Political connections, corruption and access to credit in Vietnamese SMEs

Abstract

The observation of firms’ political connections (PCs) and corruption has raised the question of their benefits to firms’ operation, especially on accessing to the financial resources. Firms with stronger political connections or informal payment willingness may get easier in approaching to formal bank loans. By using different types of PCs and bribe, the study shows that while PCs can help SMEs in getting formal bank loans, bribe does not have any effect on firms’ access to credit. The PCs can be known as the social capital, which helps the firm in accessing the resources. The paper gives a better understanding about the characteristics of SMEs in an emerging market and a network-oriented country like Vietnam.