The Credit Accessibility and the SME Growth in Vietnam

Question: Write aresearch proposal on the topic The credit accessibility and the SME growth in Vietnam. Answer: Introduction The business research proposal is based on the topic The credit accessibility and the SME growth in Vietnam. People all over the world have observed that the economic development of Vietnam is mainly accounted to growth of the small and medium sized enterprises in the country. The small and medium enterprises are a means of creation of employment opportunities, generation of income and reduction of poverty. The SMEs also contribute to the generation of revenue for the government. Though SMEs contribute to a lot of development of the economy, still the performance of this sector is not up to the mark as compared to the other sectors of the economy[1]. Researchers are of the view that the inability to access credit is the main cause of the poor performance of the medium and small sized firms. The researchers claim that the SMEs of Vietnam are unable to access both informal as well as formal financial credit. The scholars have observed that the profit generated by the SMEs in Vietnam has hit the bottom in the past few years[2]. Hence, the SMEs rank very low in the countrys economy as compared to the other industries. To increase the conditions of the business of the SMEs the government of Vietnam needs to look after the credit accessibility of these organizations. Literature review of the topic As discussed above, the SMEs are a promising and uprising sector of the economy of Vietnam. Near about 98% of the business organizations of the country, Vietnam comprises of these medium and small enterprises. The small and medium enterprises contribute to almost 48% of Vietnams Gross Domestic Product. The workforce of the SMEs includes 77% of the employees of the country. Hence, one can observe that the SMEs offer opportunity of employment to more than five hundred thousand people. SMEs play important roles to generate income to the government of Vietnam. Scholars and researchers are of the opinion that the SMEs generate growing rates of tax when they are compared to the other large business enterprises and corporations[3]. Hence, one can observe that the SMEs contribute largely to the social and economic development of the country. Researchers have observed in the recent past that the profit that the SMEs generate have declined to a great extent. MPI has reported that the equity and revenue generated by the SMEs in Vietnam has fallen drastically with corporate organizations. The value of the revenue generated by the SMEs in 2007 was 2.7%, which reduced in 2008 to 2.5%. In 2009, the value of the revenue reached 2.3% only. The data from the GSO also depicted the same picture. The data from GSO stated that the SMEs were able to manage only 43.9% of the total income generated by the enterprise. The SMEs generated only 13.6% of the profit that was not taxed by the government[4]. Most researchers are of the view that the poor accessibility of financial credit is the only cause of the poor returns generated by the SMEs. Studies regarding the performance of the SMEs have reflected on the fact that there is a positive relationship of the growth of SMEs and the financial support that these enterprises receive from the banks of Vietnam. The study also revealed that the SMEs face difficulty in obtaining financial help from the banks of Vietnam. The banks of Vietnam make all their decisions regarding loans depending on the finances of the organizations. The SMEs also face issues regarding the interest rate structures of the banks[5]. The author prepares the research proposal based on some of the issues regarding accessibility of credit of the SMEs. The proposal discusses the methods in which the SMEs can access and maintain funds. The proposal takes into consideration both the informal as well as formal avenues for accessing credit. The proposal also focuses on the following three aspects of availability of credit: obtaining loans from financial organizations, starting the business and the rates of intere sts offered by the banks. Research questions Keeping in mind the above discussion made on the accessibility and availability of funds that the SMEs of Vietnam can utilize and make profit, there are some research questions that the researcher poses can in this regard. The research questions that arise from the above discussion are described below: How does the process of accessing credit affect the progress and development of the SMEs of Vietnam? What are the factors that govern the process of accessing finances for the medium and small entrepreneurs to run their business? What are the factors that regulate the credit access ability of the SMEs to function as a start up enterprise in Vietnam? How do the rates of interests of the financial institution of Vietnam affect the accessibility of credit of the SME[6]? The researcher tries to answer the questions asked above in this research proposal. Research methodology and technique To conduct the research on the above topic the researcher uses the OLS, MNL methods. The researcher also uses the two stage sampling procedure due to Heckman to answer the questions of the research proposal. The Multinomial Logistic regression (MNL) model is a method of analysis of linear regression models. Analysts use the MNL model when the model assumes a