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

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Lan, Thanh Nguyen
Su, Jen-Je
Sharma, Parmendra
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2019
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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.

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APPLIED ECONOMICS

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51

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29

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© 2019 Taylor & Francis (Routledge). This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Economics on 25 Jan 2019, available online: https://www.tandfonline.com/doi/full/10.1080/00036846.2019.1569196

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Applied economics

Econometrics

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