Impact of bank credit on exports to Association of South East Asian Nations countries: Empirical study of Vietnam

Abstract

Using 2012 and 2016 input–output tables, the paper aims to assess the dispersion effects of bank credit on value added created by exporting activities of 17 sectors from Vietnam to Association of South East Asian Nations (ASEAN) countries. The research contributes to the literature with respect to the role of the banks on providing credit to export in developing countries. Despite the increasing demand for export credit to ASEAN countries in the period of 2013–2017, Vietnamese export credit only accounted for roughly 30% of total credit. The research results indicate that capital requirements for exporting are always higher than other activities and keep growing during the recent period. It shows the importance of bank loans for exporting activities in Vietnam. Moreover, according to the research, exports to ASEAN countries have greater dispersion impact than exporting to other countries, and capital requirements for exporting to ASEAN countries are also higher. This implies bank credit for exporting activities to ASEAN countries should be encouraged. As a result of empirical evidence regarding the power of dispersion and level of value added induced by the increase of final demand, the study recommends that Vietnam should pay more attention to potential target countries like Laos, Malaysia, and Thailand, as well as prioritize some business sectors related to agriculture and services for funding.