nominal dependent variable that possesses more than two levels. The MNL regression is considered to be the extension of the commonly known logistic regression. The analysts use logistic regression to analyze the dependent variables that are dichotomous in nature[7]. The analysts using the SPSS software to analyze the data often resort to using the MNL model. The multinomial regression model is used as a predictive analysis tool. The analysts use the MNL model to describe the dependence of the variable that is nominal in nature to the explanatory variables that are at continuous levels[8]. The researcher decided to use the MNL mod el to throw light on the credit choices that the SMEs of Vietnam would make. The analyst employs the model of the ordinary least squares (OLS) to investigate about the factors that affect the rates of interest that the banks or the financial institutions pose on the loans that the SMEs take from them. The simplest form of regression is the ordinary least squares regression technique. The analysts resort to the ordinary least squares regression when they want to regress the value of a single dependent variable from the values of a number of explanatory variables[9]. The response variable for the OLS model needs to be measured on an interval scale. The technique of using the OLS model is also useful when there are more than one explanatory variable in the model. The OLS model also describes explanatory variables that are obtained from categorical data[10]. The researcher will base his analysis on the Two-Stage procedure due to Heckman to investigate the development of the SMEs by accessing the credit. The Heckman estimation technique assumes that there exists a positive correlation between the error terms of the two models[11]. To gather primary data from the subjects of the research, the researcher takes the help of questionnaires to gather information from the subjects. The researcher conducts surveys by interviewing the subjects involved in the research. Gannt chart The author provides a detailed Gannt chart that describes the time duration that the researcher would need to complete the experiment. The Gaant chart provides the details of the time to be taken to make a literature review of the research topic. The chart also gives a detailed picture of the time that the experimenter would take to collect the required data and to perform the analysis of the data. Finally, the researcher would submit the report consisting the findings of his research on the date mentioned in the gaant chart. Task Start date Duration End date Literature Review 08th June 15 days 23rd June Data Collection 24th June 60 days 24th Aug Data Analysis 25th Aug 55 days 20th Oct Final Report Submission 21st Oct 30 days 21st Nov The bar diagram describes the required milestones of the research process. Description of the research process The first step to progress with the research is to collect primary data from the appropriate sources. To conduct the research, the researcher would ask for the help ten people to conduct the survey. The researcher would assign task to the ten people to distribute the questionnaires to the managers of the medium and small enterprises. The researcher requires the people to distribute the questionnaires to the managers of the SMEs located at different places. The people can provide the questionnaires to managers of at most three SMEs in each street of Vietnam. Before distributing the questionnaires to the managers, the concerned person would need to ask for their consent if they want to participate in the experiment[12]. If the people get a positive response from the respective managers of the SMEs then only they would provide the questionnaire to them. Then the people conducting the survey would clearly explain the procedure that the managers need to follow to answer the questions give n in the questionnaire. The surveyors would inform the managers at what time or on which day they would come collect the questionnaires from them. The people conducting the survey request the managers to complete the task of filling up the questionnaire by the stipulated time. The concerned people would distribute near about 700 questionnaires to the managers of different SMEs. After the previously mentioned time duration to complete the task gets over, the surveyor would expect to get back at least 500 to 550 correctly and completely filled up questionnaires. This would lead to the fact that the surveyor has obtained at least 70% to 75% of completed and error free feedback[13]. After collecting the desired information from the subjects, the next step that the researcher would take is to check the validity of the data. The data so collected may contain some outlier observations or may have some missing values. The managers may not feel to answer all the questions given in the questionnaire. In such a situation, the researcher needs to sort out such questionnaires with incomplete information. The researcher would then modify the information or would reject such questionnaires with inadequate or faulty information. This process is known as the process of cleaning the data. Once the researcher arrives at the appropriate data, he performs the task of data analysis. The analyst would enter the data into an Excel spreadsheet. The analyst would then transfer the data from the Excel sheet to some statistical software namely R, MATLAB or