The research investigates the access to finance, and the financial gaps and factors constraining such access, of Vietnamese Small and Medium Enterprises (SMEs), operating in Food processing, Textiles and Garment manufacturing and Wooden products manufacturing.

1. SMEs Access to Finance
Food Processing - Wooden Products Manufacturing -
June 2015
Food Processing - Wooden Products Manufacturing -
Textile and Garment Manufacturing

2. Content
• Research’s objective and methodoly• Research’s objective and methodoly
• Working Capital Financing
• Experience of using external finance (formal)
• Experience of using external finance (informal)
• About MarketIntello
2
© 2015 MarketIntello. The copyrights of this report belong to MarketIntello. The results of this survey can be publicly used, but must be cited
and sourced from MarketIntello.

3. Research’s Objective and Methodology
This research is done by MarketIntello to measure the status of SME financing in Vietnam
Research’s objectives
This research encompasses
Total samples of 208 Small & Medium
enterprises in 05 provinces of Vietnam
10%
11%
Hà Nội
Firm size
Small 64% Medium 36%
23% 38% 61%
10%
9%
Bắc Ninh
Hồ Chí Minh
Bình Dương
Đồng Nai
Food Processing
23%
Textiles & Garments
39%
38%
Wooden Manufacturing
3

4. 4
Working Capital
Financing
Enterpises rely on four main
sources of finance as working
capital.

5. Companies main finance source for working capital needs comes mainly from 04 sources: Banks or formal
credit institutions, Retained earnings, owner’s equity and families and friends.
57%
54% 53%54%
56%
54%
60%
62%
56%
53%
Total Food processing Textile and garment manufacturing Wooden products manufacturing
40%
54% 53%54%
33%
42%
54%
45%
52%
40%
53%
5
Q. F1: Please estimate the primary sources of your working capital needs (salaries, inventories, materials, etc?) (multiple choices, one firm can use more than one source
of finance)
3% 3% 3%
0%0%
2%
8%
0%
4%
6%
0% 1%
5%
1%
4%
0%
Banks or formal
credit institutions
Other financial
organizations
Family and friends Customer credits Supplier credits Retained earnings Owner's equity Other

6. 6
Experience of
using external
finance (formal)
Nearly haft of enterpises
surveyed seek for external
finance with very little obstacles.

7. 93
90
100
Nearly haft of enterprises participated in the survey said they need external finance for working capital and
most of companies apply for external finance said they have difficulties access to finance but not much.
42%
Food Processing
48%
Textile and
Garment
Manufacturing
37%
Wooden products
manufacturing
24
76
7
25
75
32
68
0
10
20
30
40
50
60
70
80
90
Yes No
Total Food processing
Textile and garment manufacturing Wooden products manufacturing
43 % of companies apply for external finance, those
in textile and garment manufacturing is the largest
number.
7
Q. F2: Did you apply for external finance in the last three
years (2013-2015)?
Textile and garment manufacturing Wooden products manufacturing
Q. F6: Do you have any difficulties in applying for an external finance?
Those in wooden products manufacturing had more difficulties accessing to
finance than other sectors.

8. Loans from state commercial banks and joint-stock commercial banks are main sources of external finance
0%Joint venture bank0%Joint venture bank0%Joint venture bank0%Joint venture bank
Food
processing
Total
Textile and garment
manufacturing
Wooden products
manufacturing
29%
37%
0%
0%
State Commercial Banks
Joint-stock commercial
bank
100% foreign-invested
bank
Joint venture bank
30%
27%
1%
0%
State Commercial Banks
Joint-stock commercial
bank
100% foreign-invested
bank
Joint venture bank
38%
29%
4%
0%
State Commercial Banks
Joint-stock commercial
bank
100% foreign-invested
bank
Joint venture bank
32%
31%
1%
0%
State Commercial Banks
Joint-stock commercial
bank
100% foreign-invested
bank
Joint venture bank
8
Q. F2b: Which external financial source did you apply in the last three years?
0%
Other financial
organizations
2%
Other financial
organizations
2%
Other financial
organizations1%
Other financial
organizations

9. Complicated process/procedures and do not have enough collateral are main reasons that enterprises are
facing when apply for external finance. For specific sectors, the reasons are quite vary.
13%
31%
Bank officers asked for
kickbacks
Time consuming procedures
18%
18%
Bank officers asked for
kickbacks
Time consuming procedures
0%
0%
Bank officers asked for
kickbacks
Time consuming procedures
14%
24%
Bank officers asked for
kickbacks
Time consuming procedures
Food processingTotal
Textile and garment
manufacturing
Wooden products
manufacturing
19%
13%
50%
6%
13%
0%
6%
13%
Banks demanded a detail
business plan
Financial report did not
meet the bank demands
Complicate process/
procedure
Loan sizes were too small
Interest rates were too high
Poor skills of bank officers
Bank bias/favoritism to
other firms
kickbacks
45%
0%
55%
9%
27%
0%
0%
18%
Banks demanded a detail
business plan
Financial report did not
meet the bank demands
Complicate process/
procedure
Loan sizes were too small
Interest rates were too high
Poor skills of bank officers
Bank bias/favoritism to
other firms
kickbacks
50%
0%
0%
0%
50%
0%
0%
0%
Banks demanded a detail
business plan
Financial report did not
meet the bank demands
Complicate process/
procedure
Loan sizes were too small
Interest rates were too high
Poor skills of bank officers
Bank bias/favoritism to
other firms
kickbacks
31%
7%
48%
7%
21%
0%
3%
14%
Banks demanded a detail
business plan
Financial report did not
meet the bank demands
Complicate process/
procedure
Loan sizes were too small
Interest rates were too high
Poor skills of bank officers
Bank bias/favoritism to
other firms
kickbacks
This information is intentionally left blank, please contact us for more
details
9
Q. F6.1: What were the main difficulties in applying for external finance? (multiple answer possible)
25%
38%
13%
0%
Other
Not enough collateral
No proof of asset ownership
Limited management
capacity
business plan
9%
55%
9%
9%
45%
Other
Not enough collateral
No proof of asset ownership
Limited management
capacity
business plan
0%
0%
0%
0%
50%
Other
Not enough collateral
No proof of asset ownership
Limited management
capacity
business plan
17%
45%
14%
3%
31%
Other
Not enough collateral
No proof of asset ownership
Limited management
capacity
business plan

