Tín dụng phi chính thức và hoạt động tài chính của doanh nghiệp vừa và nhỏ ở Việt Nam

INFORMAL LOAN AND FINANCIAL PERFORMANCE 
OF SMALL AND MEDIUM-SIZED ENTERPRISES IN VIETNAM
TÍN DỤNG PHI CHÍNH THỨC VÀ HOẠT ĐỘNG TÀI CHÍNH 
CỦA DOANH NGHIỆP VỪA VÀ NHỎ Ở VIỆT NAM
TS. Đoàn Ngọc Thắng ; ThS. Đỗ Phú Đông 
Biện Thanh Huyền ; Hà Thị Thùy Dung ; Trần Thị Thêu 
Học viện ngân hàng
dongdp@hvnh.edu.vn
Abstract 
This paper studies the use of informal loans and its effects on the financial performance of
Small and Medium-sized Enterprises (SMEs) in Vietnam for the period 2011-2015. The informal
loan includes constructive and underground loan. Financial performance is measured by return
on assets (ROA). The empirical results show that informal loan is likely to be used when firms
face industry competition, have an external audit, and bank loan problem. Using informal credit
has a positive effect on the business’s financial performance; however, the amount of informal
loans has a U-inverted relationship with financial performance. The interest rate has a negative
effect on financial performance, while loan duration plays no role. Among these informal loans,
the effects of instructive loan are more evident than that of underground one. Our findings have
practical meanings for the firms to use the informal loan effectively.
Keywords: informal loan, SMEs, financial performance
Tóm tắt
Bài viết này nghiên cứu về việc sử dụng tín dụng phi chính thức (informal loan) và tác
động của nó tới hoạt động tài chính của doanh nghiệp vừa và nhỏ (DNVVN) ở Việt Nam giai
đoạn 2011-2015. Tín dụng phi chính thức bao gồm tín dụng mang tính xây dựng (constructive
informal loan) và tín dụng đen (underground loan). Hoạt động tài chính được đo bằng chỉ số lợi
nhuận trên tài sản. Kết quả hồi quy cho thấy xác suất của doanh nghiệp sử dụng tín dụng phi
chính thức tăng lên khi hoạt động trong ngành có cạnh tranh, có kiểm toán bên ngoài, và doanh
nghiệp gặp khó khăn trong việc vay vốn ngân hàng. Sử dụng tín dụng phi chính thức có tác động
tích cực tới hoạt động tài chính của doanh nghiệp, tuy nhiên số tiền tín dụng phi chính thức có
mối quan hệ hình U ngược với hoạt động tài chính của doanh nghiệp. Lãi suất khoản vay này có
tác động tiêu cực tới hoạt động tài chính trong khi thời hạn vay lại không có ảnh hưởng. Giữa
hai loại hình tín dụng phi chính thức, tác động của tín dụng mang tính xây dựng đối với hoạt
động tài chính rõ ràng hơn so với tín dụng đen. Kết quả này có hàm ý quan trọng cho các doanh
nghiệp trong việc sử dụng tín dụng phi chính thức một cách hiệu quả. 
Từ khóa: tín dụng phi chính thức, doanh nghiệp vừa và nhỏ, hoạt động tài chính
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1. Introduction
Small and medium enterprises (SMEs) play an important role in the development of the
Vietnamese economy. Indeed, the number of SMEs accounts for more than 90% of the total num-
ber of firms operating in Vietnam. Moreover, the number of workers working in SMEs makes up
77% of the total Vietnamese labor force. In terms of contribution, SMEs contribute 40% of the
GDP of Vietnam. However, according to MPDF (1997), credits have been the major obstacle to
the growth of firms. SMEs face severer ddifficulties than the large ones when getting access to
formal financing and this is true for the case of Vietnam. The burden of administrative procedure,
institutional constraints, and collateral requirements force Vietnamese SMEs to approach the in-
formal financial sources that can provide an easy-to-assess and flexible-payback loan (Archer et
al., 2020). In Vietnam, the term “informal loan” brings on the negative thoughts because of the
misunderstanding that it only includes underground credits accompanying with bad images such
as usury. This paper uncovers the informal loan’s usage, its driving forces of informal loan’s
usage, and its effect on financial performance of SMEs.
According to Hsu and Li (2009), an informal loan is a financial activity without banks as
intermediaries. It includes money borrowed from family and friends, private money houses, and
other financial associations. Allen et al. (2019) show that informal loan could be categorized into
constructive and underground informal loan. The former includes trade credits and loans from
family and friends. This loan is legal because its interest rate is not higher than the interest rate
ceiling, and therefore, it is controlled by the governments. On the other hand, underground loan
is coercive. This kind of financing includes pawnshop loans.
