Abstract (EN)

This chapter proposes an overview of the credit market that serves the formal and informal HBs in Vietnam. Credit access is indeed an important aspect of informal businesses, as it enables intertemporal decisions, such as investment as well as income and consumption smoothing, and it offers HBs a means to bear shocks. In a fluctuating economic and institutional context, where insurance mechanisms are often inexistent or incomplete, accessing credit may thus be an important determinant of economic performance. However, due to their small size, their lack of collateral or their informal character, many HBs are likely to remain excluded from the main credit channels provided by commercial banks, and they are forced to rely on expensive informal creditsuppliers, on their business partners or on their friends and relatives to access liquidity.Different types of lenders coexist in Vietnam’s credit market: formal credit institutions that are regulated by the state such as banks, microfinance institutions (MFI), mass organisations and informal credit institutions that are unlicensed (e.g. friends and family, customers and suppliers, usurers and other types of lenders). As other studies on Vietnam have suggested, these suppliers are quite dynamic and offer a plurality of products (differing in average value lent, the collateral requirements, the interest rate and the duration of the loan) that the person applying for credit can access depending on his or her characteristics and needs. The significant presence of informal credit as a source of funding shows that formal lenders cannot adequately meet the demand of every HB.On the demand side, different profiles of HBs are present on the market and they differ in their needs and access, and some appear to be more constrained than others. Using the rich information on the topic contained in the 2014/15 HB&IS survey, this chapter characterizes the credit market by examining both the supply and the demand,and by analysing the extent and determinants of credit constraints. This chapter estimates that larger household businesses whose owners have greater human and social capital tend be less credit constrained. The rationing of credit by formal institutions, due mostly to their inefficiency, does not adequately meet the credit demand, leaving some HBs rejected or self-rejected from the credit market. Those HBs cannot provide enough guaranties for commercial banks, are not targeted by MFIs and do not have the required social capital to overcome asymmetry of information when applying for informal loans.This chapter is organised as follows: After presenting and describing the main lenders and the characteristics of the loans they offer in section 1, we examine the demand for credit among HBs. In the last part of this chapter we analyse the extent and determinants of credit rationing among HBs.