTRODUCTION
The determinants of SME loan access are a major concern of policy makers and researchers all across the world. In Vietnam, where SMEs account for about 95% of all enterprises, financing SMEs has been regularly identified as a priority amongst its economic goals. Although the government has issued an array of regulations and removed barriers in order to facilitate SMEs' loan access, this sector appear to be bounded by financial constraints. This study aims to contribute to the empirical literature by investigating the drivers that underpin SME credit decision making by banks in Vietnam.
More specifically, our study aims to examine the impact of (i) SME tailored lending technologies (ii) firm-specific factors and (iii) characteristics of the SME credit market. There is a paucity of evidence for transition countries while significant differences across banks in developed and developing countries. This paper, therefore, seeks to shed some light on factors that hinder SME access to finance in the context of Vietnam. To this end, we first conduct a survey in the Red River Delta of Vietnam for the period between August and October 2012. This survey is comprised of two questionnaires for banks and SMEs with in-depth questions for quantitative analysis and open questions to identify...