Financial solutions for developing medium and small enterprises in bac giang province

Stemming from the above reasons, the PhD student chose the topic "Financial solutions for developing small and medium enterprises in Bac Giang province" as the research topic of the thes

MINISTRY OF EDUCATION AND TRAINING MINISTRY OF FINANCE

ACADEMY OF FINANCE

PHAM VAN THINH

The work was completed at Academy of Finance

Supervisor’s full name: 1 PhD Nguyen Dinh Hoan

2 PhD Luong Thu Thuy

Opponent 1: ………

Opponent 2: ………

Opponent 3: ………

The thesis will be defended in front of the thesis marking Council at State level held at Academy of Finance, Hanoi At h , day month năm 2024

It is possible to learn about the thesis at

1 National Library

2 Library of Academy of Finance

PREFACE

1 Rationale

SMEs account for the majority of businesses operating in the market with important contributions to the economies of many countries around the world However, the majority of this group are businesses with limited capital, limited management, etc In the current context, people and businesses, especially SMEs, are facing very difficult production and business activities Because the domestic and foreign economies are facing difficulties, the level of risk is higher when businesses have difficulty proving business efficiency Meanwhile, credit institutions have difficulty lowering lending standards This leads

to credit institutions wanting to lend but not finding qualified customers With a natural area of 3,895 km² and a population of over 1.8 million people, Bac Giang has 09 district-level administrative units and

01 city Bac Giang has a central geographical location, connected to major cities such as Hanoi and Ho Chi Minh Based on the above available potentials along with the political determination of local authorities, Bac Giang is striving to become an attractive destination for domestic and foreign investors In recent years, the local government of Bac Giang province has synchronously implemented many specific financial solutions to develop SMEs in the area, thereby creating motivation to promote the process of industrialization and modernity chemistry However, these solutions still reveal some limitations and weaknesses, leading to SMEs in the province not being able to develop strongly and comprehensively Stemming from the above reasons, the PhD student chose the topic "Financial solutions for developing small and medium enterprises in Bac Giang province" as the research topic of the thesis

2 Overview of studies

2.1 Research projects related to the thesis topic

2.1.1 Research on small and medium enterprises

2.1.1.1 Foreign studies:

Ayyagari et al (2003) with the study "Small and medium enterprises across the globe: a new database" Beck and colleagues (2005) published a research article "SMEs, growth and poverty: cross-country evidence" (SMEs, growth and poverty: based on cross-country data) Research by Ardic, Mylenko and Saltane (2011) titled “Small and Medium Enterprises: A Cross-Country Analysis with a New Data Set” (SMEs: Cross-country analysis with a new data set) Research by Berisha and Pula (2015) titled "Defining Small and Medium

Enterprises: a critical review" has synthesized quite detailed and specific methods Identify SMEs Casalino, Ivanov and Nenov (2014) with the study "Innovation's governance and investments for enhancing competitiveness of manufacturing SMEs"

2.1.1.2 Domestic research:

Pham Thi Van Anh (2012) with PhD thesis on the topic "Solutions

to improve the financial capacity of small and medium enterprises" Nguyen The Binh (2013), "International experience on policies to support the development of small and medium enterprises and lessons for Vietnam" Nguyen Truong Son (2014) has a monograph

"Development of small and medium enterprises in Vietnam today" Pham Thu Huong (2017), "Competitiveness of SMEs researched in Hanoi City", Doctoral thesis, University of Mining and Geology Nguyen Van Thich (2018) with the study "Factors affecting the business success of small and medium-sized enterprises in Ho Chi Minh City" identifies factors affecting the business success of small and medium-sized enterprises in Ho Chi Minh City small and medium enterprises in

Ho Chi Minh City Diep To Uyen and colleagues (2021) have a study

"The role of small and medium-sized enterprises in socio-economic development of Phu Tho province"

2.1.2 Research on financial solutions for small and medium-sized enterprise development

2.1.2.1 Foreign studies:

Baurer's (2005) study titled "Tax administrations and small and medium enterprises in developing countries" is one of the works that contributed important regarding tax policy for SMEs in developing countries Uchikawa (2009) has a research article "Small and Medium Enterprises in Japan: Surviving the Long-Term Recession" (SMEs in Japan: Surviving the long-term economic recession) Research by Beca and Nişulescu-Ashrafzadeh (2014) titled “The effect of the fiscal policy

on the SME sector in Romania during the economic crisis” (The impact

of the fiscal policy on the SME sector in Romania during the crisis) economic crisis) According to an OECD study (2021) titled