STATA to analyze the data by statistical methods. Description of data collection and data analysis The researcher collected the data for conducting the experiment from the managers of the SMEs that are registered as the small and medium sized organizations under the government of Vietnam[14]. The researcher has chosen Hanoi as the sampling frame for doing the research. The researcher has chosen Hanoi as the sampling frame as it possesses a large number of SMEs that are registered under the government. The researcher recorded that by 2011, the number of small and medium sized organizations in Hanoi reached approximately 59,195[15]. The researchers would primarily focus on the directors and the managers of finance of the SMEs to make them fill up the questionnaires. The questionnaires that the researchers would provide to the managers and directors of the company would consist of questions that would fetch information regarding the accessibility of the credit by the SMEs. The researcher has decided upon the size of the sampling unit to be 385. The researcher would select these sampl ing units from at least 500 medium and small enterprises. The researcher would collect information from at most three SMEs located in each of the streets. This would allow the researcher to perform the experiment at a level of significance of 95%. This means that the results obtained from the research would be more or less 95% accurate[16]. The researcher interviewed the subjects using a questionnaire. The information gathered includes the knowledge of the chances of the small enterprises to obtain funds for setting up the business. The researchers gather information about some of the salient features of the SMEs. The researchers test the questionnaires by employing them on the managers of the SMEs chosen at random by suitable random sampling technique. The data analyst would statistically analyze the data using the suitable statistical software. The analyst would first judge the inflation in variance of all the models described above by employing the Ordinary least squares technique. The analyst uses the Housman test to investigate the assumption of IIA. The next aspect that the person conducting the research takes into consideration is the relationship between the managers of the SMEs and the sources from where the SMEs obtain informal credit[17]. This would help the researcher to understand the effect of the rates of interest on the loans that the SMEs take from the banks. The analyst calculates certain measures of descriptive statistics from the quantitative data. Some of these measures include the quartiles of the distribution, the inter quartile range, the median, mean and standard deviation of the distribution. A data that is dynamic in nature would be helpful for the analyst to judge the development of SMEs in accessing the available funds[18]. The analyst also investigates some other factors that can influence the profit earned by the SMEs and the rate at which they invest money over an interval of time. This analysis would help the researcher to test the ability of the SMEs to avail credit. The expected research outcomes The researcher expects that the research conducted on the topic of credit accessibility of the SMEs in Vietnam would produce some positive results. The researcher states that the first result focuses on the method of credit access by the SMEs to start their business. The researcher arrived at the result by employing the Multinomial Logistic Model (MLN) to the data. The outcome that the researcher expects from this result is that the assistance of the government has an effect on the capability of the SMEs to utilize credits obtained from outward sources[19]. Apart from the expected outcome, the researcher also expects that the age and the experience of the manager of the SMEs play a vital role in enabling the SMEs to obtain loans from other sectors. The researcher also expects another outcome that the rates of interests offered by the banks of Vietnam would also affect the loans that the SMEs take from them. The research proposal anticipates that the SMEs would be inclined to take loans from the private banks of Vietnam who offer higher rates of interests than the public sector banks[20]. Conclusion The research proposal deals with the topic of the issues of the credit accessibility and the growth of the SMEs in Vietnam. By making the business proposal one can easily conclude that the government of Vietnam needs to assist the SMEs in obtaining credit from external sources to foster the growth of the SMEs in the country. The growth and development of this sector would help in the betterment of the economy of Vietnam. References: Nguyen, N. (2014). Credit accessibility and small and medium sized enterprise growth in Vietnam. Statistics Solutions. (2016). Conduct and Interpret a Multinomial Logistic Regression - Statistics Solutions. Vunyale, Narender, Nemi Raja, and Raveesh Krishnankutty. "Does Innovative Financing Increase the Firm Performance? An Empirical Investigation of Indian Manufacturing Firms."Theoretical Economics Letters6, no. 02 (2016): 304. Mateev, Miroslav, Panikkos Poutziouris, and Konstantin Ivanov. "On the determinants of SME capital structure in Central and Eastern Europe: A dynamic panel analysis."Research in International Business and Finance27, no. 1 (2013): 28-51. 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