This paper uses the data from the Vietnamese enterprise survey conducted by the Central
Institute for Economic Management of Vietnam (CIEM) under the funding of the World Bank in
the period from 2011 to 2015. We apply a Probit method in order to examine the probability of
using informal loan and the ordinary least square regression to estimate the effects of informal
loan on the financial performances. The empirical results show that enterpr ... 
(0.0136) (0.0137) (0.0136)
LnBankoff 0.0315*** 0.0315*** 0.0347***
(0.00740) (0.00729) (0.00726)
Interest -0.0200*** -0.0194*** -0.0205***
(0.00554) (0.00551) (0.00545)
Amount 0.107*** 0.109*** 0.115***
(0.0220) (0.0222) (0.0226)
Amount2 -0.000487*** -0.000499*** -0.000511***
(0.000101) (0.000103) (0.000102)
Duration 8.93e-05 9.01e-05 0.000161
(0.000269) (0.000266) (0.000265)
Informal 0.0115
(0.00915)
Constructive 0.0155*
(0.00868)
Underground -0.0279
(0.0171)
Constant 0.921*** 0.918*** 0.926***
(0.0617) (0.0615) (0.0611)
Observations 5,120 5,120 5,120
Number of id 1,718 1,718 1,718
The regression results of the model (3) are presented in Panel A of Table 3. The coefficient
of Informal implies positive effects on ROA with the value at 0.0289 and is statistically significant
at 1%. In which, Constructive has a positive impact on the financial performance of the business
while Underground is not statistically significant. Constructive (0.0279) is positive which means
that if firms increase the use of constructive informal loan, their performances tend to increase.
This result is consistent with the study of Su and Sun (2011) and Allen et al. (2019). This is ex-
plained by the fact that constructive informal loan is loans from relatives, friends, social rela-
tionships with very low or without interest rates, and there are no complicated procedures, or,
the repayment deadline is not constrained, thus, firms can mobilize money quickly, and the re-
payment period is not a concern. Moreover, these are loans that are under the control of the gov-
ernment, so unethical activities such as violence, raising interest rates exceed a high level,
shortening the repayment period, ... are unlikely to happen. Meanwhile, the proportion of using
underground loan in our sample is quite small, only about 4%, so the underground loan’s role
may not be large enough to affect the performance of the SMEs. However, the results relating to
informal loan is not consistent with the study of Cuong and Hau (2020) on informal loan in Viet-
nam. Indeed, Cuong and Hau (2020) investigated on projects of both institutions and individuals.
That is reason why they concluded that informal loan brings on the negative effect on the return
of the projects. 
LnAsset and LnAge are negative and statistically significant. These variables are inversely
proportional to the firm’s performance, which is completely consistent with Rand (2007). In par-
ticular, when the assets of the business increase by 1%, the use of informal loan will reduce the
efficiency of operations by about 9%. Similarly, the ROA of an enterprise will be reduced by 4%
if the business has more years of operation. The coefficients of the variables LnAsset and LnAge
were substantially consistent with the theory. Audit variable is positive with a statistical signifi-
cance of 1%. The meaning of the above results is that when firms access informal loan with out-
sourced accounting, their performance will increase. The reason is that hiring an external
accountant will help firms to control their finances more closely. The efficient use of informal
loan and combining with external accounting will help firms to save time, money, and be more
flexible with cash flow. Meanwhile, Cooperative, Competition, and Loanproblem will not affect
the firm’s performance.
In Panel B of Table 3, variables related to the use of informal loan are added as control
variables. The interest rate on informal loan, Interest, negatively affects ROA. Particularly, when
interest rates increase to 1%, ROA decreases by 2%. The negative effect of underground credit
on ROA is higher than on constructive informal credit. According to Rand (2007), informal loan
typically does not require collateral, but interest rates range from 0% up to 6% per month. This
corresponds to the findings of McMillan and Woodruff (1999) when interest rates paid by private
producers in the informal credit market in Vietnam are up to 4-7% per month. The increase in
interest rates will reduce the profits that businesses earn. Therefore, firms will have difficulties
in not having enough capital to improve their business operations as well as reinvest in new
profitable projects. Thus, operational efficiency will not be enhanced.
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Amount positively affects the financial performance of the firms at 10.9% when they use
constructive informal loan and at 11.5% when they borrow an additional VND 1 billion in un-
derground credit. This means that when businesses increase their loan value, their ROA also in-
creases. However, when the loan value becomes too large, it harms the financial performance of
the business, as shown by the coefficient of Amount2 is negative and statistically significant at
1%. This is because a moderate informal credit will have a positive effect on solving liquidity
problems and financing day-to-day business operations. However, when the value of this loan is
too large, the pressure to pay interest and principal is burdened on the business, making the firms
less efficient.
