Financial accessibility, entrepreneurship, and government initiatives: an investigation of small and medium-sized enterprises in Vietnam : A thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy at Lincoln University

Abstract

Small and medium-sized enterprises (SMEs) in Vietnam account for 98% of total enterprises, employ about 40% of the labour force and contribute about 40% to Vietnam’s gross domestic product (GDP). Vietnam’s SMEs grew by an annual average of 14.6% from 2007 to 2019, with an associated average SME loan growth of 14.7% from 2012 to 2019. However, the lending rate to Vietnam’s SMEs then gradually declined from 13.5% in 2012 to 7.7% in 2019. A survey by the Central Institute for Economics Management (CIEM) in 2015 revealed that financial constraint is the top challenge facing Vietnam’s SMEs in growing their business. The survey also highlighted that only 25% of surveyed SMEs applied for a bank loan and over 85% had problems obtaining loan approval. The two significant reasons that Vietnamese SMEs confront credit constraints are complicated government regulations and SMEs' capacity to repay the loans. The literature also shows that SME entrepreneurship is significantly correlated with credit constraints and SME performance. This study investigates the determinants of credit constraints and how these constraints facilitate or hinder SME performance in Vietnam. We also consider the mediating roles of SME entrepreneurship and government support in the correlation between credit constraints and SME performance. We develop a survey questionnaire to collect information from Vietnamese SMEs about financial accessibility, entrepreneurship, government support/constraints, and SME performance. The results show that SME credit constraints are significantly driven by credit demand, perceived credit constraints and SME characteristics (e.g., size, business association membership and corporate social responsibility). We also find that credit-unconstrained SMEs have a higher performance than credit-constrained SMEs. Mediation analysis results confirm the complementary mediating effect of SME entrepreneurship that enhances the positive correlation between credit access and SME performance. Mediation analysis also shows that government support significantly positively affects SME credit access, but there is no strong evidence of the effect of government support on SME performance.