Asia SME Finance Monitor 2014: Vietnam

5 September 2015 | The Asia SME Finance Monitor 2014 is the knowledge sharing product on small and medium-sized enterprises (SMEs) in Asia and the Pacific, specially focusing on SME access to finance. This publication reviews various country aspects of SME finance covering the banking sector, nonbank sector, and capital markets. It is expected to support evidence-based policy making and regulations on SME finance in the region.

SME landscape
Vietnam’s statistics on micro, small, and mediumsized enterprises (MSMEs) in Viet Nam have not been updated since January 2013 (data as of the end of December 2012). There were 333,835 active MSMEs in the country in 2012, accounting for 97.7% of the total enterprises that paid corporate tax (Figure 4.186 and Table 4.93). The growth rate in the number of MSMEs has slowed since 2010, and stood at 5.3% in 2012.

The MSME sector in Viet Nam, in 2012, consisted of state-owned enterprises (0.5% of total active MSMEs), private enterprises (97.2%), and foreign-invested enterprises (2.3%). Wholesale and retail trade was a dominant business sector among MSMEs in the country, accounting for 39.8% of total active MSMEs in 2012, followed by the service sector (including technology, accommodation, and food services) at 20.5%, and manufacturing at 15.7%.

The MSME sector employed 5.1 million workers in 2012, a 2.4% increase from 2011, and accounted for 46.8% of the total workforce in the country (Figure 4.187). The majority of employees in the MSME sector belonged to labor-intensive industries, such as manufacturing (31.8% of total MSME employees) and construction (23.6%). Workers engaged in wholesale and retail trade accounted for 21.8% of MSME employees in 2012, followed by the service sector (13%).

For financial indicators, total capital in the small and medium-sized enterprise (SME) sector was D5,931 trillion in 2012, and the fixed assets and long-term investment by SMEs amounted to D2,107 trillion, a 14.5% increase from 2011 (Figure 4.188). The total net income of SMEs was D5,033 trillion in 2012, growth of 7.7% from 2011, but the growth of profits in the overall SME sector has been slowing since 2009.

Decree No.56/2009/ND-CP on Support for Development of SMEs provides a core legal basis for SME sector development policy, including the definition of MSMEs. Under this decree, firms with fewer than 10 employees are categorized as micro enterprises. In the primary industries (agriculture, forestry, and fisheries), manufacturing, and construction sectors, firms with 11–300 employees and total capital of D100 billion or less are regarded as SMEs. In the trade and service sectors, firms with 11–100 employees and total capital of D50 billion or less are regarded as SMEs. The Agency for Enterprise Development, under the Ministry of Planning and Investment, is preparing a new law on support for SME development, including new guidelines for MSME definitions in the country. This law is scheduled to be submitted to the Vietnam National Assembly by 2016 (the second meeting).

Banking Sector
As of the end of 2013, the banking sector in Viet Nam is composed of 5 state-owned commercial banks, 2 policy banks (Vietnam Bank for Social Policies and Vietnam Development Bank), 33 joint-stock commercial banks, 4 joint-venture banks, 53 branches of foreign banks, and 5 wholly foreign-owned banks. In July 2013, as approved by the State Bank of Vietnam (the country’s central bank), the Central People’s Credit Fund (a credit cooperative) was transformed into the Cooperative Bank of Vietnam.

According to the State Bank of Vietnam, as of the end of 2014, bank loans outstanding amounted to D3,971 trillion, a 14.2% increase from 2013. Meanwhile, the nonperforming loan (NPL) ratio slightly increased year on year, from 3.6% in 2013 to 3.7% in 2014 (Figure 4.189 and Table 4.94). Manufacturing is a dominant sector in bank lending, accounting for 25.6% of total loans outstanding in December 2014. This was followed by the wholesale and retail trade sector with 18.6% (Figure 4.190).

There is no SME credit data publicly available in Viet Nam. However, according to the SME White Paper 2014, published by the Agency for Enterprise Development under the Ministry of Planning and Investment, SME loans outstanding reached D862,392 billion and accounted for 27.9% of total loans at the end of 2012. Presuming the same percentage share from 2012 onward, SME access to bank credit could be considered limited.

Following the Credit Institutions Restructuring Plan during 2011–2015, the State Bank of Vietnam has guided credit institutions in strengthening their operational capacity and governance, while facilitating credit for priority sectors, including SMEs. For local currency short-term lending, the interest rate ceiling of 10% per annum was set for five priority sectors: agricultural and rural enterprises, exports, SMEs, supporting industries, and technology-oriented enterprises (SME White Paper 2014).