Duration does not affect the firm’s performance because the estimation coefficient of this
factor is not statistically significant (p>0.1). This result is contrary to the study of Nderitu and
Githinji (2015). This can be explained by the fact that the informal loan is mainly based on re-
lationships, there is no contract to extend the payment period, so the loan period can be more
flexible than original payment commitments. LnBankoff positively affects business perform-
ance. As the company has more relationships with bank staff, the firm can access formal loans
and reduce access to informal finance. This result is consistent with findings from the United
States (Berger and Udell, 1995; Uzzi, 1999) that when firms have a longer banking relationship,
they can borrow at lower interest rates. That means the risk will be reduced, the operational ef-
ficiency will increase.
4.3. Endogeneity problem
Up to now, we ignore the potential bias caused by the endogeneity of informal loan. A weak
financial performance may prevent firms from borrowing from banks as the banks depreciate the
firms that have bad financial reports. In this case, if the firms still need external finance, they
only use the informal channel. To mitigate the estimation bias, we apply the instrumental variable.
We construct a variable Flexible that takes a value of one if a firm answer that flexible payback
is a reason why firm use informal loan and zero otherwise. This variable is expected to have a
strong correlation with the use of informal loan (Archer et al., 2020). In our data sample, 46% of
firm chooses this reason. To the best of our knowledge, we find no consensus about the relation-
ship between flexible payback and financial performance. Hence, our instrumental variable is
valid. We report the IV regression in Table 4. The results show that when controlling the endo-
geneity problem, the effects of Informal and Constructive become pronounced.
Table 4: IV regression 
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VARIABLES (1)
ROA
(2)
ROA
LnAsset -0.0884*** -0.0883***
(0.00380) (0.00380)
LnAge -0.0379*** -0.0382***
(0.00829) (0.00829)
In parentheses is the solid standard deviation
*** p<0.01. ** p<0.05. * p<0.1
5. Conclusion
In this paper, we use the Probit and OLS models to study the probability of informal loan
selection and its effect on the financial performance of the SMEs. The empirical results, without
endogenity, show that having a competitor in the industry, using external audit or having diffi-
culties in accessing formal loan are factors leading to SMEs choosing to use informal credit. In
contrast, the size of assets and the number of years in operation are factors that reduce a firm’s
access to informal loan.
When evaluating the impact of informal loan on the financial performance of SMEs, the
results show that informal loan in general and, in particular, constructive informal credit have
positive effects on the financial performance of the firms. Meanwhile, using underground loan
does not affect ROA. 
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Cooperative -0.0181 -0.0184
(0.0250) (0.0251)
Audit 0.136*** 0.137***
(0.0108) (0.0107)
Competition 0.00713 0.00811
(0.0122) (0.0121)
Loanproblem 0.00916 0.0126
(0.0144) (0.0142)
Informal 0.0723***
(0.0213)
Constructive 0.0750***
(0.0221)
Constant 0.842*** 0.843***
(0.0601) (0.0599)
Observations 5,120 5,120
Number of id 1,718 1,718
R2 0.240 0.239
Wald test p-value 0.000 0.000
Based on the above analysis results, to increase operational efficiency for SMEs, we suggest
some practical policies as follows. The government needs to lay down a strict fiscal mechanism,
take detailed steps to regulate informal finance in order to promote positive aspects such as in-
creasing the use of constructive informal loan, play a supporting role, avoiding destabilization
and establishing multifaceted funding to meet the necessary needs that helps to develop the SMEs.
Additionally, the Vietnamese authorities need to play an important role in controlling underground
loans. For examples, the government is advisable to review the operation of potential underground
sources like pawnshops in order to manage successfully interest rates and payback method. Free-
man and Le (2007) have pointed out that rental, subscription and credit guarantee funds are often
not known as the usual and effective channels to raise funds for SMEs due to their mechanisms
are not suitable. Therefore, banks should develop new financial services or tailored credit products
for SMEs, linking the provision of credit to technical advisory, financial advisory or managing
loan services to businesses / customers to improve loan efficiency. Disseminate supporting serv-
ices to support SMEs such as factoring, credit guarantees, rental funds, etc., simultaneously,
SMEs should actively improve their understanding of trade finance methods, limit maximum use
of underground loan. Last but not least, according to Cuong and Hau (2020), innovations play an
important role in reducing accessing informal loan of SMEs. Therefore, governmental support
to facilitate innovation of SMEs should be considered by authorities. 
Due to research limitation, this paper did not examine fully the endogeneity between in-
formal and formal loans in the Vietnamese market. Therefore, evaluating endogeneity is a sug-
gested research in the future. Additionally, although governments play an important role in laying
down regulations on accessing informal and formal loans, this study did not cover this issue.
Thus, future research on informal loans in Vietnam should focus on the policy regulations. 
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