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SME credit constraints in Asia’s rising economic star: fresh empirical evidence from Vietnam

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  • Lan Thanh Nguyen
  • Jen-Je Su
  • Parmendra Sharma

Abstract

This study provides a fresh look at the SME sector’s economic backbone vis-à-vis credit constraint dichotomy in Vietnam—Asia’s rising economic star. The study uses data from the Survey of Manufacturing SMEs in Vietnam from 2005 to 2013 and adopts a two-step Heckman modelling strategy to single out firms with formal financing needs that are credit constrained. Results show that several characteristics—including firm size, investment, financial assets, leverage, equity, registration, gender of owner, age, and education—significantly affect the likelihood of either credit constraints or demand. The main results do not change even when the issue of endogeneity is dealt with. Particularly, we provide evidence that unobserved factors that increase the probability of debt demand also increase the probability of being constrained. Policy implications are discussed.

Suggested Citation

  • Lan Thanh Nguyen & Jen-Je Su & Parmendra Sharma, 2019. "SME credit constraints in Asia’s rising economic star: fresh empirical evidence from Vietnam," Applied Economics, Taylor & Francis Journals, vol. 51(29), pages 3170-3183, June.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:29:p:3170-3183
    DOI: 10.1080/00036846.2019.1569196
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    Cited by:

    1. Zhang, Dengjun & Sogn-Grundvåg, Geir, 2022. "Credit constraints and the severity of COVID-19 impact: Empirical evidence from enterprise surveys," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 337-349.
    2. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    3. Melesse, Wondemhunegn Ezezew, 2020. "Determinants of debt ratio levels among small-scale manufacturing enterprises in Ethiopia: Do government policies matter?," MPRA Paper 103240, University Library of Munich, Germany.
    4. Phan, Trang Hoai & Stachuletz, Rainer & Nguyen, Hai Thi Hong, 2022. "Export Decision and Credit Constraints under Institution Obstacles," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 132783, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    5. Trang Hoai Phan & Rainer Stachuletz & Hai Thi Hong Nguyen, 2022. "Export Decision and Credit Constraints under Institution Obstacles," Sustainability, MDPI, vol. 14(9), pages 1-27, May.

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