Informal Short-term Borrowings and Small and Medium Enterprises’ Performance in a Credit Crunch: Evidence from Vietnam
Publication Name
Journal of Development Studies
Abstract
This study examines the access to informal short-term borrowings of small and medium enterprises (SMEs) and their performance in a credit-rationing period. Using a unique data set on Vietnamese private manufacturing SMEs spanning before, at the onset of, and during the period of credit distress 2011–2014, we find that bank loans act as a substitute for informal borrowings prior to but a complement during the crisis. Meanwhile, trade credit always complements informal borrowings, even when the crisis endures. Informal borrowings help enhance SMEs’ sales and investment performance and outweigh trade credit in predicting firms’ investments. Obtained findings convey important policy implications on the macro-management of informal short-term finance in the credit distress.
Open Access Status
This publication is not available as open access
Volume
57
Issue
8
First Page
1321
Last Page
1335