Entering a new market: commercial banks and small/micro enterprise lending in Viet Nam

Examines the supply of formal financial services to Micro and Small Enterprises (MSEs) in the urban areas of Hanoi, Ho Chi Minh City, and Can Tho.

The private sector, especially small enterprises, has demonstrated to be the engine of growth and employment for emerging and developing economies alike. In Viet Nam, the enactment of the Enterprise Law in 2000 has resulted in a burgeoning private sector. By November 2003, there were a total number of 120,000 private enterprises and 2.5 million household enterprises operating in the country.Of these, 95 per cent of the private enterprises are Small and Medium Enterprises (SMEs) while 50 per cent of are Micro and Small Enterprises (MSEs). Both sectors have contributed to 48.5 per cent of the country's GDP.

This study has been commissioned by the ILO in order to examine the supply of formal financial services to MSEs in the urban areas of Hanoi, Ho Chi Minh City, and Can Tho. The objectives of the study are three-fold: (i) to provide a comprehensive and updated overview of the financial services market for MSEs, (ii) to understand the constraints and barriers in providing financial services to MSEs, and (iii) to gauge commercial banks' interest in serving this sector. This study seeks to identify commercial banks with which Business Development Services (BDS) providers, including the SIYB program in Viet Nam, could establish a strategic linkage to facilitate access to financial services for this under-served urban segment.