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Article

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

1
Graduate School for International Development and Cooperation (IDEC), Hiroshima University, Kagamiyama 1-5-1, Higashi Hiroshima 739-8529, Japan
2
Banking Academy, No 12 Chua Boc Street, Dong Da District, Hanoi 1000004, Vietnam
3
Graduate School of Social Sciences, Hiroshima University, Kagamiyama 1-2-1, Higashi Hiroshima 739-8525, Japan
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(19), 5451; https://doi.org/10.3390/su11195451
Submission received: 28 July 2019 / Revised: 15 September 2019 / Accepted: 18 September 2019 / Published: 1 October 2019
(This article belongs to the Special Issue Sustainable Business and Development II)

Abstract

In many developing countries, obtaining financial services at affordable rates and fair terms has been a significant challenge for small and medium enterprises (SMEs). However, this issue has not been paid much attention in Vietnam, even though SMEs account for about 95% of total enterprises and the financial market of the country has not been well developed. This study investigates the causal effects of access to finance on productivity of SMEs operating in the manufacturing sector in Vietnam. Productivity was measured as the total factor productivity (TFP) obtained by production function estimation using the Levinsohn and Petrin approach. Regarding financial accessibility, two factors covered the extent to which firms might have a bank loan or overdraft facility were employed. To study the causal inferences of access to finance on firm productivity, the research adopted the difference-in-differences (DID) approach, as well as the propensity score matching (PSM) coupled with DID technique. The empirical results indicated that improving the financial accessibility could directly enhance firm productivity. Particularly, it was shown that firms having access to a bank loan could significantly improve TFP by approximately 8.6% in the DID model and about 9% in the PSM-DID model. Meanwhile, the firm average TFP increased by approximately 12.3% and 15.7% in simple DID and PSM-DID models, respectively, when firms had an overdraft facility. These findings suggest that the government should put more effort into assisting SMEs in generating bankable projects, and create a sound and healthy financial environment to stimulate firms’ access to finance, which will ensure their sustainability and growth.
Keywords: access to finance; total factor productivity; Vietnamese small and medium enterprises; difference-in-differences; propensity score matching access to finance; total factor productivity; Vietnamese small and medium enterprises; difference-in-differences; propensity score matching

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MDPI and ACS Style

Giang, M.H.; Trung, B.H.; Yoshida, Y.; Xuan, T.D.; Que, M.T. The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam. Sustainability 2019, 11, 5451. https://doi.org/10.3390/su11195451

AMA Style

Giang MH, Trung BH, Yoshida Y, Xuan TD, Que MT. The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam. Sustainability. 2019; 11(19):5451. https://doi.org/10.3390/su11195451

Chicago/Turabian Style

Giang, Mai Huong, Bui Huy Trung, Yuichiro Yoshida, Tran Dang Xuan, and Mai Thanh Que. 2019. "The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam" Sustainability 11, no. 19: 5451. https://doi.org/10.3390/su11195451

APA Style

Giang, M. H., Trung, B. H., Yoshida, Y., Xuan, T. D., & Que, M. T. (2019). The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam. Sustainability, 11(19), 5451. https://doi.org/10.3390/su11195451

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