"Understanding Firm Growth: Helping SMEs Scale Up" Adžić et al (2023) “The Impact of Tax Policy, System, and Administration on Small and Medium-Sized Enterprises in the Republic of Serbia: A Statistical Analysis of the Situation” management to SMEs)

2.1.2.2 Domestic research:

Ha Quy Sang (2010) conducted a thesis with the topic "Financial - accounting solutions to develop small and medium-sized enterprises in

Vietnam" Le Quang Manh (2011) with the research "Promoting the role of the State in developing small and medium enterprises in Vietnam" Phung Thanh Loan (2019) with thesis topic "Financial policies to support the development of SMEs in Vietnam" Ngo Thi Phuong Thao (2021) with the research "Mobilizing capital to develop small and medium-sized enterprises in Hanoi city" Nguyen Thi Ly (2023) with the study "Access to land for small and medium-sized enterprises - Issues raised in perfecting land policy" pointed out the difficulties of SMEs in Vietnam when accessing land land for production and business

2.2 General assessment of research projects related to the thesis topic

2.2.1 Issues that have been researched:

First, the general theory of SMEs along with the characteristics and role of this type of enterprise in the country and locality has been clarified in many studies Second, the connotation of the issue of SME development as well as the factors affecting the development of SMEs have also been pointed out in many studies Third, financial solutions from the government to support SMEs have also been built and developed in many studies Fourth, the current situation of SMEs in Vietnam in terms of technological level, labor level, competitiveness, financial capacity, over time as well as the difficulties of businesses Fifth, some basic characteristics of the local socio-economic situation have also been clearly shown

2.2.2 Issues that have not been researched:

First, research related to local financial solutions to promote SME development has not been done much Second, some studies on financial solutions for SME development only focus on tax or capital or land policies, lacking comprehensive research on the combination of many state financial tools for development SME Third, there is a lack

of quantitative research to measure the impact of financial solutions on the development of SMEs in a locality Fourth, there is no in-depth research on financial solutions to help develop SMEs in Bac Giang

2.3 Issues selected for research in the thesis topic, research questions and analytical framework

2.3.1 Issues selected for research:

First, research and systematize the theoretical basis of financial solutions for SME development for a locality in a country, focusing on solutions to taxes, state budget expenditure, credit and land finance Second, learn and build an econometric model to evaluate the impact of selected financial solutions on SME development in a specific locality

Third, select a case in Bac Giang province to apply the theoretical basis built to analyze the current situation of implementing financial solutions for SME development in the locality, thereby providing solutions to improve the situation these contents

- What factors affect financial solutions for SME development?

- What is the current status of financial solutions for SME development in Bac Giang province in the period 2018-2022? What are the shortcomings in those solutions?

- What needs to be done to improve financial solutions for SME development in Bac Giang province in the coming time?

2.3.3 Analytical framework of the thesis

3 Research objectives

Research objective: Based on the analysis of financial solutions for SME development in Bac Giang province, the thesis will develop perspectives, orientations, solutions and recommendations to improve development financial solutions SME development in Bac Giang province has a scientific basis in theory and practice and is highly feasible

Research tasks: Starting from the above research objectives, the thesis will focus on clarifying the following issues:

- Research theoretical issues about SMEs Clarifying the connotation of SME development (concept, content, evaluation criteria)

- Research the current situation of SME development, using financial solutions for SME development in Bac Giang province during the research period

- Research factors affecting financial solutions for SME development in Bac Giang province

- Research opportunities and challenges as well as orientations for SME development and perspectives on perfecting financial solutions for SME development in Bac Giang province From there, propose to complete financial solutions for developing Bac Giang SMEs until

2030

4 Subject and scope of research

Research object: theoretical and practical issues on financial solutions for SME development in Bac Giang province

Research scope

- Regarding content: The thesis focuses on researching tax solutions (VAT, corporate income tax), state budget expenditure, credit and land finance to develop SMEs with the main subject of building and implementing the solutions central and local authorities

- About space: Thesis research in Bac Giang province

- Regarding time: current situation in the period 2018 - 2022; viewpoints, orientations, solutions and research recommendations for application until 2030

5 Research methods

The thesis uses the method of dialectical materialism and historical materialism for the research content Combined with that is statistical methods to collect, analyze, synthesize and evaluate basic theories on financial policies for developing SMEs in general and SMEs of Bac Giang province in particular, through research published research projects Statistical methods to collect and synthesize secondary

documents From there, we clearly point out the inheritance as well as the gaps that need further research

