Premium
What Factors Determine Whether Small and Medium Enterprises Obtain Credit from the Formal Credit Market? The Case of Vietnam
Author(s) -
Thi Khanh Cao Nguyet
Publication year - 2019
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12183
Subject(s) - collateral , vietnamese , loan , business , credit history , bond market , credit enhancement , financial system , small and medium sized enterprises , finance , credit reference , credit risk , linguistics , philosophy
Using a survey of Vietnamese small and medium enterprises (SMEs) conducted during 2005–2013, this paper examines the process of applying for a formal loan and the level of satisfaction (credit needs) obtained by SMEs. The empirical results show that banking relationships and the business environment are important factors when applying for and obtaining formal credit. However, positive measures of firms' financial performance, such as a high return on assets score and sales growth, did not have a significant influence on whether firms obtained credit. Formal financial institutions in Vietnam were found to depend too much on collateral assets in assessing whether to supply credit to an SME.