UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF LOANS TO SMALL AND MEDIUM ENTERPRISES: THE CASE STUDY OF VIET NAM By BUI THI HONG CHINH MASTER OF ARTS IN DEVELOPMENT ECONOMICS Ho Chi Minh City, January 2018 i TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF LOANS TO SMALL AND MEDIUM ENTERPRISES: THE CASE STUDY OF VIET NAM By BUI THI HONG CHINH Supervisor Dr. NGUYEN THI THUY LINH Ho Chi Minh City, January 2018 ii TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT This process of writing a thesis is a collaborative experience involving the support and helps from many people. I want to express my gratitude to those who give me the tremendous support to complete this thesis. First of all, I would like to thank gratefully to my supervisor Dr.
Nguyen Thi Thuy Linh. I cannot finish my thesis if do not get the support and the advice from her. Beside that, I want to thank to Dr. Pham Khanh Nam who give me many useful and important advice that help me very much through the time I do the thesis.
Moreover, I want to thank Dr. Truong Dang Thuy who helps me answer questions when I need it. And I want to thank the professors and the teacher staff of Viet Nam – Neth- erlands Program that gave many supports to me to have the knowledge, to solve the difficult problems in my studying process. Last, I want to thank my closet friends and my family.
iii TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATIONS SME Small and Medium Enterprise RD Regression Discontinuity Design PSM Propensity Score Matching Method DD Difference in difference VIF Variance inflation factor IV Instrumental variable HET Heteroscedasticity SOE State Owned Enterprise OECD Organization for Economic Co-operation and Development DNNN State enterprises NHNN State Bank NHTM Commercial Bank iv TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT After a period of growth and affected by the crisis, Vietnam's economy has de- creased. Hundreds of thousands of small and medium-sized enterprises went bank- rupt and shut down. Loan is a solution for business to expand scale, increase sales and profits, but it can create jobs, increase salaries to improve social welfare or not? To verify that argument, the author uses the PSM method and combines with DD on the SME data set from 2009 to 2013 to more accurately assess the impact of the loans. The results show that loans do not have the effect of improving employee in- comes, as well as creating more jobs.
In addition, the loans from informal sources with low cost do not help enterprises to expand their operations because of the small scale. Loans from official sources are large scale, but the high costs overwhelm profits. Moreover, the impact of formal loans also causes businesses to reduce their jobs. The topic also shows other factors such as export, type of ownership, scale, production technique, entrepreneurial qualification that affects to employment and wage.
v TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS ACKNOWLEDGEMENT .2 Main research question. 3 CHAPTER 2: LITERATURE REVIEW .1 REVIEW OF THEORY .1 Definition of small and medium enterprises and types of credits.2 The impact of loans to employee from producer theory .3 Factors affecting the operation of the business .2 REVIEW OF EMPIRICAL STUDIES .1 Impact of loan to SMEs in Viet Nam. 13 CHAPTER 3: RESEARCH METHODOLOGY .1 Impact assessment methodology .2 Research proposal and select model. 24 CHAPTER 4: RESEARCH RESULTS .1 OVERVIEW OF THE RESEARCH TOPIC.
28 vi TIEU LUAN MOI download : skknchat@gmail.1 OLS regression results .2 PSM combined with DD results .3 Verification of model stability. 42 CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS .3 LIMITS OF THE STUDY. 55 APPENDICES 1: DIVIDE THE SIZE OF THE BUSINESS. INFLATION AND PRICE INDEX VND (1994=1).
INFLATION AND PRICE INDEX VND (1994=1) (CONT). IMPACT ASSESSMENT BY MATHEMATICAL METHOD. GROUPS WERE DEVIDED BY PSM METHOD. REGRESSION DISCONTINUITY DESIGN - RD.
INSTRUMENTAL VARIABLE - IV. DEFINITION OF SOME VARIABLES. ANALYSIS OF CORRELATION BETWEEN QUANTITATIVE VARIABLES. 64 vii TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLE TABLE 3.1 DESCRIPTION AND MEASUREMENT VARIABLES .2 STATISTICS DESCRIBE THE PARTICIPANTS AND THE CONTROL GROUPS BEFORE THE LOAN.3 IMPACT OF LOAN TO SMALL AND MEDIUM ENTERPRISES- BASIC MODEL .4 REGRESSION MODEL OF THE LOANS TO SME .5 TREND POINT OF GENERAL SUPPORT AREA .6 IMPACT OF LOANS TO SME ON THE LABOUR COSTS .7 IMPACT OF LOANS TO SME ON THE NUMBER OF EMPLOYEES .8 IMPACT OF EACH TYPE TO SME ON THE LABOUR COSTS .9 IMPACT OF EACH TYPE TO SME ON THE NUMBER OF EMPLOYEES .10 INVESTMENT AND LABOUR .11 THE SCALE OF THE MOST IMPORTANT LOAN.