6 New contributions of the thesis

6.1 Theoretically:

First, clarify the meaning of SMEs on both qualitative and quantitative criteria; The main factors affecting the development of SMEs include infrastructure, land, capital, human resources and science and technology Second, explain the theory of financial solutions for SME development, especially specifically analyzing the impact of these financial solutions on the main factors affecting the development of SMEs Third, synthesize some valuable experiences on financial solutions for SME development in a number of countries and localities, thereby stating lessons suitable for Bac Giang

6.2 In terms of practice:

First, the thesis synthesizes the natural and socio-economic conditions of Bac Giang province; Analyze the current status of financial solutions being applied in the province to support the development of local SMEs Second, Evaluate the achievements and limitations in implementing financial solutions for SME development in Bac Giang province, thereby finding out the subjective and objective causes leading to limitations Third, Propose a comprehensive set of solutions, most suitable for the current situation of Bac Giang province during the research period to help the province support the development

of SMEs more effectively in the future

7 Structure of the thesis

In addition to the introduction and conclusion, the main content of the thesis is structured in 3 chapters:

Chapter 1: Theory and experience on financial solutions for developing small and medium enterprises;

Chapter 2: Current status of financial solutions for developing small and medium enterprises in Bac Giang province;

Chapter 3: Completing financial solutions for developing small and medium enterprises in Bac Giang province

CHAPTER 1: THEORY AND EXPERIENCE IN FINANCIAL SOLUTIONS FOR DEVELOPMENT OF SMALL AND MEDIUM

ENTERPRISES

1.1 DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES

1.1.1 Small and medium enterprises

1.1.1.1 Concept of small and medium enterprises

Through research, the thesis believes that "SMEs are legally operating business establishments with a capital or labor scale corresponding to the national classification of micro, small and medium enterprises SMEs often have an owner who is also a business manager, have a simple operating system, and develop products based on consumer tastes."

1.1.1.2 Characteristics of small and medium enterprises

SMEs of each country have basic characteristics including:

- The scale of capital and labor is small, manual labor accounts for

a large proportion This is the most basic characteristic of SMEs

- The business lines of SMEs are mainly concentrated in fields that require little capital and quick capital turnover times

- Organize a compact, flexible and effective apparatus, especially for micro enterprises

- The market share of SMEs is not large and their ability to dominate the market is not high The market often reacts less drastically, or even does not react, to changes in business strategies of SMEs

1.1.1.3 The role of small and medium enterprises in the economy

SMEs contribute to creating jobs for local workers; SMEs promote local economic restructuring; SMEs contribute to increasing the scale and speed of local economic development; SMEs attract and exploit capital and locally available resources for development investment goals; SMEs also contribute to increasing revenue for local budgets

1.1.2.Development of small and medium enterprises

1.1.2.1 Perspectives on small and medium enterprise development

Through research, the thesis states that: "SME development is an increase in both quantity and quality of this type of enterprise from low

to high, reflected in the expansion of the number of enterprises and the scale of production." production, an increase in contribution to the state budget and an increase in the number of jobs created for the local economy

1.1.2.2 Evaluation criteria for small and medium enterprise development

a Regarding quantitative criteria

Growth rate of the

number of SMEs =

Number of SMEs in year n - Number of SMEs in year n-1  100% Number of SMEs in year n-1

Growth rate of number of

employees in SMEs =

Yt - Yt-1

 100%

Yt-1

In which: Yt is the number of employees working in SMEs in year

t Yt-1 is the number of employees working in SMEs in year t-1

b Regarding qualitative criteria:

The development of SMEs can also be expressed through the following qualitative criteria:

(1) Impact of SMEs on local economic restructuring;

(2) Innovation and creativity in the activities of SMEs;

(3) Law compliance of SMEs;

(4) Responsibilities of SMEs to the environment

(5) Building the brand of SMEs with local image

1.1.3.Factors affecting the development of small and medium enterprises

First, the infrastructure factor: Technical infrastructure system and support service infrastructure system.Second, the land factor Third, capital factor Fourth, human resource factor Fifth, scientific and technological factors

1.2 FINANCIAL SOLUTIONS FOR DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES

1.2.1 Concept of financial solutions for small and medium enterprise development

The researcher's view on financial solutions for SME development

will be as follows: "Financial solutions for SME development are the totality of ways and measures by which the State uses financial tools to influence key factors factor to create favorable conditions and

environment for the development process of SMEs according to set goals within a certain period of time"

