Constraints of Small and Medium Enterprises Access To Bank Loans: Evidence from Vietnam Manufacturing Firms

Small and Medium Enterprises (SMEs) have played an important role in Vietnam’s economic development. They are not only offering employment but also promoting innovative ideas. However, they are facing many constraints in accessing resources. Especially, financial constraints have been hindering their performance and their growth. This paper employs the probit and logit regression methods to evaluate factors that are important in determining SMEs’ access to bank loans in Vietnam. Based on the sample of 695 firms in Vietnam’s Manufacturing Sector that are directly collected by structured questionnaires, findings from the study show that: the size of firm, the collateral requirements, the cost of bribes and gifts, and high interests are main constraints to bank loans for most firms, especially SMEs. There are still marked discrimination in processing loan application (such as scale of firm, type of ownership). The firm performance and development of capital markets are positive factors that help SMEs to have an easier access to bank loans. i»?