The impact of loans to small and medium enterprises: the case study of Vietnam

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 bankrupt 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 im-pact 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 over-whelm profits. Moreover, the impact of formal loans also causes businesses to re-duce their jobs. The topic also shows other factors such as export, type of owner-ship, scale, production technique, entrepreneurial qualification that affects to em-ployment and wage.