1.2.2 Impact mechanism of financial solutions for small and medium-sized enterprise development

The impact mechanism of these financial solutions on the development of SMEs can be implemented in many different ways to increase the scale of operations, support access to capital, tax incentives, subsidies, etc Improving labor quality will help these businesses overcome difficulties and improve their competitiveness in the market The impact mechanism of financial solutions implemented by the State

on the development of SMEs can be classified into two groups:

- Direct impact mechanism: Through financial solutions of the state, it will directly affect the financial situation of SMEs

- Indirect impact mechanism: Through impact on factors such as infrastructure, science and technology, human resource training, market development to create favorable conditions and environment for the operations of SMEs

1.2.3 Content of financial solutions for development of small and medium enterprises

1.2.3.1 Tax solutions to support the development of small and medium enterprises

Corporate income tax exemption and reduction programs for SMEs

to support these enterprises in stabilizing production and business and expanding their scale of operations VAT refund and VAT reduction programs to create conditions for SMEs to have more financial resources for development At the same time, tax solutions also focus on promoting businesses to invest in the necessary infrastructure to develop local SMEs

1.2.3.2 State budget spending solutions to support the development of small and medium enterprises

State budget expenditures are mainly concentrated through the following expenditures: Infrastructure construction expenditures, state budget expenditures for training and human resource development, state budget expenditures for science and technology development, and expenditures to support market development school, state budget spending to establish and organize a credit guarantee fund for SMEs; State budget spending to carry out legal support activities for SMEs; State budget spending to implement programs to support SMEs

1.2.3.3 Credit solutions to support the development of small and medium enterprises

State credit for SMEs will help improve the responsibility of businesses in using state credit because they must comply with the principle of borrowing with repayment, or must comply with conditions prescribed by the State Three forms of support include: support for loan capital; Support for loan term and support for loan interest rates

1.2.3.4 Financial solutions for land to support the development of small and medium enterprises

The Government can use a number of forms of land financial support as follows: exemption or reduction of land rent and land tax for

a limited period of time; Exemption or reduction of land rent and land tax for the entire lease term and regulations to stabilize land rent and land tax during a number of lease cycles or throughout the life of the project

1.2.4 Criteria for evaluating financial solutions for small and medium-sized enterprise development

Criteria for evaluating credit solutions: number of loans, amount of money disbursed to SMEs from local banks or investment funds

Criteria for evaluating land finance solutions: the amount of land rent to be exempted or reduced as well as money to support businesses

in finding and building production and business premises in the locality

- Financial solutions impact science and technology to develop small and medium enterprises

1.2.6 Factors affecting financial solutions for SME development

- Subjective factors: National and local economic potential; Legal basis system for managing the operations of SMEs; Personnel implementing financial solutions to support SMEs

- Objective factors: Characteristics of SMEs; Production and business situation of SMEs; Context of the national and world economy

1.3 EXPERIENCE IN SOLUTIONS FOR DEVELOPING SMALL AND MEDIUM ENTERPRISES AND LESSONS LEARNED FOR BAC GIANG PROVINCE

1.3.1 Experience of some countries

1.3.1.1 Tax solutions to support the development of small and medium enterprises

With corporate income tax: Reducing corporate income tax rates for SMEs: That is, SMEs will be subject to a lower corporate income tax rate (Netherlands, China, Laos, Thailand); Tax exemption and reduction for SMEs (Laos, Myanmar, Malta); SMEs are allowed to accelerate depreciation (South Africa, Germany)

With VAT: Sweden has established an annual value-added tax period for small businesses; Some countries around the world regulate VAT declaration revenue thresholds (Australia, Austria, France, Germany, ); implementation of a simple input VAT program (Japan); Reduced VAT rate (China)

1.3.1.2 Solutions for state budget spending to support the development of small and medium enterprises: State budget

expenditures to support the activities of SMEs such as subsidies for SMEs in Singapore and expenditure on purchasing goods from SMEs in the US In Japan, state budget spending to support SME development will focus on two aspects: supporting competitiveness and supporting business structure change; Korea supports 50% of equipment costs and provides financial support for businesses to invest in technological innovation for SMEs

1.3.1.3 Credit solutions to support the development of small and medium enterprises: The Chinese government established funds to

support SMEs Taiwan encourages commercial banks to lend capital to SMEs, establishing an SME development fund and a credit protection fund