Credit guarantees are a critical tool to enhance SME access to finance in the country. There are two channels of credit guarantees available for enterprises: (i) the Vietnam Development Bank’s credit guarantee fund, and (ii) local credit guarantee funds supervised by the Ministry of Finance.

The Vietnam Development Bank’s credit guarantee fund provides a maximum of 85% partial guarantee on the total investment capital of a project, whose total guarantee for enterprises does not exceed 5 times the actual charter capital of the bank. The Vietnam

Development Bank collects guarantee fees, 75% of which are taken into guarantee risk provision, and the remaining 25% are considered bank income. More than 1,500 guarantee deeds for enterprises, mostly SMEs, were approved and issued by the Vietnam Development Bank, amounting to D11 trillion, based on which commercial banks granted guaranteed loans to enterprises totaling D9 trillion, as of the end of 2014.

Local credit guarantee funds, operated by provincial authorities and supervised by the Ministry of Finance, numbered 21 across the country, as of the end of 2014. Some provincial authorities (e.g., Hai Phong, Tien Giang, Son La, Vung Tau, Dong Nai, Da Nang, and Tay Ninh) have deployed the SME Credit Guarantee Fund (SME White Paper 2014).

In April 2013, the Government of Viet Nam decided to establish the SME Development Fund to support SMEs that have feasible business plans and/or projects in the government’s priority sectors (Prime Minister Decision No.601/QD-TTg). The fund, with an independent legal status, is operated by the Ministry of Planning and Investment, with the management board including representatives from the Ministry of Finance, the State Bank of Vietnam, the Agency for Enterprise Development, and the Viet Nam SME Association. The initial chartered capital of D2 trillion was funded by the state budget.

For an SME to take a loan from the fund, it is required to provide a feasible business plan or project relating to the list of priority sectors that is periodically issued by the Ministry of Planning and Investment, and to commit at least a 20% capital contribution to the business plan or project. SMEs financed by the fund cannot take any concessional loans from other public financing schemes. The maximum loan amount is 70% of the total investment capital required by the business plan or project, but not exceeding D30 billion, with a maximum loan period of 7 years. The lending rate shall not exceed 90% of the commercial lending rate (the average lending rate of the five state-owned commercial banks). To date, the fund has been completing related legal documents needed to provide loans to SMEs.

The Credit Information Center (CIC) has extended its credit database, adding data from the Vietnam Bank for Social Policies and the Vietnam Development Bank. This totalled more than 39 million borrower profiles, as of the end of 2013, including both positive and negative data. The collected data are to be placed in archives for 5 years.

Nonbank Sector
The nonbank financial institution (NBFI) industry is small in scale compared to the banking sector in Viet Nam. However, nonbank financing instruments are critically important for SMEs to raise necessary funds for working capital and investment capital. As of the end of 2013, there were 17 finance companies, 12 financial leasing companies, 1,144 “people’s credit funds”, and 2 licensed microfinance institutions (MFIs), operating in the country. Finance companies include affiliated firms of large enterprises, while financial leasing companies are typically subsidiary firms of banks.

The State Bank of Vietnam is the single regulator for both banks and NBFIs, and supervises them under the Credit Institutions Law enacted in 2010. A “people’s credit fund” is a credit institution established on a voluntary basis in the form of cooperatives. Introduced in 1993, when there were 179 funds, the number has grown by more than 6 times, as of the end of 2013, with funds now spread across the country.

The Central People’s Credit Fund, established in 1995 as an apex fund for all people’s credit funds, shifted its legal status to a cooperative bank in July 2013. Lending by a people’s credit fund is restricted to members in a commune that comprises up to four villages, and a maximum of 10% of its loan portfolio can be allocated to poor nonmembers. Approximately 30% of borrowers are women. According to an Asian Development Bank (ADB) report in 2014, loans outstanding by people’s credit funds amounted to $1.29 million in 2013, covered by deposits of $1.47 million and financing 1.12 million borrowers (Figure 4.191 and Table 4.95).

MFIs provide financial services for low-income individuals, households, and micro enterprises. While two state-owned banks (the Vietnam Bank for Agriculture and Rural Development and the Vietnam Bank for Social Policies) dominate the microfinance market in Viet Nam, around 50 semiformal MFIs and 2 licensed MFIs, together with people’s credit funds, supplement microfinance needs across the country. The ADB report in 2014 indicated that MFI loans outstanding (formal and semiformal) amounted to $190,000 in 2013, with deposits of $50,000, financing 770,000 borrowers (Figure 4.192). The Credit Institutions Law 2010 requires MFIs to obtain a business license, but many MFIs remain semiformal entities without licenses, due to the relatively strict requirements of formal bank operations.