43 viii TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURE Figure 2.1 Illustration of the impact of loan to SMEs………………………………5 Figure 2.2 Optimal coordination of production factors when loan increases…….1 Impact of loans to SMEs when enterprises participate and do not join in loans………………………………………………………………………….2 Impact assessment by DD method……………………………….3 Illustrate the general support area and the observation area discarded with PSM…………………………………………………………………….1 The supply of formal credit………………………………………….2 The supply of informal credit………………………………………….3 The biggest difficulties prevent the development of SMEs……………44 ix TIEU LUAN MOI download : skknchat@gmail.com TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: INTRODUCTION 1.1 Problem statement Vietnam's economy from 2008 to 2015 has more volatile due to the impact of the financial crisis of the world and the domestic country. High inflation in 2008, 2010 and 2011 are over two figure (Appendices 2, 3); that makes the government offer the methods to cut public investment, to be macroeconomic stability, to de- crease inflation … These policies contribute to economic growth mainly relies on investment. To prevent a recession, the government launched stimulus packages such as the 4% interest rate subsidy to 17,000 billion in 2009, preferential loans to buy houses, but not restore the economy, resulting in 600,000 registered businesses officially only 380,000 active businesses (Truong Tan Sang, 2013). To statistics of Department of business registration management in 2016, the number of bankrupt enterprises 1.3 times in 2010, mostly small and medium-sized enterprises (SMEs) for 10 months in 2015.
The giant state-owned corporations enjoy too many privileges but inefficient op- erations were restructured, foreign investment (FDI) has not restored as expected economy, cooperative economy is slow and efficiency is not much. At this time, the SME is the most emphasis. The SMEs bankrupt, dissolute too much to be explained by the macro-economy, made SMEs difficult to search their market, difficult to ac- cess to loans (VCCI, 2015). The dissolution of a series of enterprises affects the so- cial security issues such as GDP, consumption, unemployment, price indexes.
be- cause Vietnam has a large stock of human resources, of which SMEs account for 96, 4% of the total number of enterprises in the country (ADB, 2014). By the end of 2013, Viet Nam had a total of 359,794 SMEs, accounting for 5.1 million workers, accounting for 46.8% of the nation's labor force (ADB, 2014). Vietnam needs more and more sustainable SMEs in a competitive environment. To do that, the State needs appropriate support measures, first of all to exist, then to expand, thereby cre- 1 TIEU LUAN MOI download : skknchat@gmail.com ating jobs and increasing laborers' incomes and solve the macroeconomics of the country.
According to many economists, loan is very important problem, even the lead- ing factor to support SMEs (ADB, 2014, Tran Hoang Ngan, 2015). Referring to SMEs, the first thing to mention is difficult access to credit and the need to remove barriers to accessing credit (Tran Dinh Thien et al. Many economists have traditionally believed that loan is the key to help SMEs better function. The policies promulgated by the State such as the establishment of the SME Development Fund, the application of the ceiling lending interest rate, the expectation of SME devel- opment to increase incomes, create jobs for employees.
In fact, there is little research to quantify the impact of loans to SMEs by exper- iment. Moreover, the performance evaluation of SMEs does not clearly distinguish between growth and development. The growth of SMEs is measured by the increase in revenue and profit. The development of SMEs involves equitable growth and dis- tribution of results in a relatively fair way, which helps business owners and work- ers achieved benefit.
On the other hand, the development of SMEs is reflected in an increase in the wage index and employment. This topic explores the impact of loan on the costs that an enterprise invests in employees and the impact on their wages and employment from formal or informal loans; after that, provide appropriate poli- cy recommendations for small and medium enterprises. That is why the study titled "Impact of loans to employee in small and medium enterprises" in order to clarify the issue: loan to employee in SMEs is the solution to social security, isn't it? On the other hand, the topic seeks the impact of loan on development through the wage index, employment at the enterprise micro level.1 Research objectives 2 TIEU LUAN MOI download : skknchat@gmail.com This study determines the relationship between loans and number of employees, wages in small and medium enterprises. From that, research offers the policy impli- cations to improve the activity of business.2 Main research question Does the loan to SMEs impact on the labour costs? Does the loan to SMEs impact on the number of employees? Does the each type of credit to small and medium enterprises impact on the labour costs and the number of employees? 1.3 Scope of study This thesis investigates the impact of loan to employee on the number of employees and the labour costs by using the dataset of Survey of Small and Medium Enterpris- es which is done by the Central Institute for Economic Management and partner.
The data is collected from 2009 to 2013 due to its availability. The methods will be applied in this study is descriptive statistics, OLS regression, Propensity Score Matching Method (PSM) combined with Difference in Difference (DD), accuracy test of model.4 Structure of the thesis This thesis consists of five main chapters. Chapter one is introduction. Chapter two is literature review, including review of theory and review of empirical studies that related to the impact of loan to employee in SMEs.
Chapter three is research meth- odology; in this chapter will be present about analytical framework and the method- ology, variable measure, descriptive statistics to dataset. Chapter four is research results, including overview of the research topic, descriptive statistics, results and dicussions. Chapter five is conclusions and policy implications in addition that is limits of the study. 3 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 2: LITERATURE REVIEW 2.1 Review of theory Chapter 2 presents theories concerning the impact of loan capital on labor in small and medium enterprises.1 is Review of theory, which includes definitions and the impact of the factors seen from the manufacturer's theory.2 is a review of empirical studies, including Loans to SMEs in Viet Nam and other relevant studies.4 is summary of chapter 2.1 Definition of small and medium enterprises and types of credits.
There are many ways to classify enterprise with the criteria related to the num- ber of full-time, part-time and non-permanent employees, World Bank definite about the scales of enterprises such as: microenterprises scale from 1 to 9 employ- ees; small businesses with 10 to 49 employees; medium-sized businesses with 50 to 299 employees; large enterprises with 300 employees or more. In Viet Nam, there is distinction by industry.