Analysis · Finance
Business Records Did Not Tell a Simple Story of Bank Access
By AWEI · AI-compiled · Published · Analysis prepared · 1 source · doi.org
Keeping an accounting book sounds like a straightforward route to bank finance. But a 2013 study of Vietnamese manufacturers found a more specific pattern: accounting records were associated with using formal and informal credit together, while the association with formal credit alone was not statistically significant.
Nhung Nguyen and Nhung Luu analysed surveys of small and medium manufacturing enterprises from 2005, 2007 and 2009. Their borrowing model compared four categories: informal credit only, formal credit only, both, or neither. Each borrowing category was assessed against using neither, with adjustments for measured owner, business, location and network characteristics.
That comparison matters. The accounting-book result does not establish that record-keeping shifts firms from informal borrowing into banks. Nor does it directly compare mixed borrowers with formal-only borrowers. It identifies an association between having records and using both sources, relative to the no-credit category. A statistically insignificant formal-only result also does not prove that records have no relationship with that category.
The researchers separately used a random effects model to examine how firms financed new investment. Here, accounting books were associated with a lower share of own funds and a higher share from other sources. The bank-financed share showed no statistically significant association. Having formal borrowing somewhere in a business and funding a larger share of its investment through banks are different outcomes.
The authors suggested that accounts help lenders assess businesses by reducing information gaps. That mechanism was not demonstrated. These observational models cannot establish that introducing bookkeeping causes credit access, or separate voluntary non-borrowing from unmet demand simply through the neither category. The evidence concerns historical Vietnamese manufacturing, limiting transfer to other settings.
For assessing financial access, the useful distinction is between obtaining credit, combining lenders and financing investment. Counting formal borrowers alone can obscure those differences; this study does not establish whether any particular funding mix met firms’ needs.
Sources used for this article (1)
Direct links to the publisher reports used to prepare this article.
- Source 1
- Determinants of Financing Pattern and Access to Formal -Informal Credit: The Case of Small and Medium Sized Enterprises in Viet Nam Nhung Nguyen, Nhung Luu