10. The most frequently approved rate for companies seeking for official external finance in 2013 is among 80-
100%, it is noted that 2% of companies got the loans even higher loan than their proposed amount
4%
12%
2%
12%
82%
0-40%
40%-80%
80%-100%
Over 100%
98%
10
Q. F4: What was the amount of external finance approved in 2014?
Rate of loan approval
Q. F3: Was the financing you applied for in
2014 approved?

11. 11
Experience of
using external
finance
(informal)
More than one third of
enterpises surveyed seek for
informal external finance.

12. Main sources of informal finance comes mainly from personal connections at the rate of 32% for all
companies surveyed.
Food
processing
Total Textile and garment
manufacturing
Wooden products
manufacturing
12%
34%
Pawnshop
Personal connections
(family/relatives/friends)
7%Pawnshop
Personal connections
(family/relatives/friends)
6%Pawnshop
Personal connections
(family/relatives/friends)
9%
32%
Pawnshop
Personal connections
(family/relatives/friends)
26% 35%
12
Q. F8.1: Your company apply for informal external finance from Whom?
0%Other2%Other2%Other1%Other

13. The main reasons why companies applying for inofficial external finance is mainly because this formality is
much easier, 61% companies stated that. No collateral required and flexible payback are also two main
reason for enterprise to choose informal finance
24%
Couldn's get a formal
credit21%
Couldn's get a formal
credit
14%Couldn's get a formal credit
Food
processing
Total
Textile and garment
manufacturing
Wooden products
manufacturing
21%
Couldn's get a formal
credit
34%
62%
21%
24%
No collateral required
Easier fomalities
Most favorable interest
credit
45%
61%
33.33
21%
No collateral required
Easier fomalities
Most favorable interest
credit
50%
57%
29%
No collateral required
Easier fomalities
Most favorable interest
42%
61%
28%
No collateral required
Easier fomarlities
Most favorable interest
13
Q. F10: What are the main difficulties in applying for external finance? (single main reason)
7%
34%
Others
Flexible payback
3%
64%
Others
Flexible payback
7%
43%
Others
Flexible payback
5%
49%
Others
Flexible payback

14. Most of informal loans required neither collaterals nor guarantors
Some loans requiredSome loans requiredSome loans requiredSome loans required
Food
processing
Total
Textile and garment
manufacturing
Wooden products
manufacturing
11%
14%
4%
Loans required
guarantors only
Loans required collaterals
only
Some loans required
collaterals and some
loans required guarantors
12%
9%
12%
Loans required guarantors
only
Loans required collaterals
only
Some loans required
collaterals and some loans
required guarantors
7%
21%
0%
Loans required
guarantors only
Loans required collaterals
only
Some loans required
collaterals and some
loans required guarantors
11%
13%
7%
Loans required
guarantors only
Loans required collaterals
only
Some loans required
collaterals and some
loans required guarantors
14
Q. F11 Did your finance need collateral or guarantors?
71%
Loans required neither
collaterals nor guarantors
67%
Loans required neither
collaterals nor guarantors71%
Loans required neither
collaterals nor guarantors
69%
Loans required neither
collaterals nor guarantors

15. For most of companies, formal external finance is much more important than that from informal source*
80%
90%
75%
80%
80%
90%
100%
Formal sources Informal sources
75%
20%
10%
25%
20%
20%
30%
40%
50%
60%
70%
15
Q. F12:Which source of loan is more important to your business?
*The average amount of loan from informal source s varies from VND 1 billion to VND 2 billion for three sectors comparing to VND 3
billion to VND 6 billion from formal sources
10%
0%
10%
Total Food processing Textile and garment
manufacturing
Wooden products
manufacturing

16. 16
Future
Financing
Is an annual interest rate of 7%
attractive enough for SMEs to
apply for external finance?

17. Even at the very low interest rate (7%), not many enterprises would like to apply for external finance
58% 28%7% 7%
Do not borrow Under VND 1 billion VND 1 – 10 bilion Over VND 10 bilion
17
Do not borrow Under VND 1 billion VND 1 – 10 bilion Over VND 10 bilion
The main reason for not having intention to apply for external finance lies in the fact that these industries’s financial needs are
very much depending on customers’ orders which cannot be foreseen by most of enterprises when being asked
Q. F7: How much would you like to borrow if banks offer an annual interest of 7% for loan?

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18
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