Capital Markets
Since 1992, Viet Nam’s capital market has evolved through the privatization of state-owned enterprises. Two state-owned stock exchanges (the Ho Chi Minh Stock Exchange and the Hanoi Stock Exchange) were created in 2000 and 2005, respectively. The State Securities Commission of Vietnam regulates and supervises stock exchange markets under the Securities Law, enacted in 2006. The Vietnam Securities Depository deals with clearing and settlements of all traded stocks in exchange markets as a central depository.

Informal trading of unlisted companies has been popular in Viet Nam. The Securities Law does not (OTC) market is active, especially for the stocks of certain unlisted large companies.

The UPCoM, which started operations in 2009, under the Hanoi Stock Exchange, is a trading venue of unlisted public companies. There are many companies not listed on stock exchanges after an initial public offering (IPO), which is used only for the purpose of increasing the number of shareholders by IPO.

These companies are categorized as unlisted public companies. The UPCoM is not a dedicated SME market but an equity market that SMEs can tap for long-term financing. The UPCoM requires no listing fees. Firms in the energy sector (electricity) and manufacturing, and securities firms, are major registered companies, and individuals are typical investors in the UPCoM market. As of the end of 2014, the UPCoM Index rose by 42% on the previous year. The market capitalization reached D37,170 billion with annual trading value of D5,410 billion in 2014 (Figure 4.193 and Table 4.96).

There were 169 companies registered on the UPCoM in 2014 (Figure 4.194). As of the end of 2013, 84 securities firms (as UPCoM members) dealt in UPCoM stocks.

Policy and Regulation
There are several financial and nonfinancial preferential measures available to SMEs in Viet Nam, and these are provided by different government authorities to support SME sector development.

The Ministry of Industry and Trade promotes the “Buy Vietnamese” campaign, with the National Brand Program to establish and disseminate branded Vietnamese goods in the country. The ministry also established the National Trade Promotion Program to expand export markets, supporting mostly SME exporters.

The Ministry of Finance has provided several tax incentive schemes and preferential measures for enterprises to expand business investments and to reduce business costs. These measures have included giving 6 month’s grace for corporate income tax and value-added tax payments in early 2013, a 50% reduction of state land rent in 2013 and 2014, preferential corporate income tax of 20% in the early application by SMEs, and online tax declaration.

To facilitate information exchange and coordination among central and local governments, the Ministry of Planning and Investment (the Agency for Enterprise Development) launched an SME supporting information system, setting up the business portal

The National Foundation for Science and Technology provides zero-rate loans and soft loans for technology oriented projects, with the condition of lending a maximum of 70% of the total investment capital but not exceeding D10 billion. The foundation also provides credit guarantees for SME projects in energy efficiency not exceeding D3 billion, with maximum guarantee amounts of D4.5 billion.

The Ministry of Science and Technology promotes the National Technological Innovation Program, available until 2020, to support SMEs investing in innovative technologies and improving their productivity and competitiveness. This includes support for SMEs in IT application, the development of a database of new and advanced technologies for SMEs, and the creation of a base of business incubators.

The Five-Year SME Development Plan 2011–2015, a comprehensive SME development policy package prepared by economic ministries and agencies, is ongoing with numeric targets: (i) 350,000 SMEs created during 2011–2015, (ii) SME exports accounting for 25% of total exports nationwide, (iii) SME investments accounting for 35% of total investment, (iv) SME contribution to gross domestic product (GDP) and the total state revenue, respectively, reaching 30%, and (v) 2.5 million to 4 million new jobs created by SMEs during 2011–2015 (Table 4.97). The Ministry of Planning and Investment (the Agency for Enterprise Development) is a government focal entity for preparing the SME Promotion Law, a draft of which was being screened by the government as of the end of 2014.
ADB (2015). Asia Small and Medium-sized Enterprise (SME) Finance Monitor 2014. September.



  1. Interesting. This will be a vital requirement to “measure” how well enterprises are doing. What is needed is a new way to categorize and analyze structured organizations whether they are private or public. Public organisations need to understand what they are doing themselves to improve decision making knowledge. Banks need a standardized way of knowing how risky their clients are.


    • Well, i agree on the need for measure and standard. However, the two are still not enough. Information accountability is rooted in business culture. In light of this, the value of business ethics should be considered.


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