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‘Credit Constraints and Determinants of the Cost of Capital in Vietnamese Manufacturing’

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John Rand ()

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Abstract

This paper examines the extent to which borrowing constraints restrict firm access to credit and identifies individual, firm, and loan characteristics, which determine the cost of capital in Vietnamese manufacturing. Using direct information from a Vietnamese enterprise survey the paper shows that between 14 and 25% of the enterprises are credit constrained, and these enterprises would increase their debt holdings by between 40 and 115% if borrowing constraints were relaxed. Moreover, it emerges that informal credit markets play an important role for fast growing firms. Enterprises do not appear to have the necessary time to go through the many administrative difficulties in the formal credit system if they want to “seize the day”. Finally, collateralized loans face larger interest rates, explained by the significant influence of “policy lending” in Vietnamese credit markets. Copyright Springer 2007

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File URL: http://hdl.handle.net/10.1007/s11187-005-1161-2
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Publisher Info
Article provided by Springer in its journal Small Business Economics.

Volume (Year): 29 (2007)
Issue (Month): 1 (June)
Pages: 1-13
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Handle: RePEc:kap:sbusec:v:29:y:2007:i:1:p:1-13

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Web page: http://www.springerlink.com/link.asp?id=100338

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Related research
Keywords: credit constraints financial markets Vietnam O16 O53

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns S–derbom & Francis Teal & Albert , 2003. "Credit Constraints in Manufacturing Enterprises in Africa," Journal of African Economies, Oxford University Press, vol. 12(1), pages 104-125, March.
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  2. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February. [Downloadable!] (restricted)
  3. Dominique van de Walle & Dorothyjean Cratty, 2004. "Is the emerging non-farm market economy the route out of poverty in Vietnam?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(2), pages 237-274, 06. [Downloadable!] (restricted)
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  4. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February. [Downloadable!] (restricted)
  5. McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Henrik Hansen & John Rand & Finn Tarp, 2004. "SME Growth and Survival in Vietnam: Did Direct Government Support Matter?," Discussion Papers 04-13, University of Copenhagen. Department of Economics. [Downloadable!]
  7. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March. [Downloadable!] (restricted)
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  8. Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May. [Downloadable!] (restricted)
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  9. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 637-58, October.
  10. Bao Duong, Pham & Izumida, Yoichi, 2002. "Rural Development Finance in Vietnam: A Microeconometric Analysis of Household Surveys," World Development, Elsevier, vol. 30(2), pages 319-335, February. [Downloadable!] (restricted)
  11. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July. [Downloadable!] (restricted)
  12. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  14. Duca John V. & Rosenthal Stuart S., 1993. "Borrowing Constraints, Household Debt, and Racial Discrimination in Loan Markets," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 77-103, October. [Downloadable!] (restricted)
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  15. Vijverberg, Wim P. M. & Haughton, Jonathan, 2002. "Household enterprises in Vietnam : survival, growth, and living standards," Policy Research Working Paper Series 2773, The World Bank. [Downloadable!]
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