Nearly eight years after the Law on Support for Small and Medium-sized Enterprises (SMEs) came into force, calls to amend the legislation are gathering momentum. While the existing framework has laid an important policy foundation, experts argue that the next phase of reform should go beyond expanding support programs or increasing funding. Rather, the revised Law should embrace a more fundamental shift, from fragmented assistance toward a cohesive support ecosystem that prioritizes implementation, institutional quality, and measurable outcomes.
For an effective SME ecosystem
Since the Law on Support for SMEs took effect in 2018, the government has worked with ministries, agencies, and local authorities to roll out a wide range of support policies. For the first time, large-scale initiatives in digital transformation, legal advisory services, innovation, and startup development were implemented nationwide, helping SMEs modernize their business models and strengthen corporate governance. Policies encouraging participation in global value chains have also enabled many businesses to improve their competitiveness in an increasingly integrated economy.
According to the Ministry of Finance’s review of the Law’s implementation, credit support policies delivered through commercial banks have improved SMEs’ access to financing, enabling many businesses to maintain operations and expand despite the twin challenges of the Covid-19 pandemic and global economic uncertainty.
However, the review also highlighted persistent shortcomings. Outstanding loans to SMEs account for only around 19-20 per cent of total credit in the economy; well below the sector’s share of total enterprises. Limited financial capacity, small operating scale, unstable business plans, and weak project preparation continue to constrain SMEs’ ability to access bank financing.
Collateral requirements remain one of the biggest obstacles. Though banks have expanded unsecured lending, strict prudential regulations continue to limit their risk appetite. Meanwhile, policy tools such as the Credit Guarantee Fund and the SME Development Fund have delivered only modest results.
Gaps also remain across other support policies. Tax incentives - the largest form of government assistance between 2020 and 2024 - have yet to be fully institutionalized under the Law, while many relief measures have been only temporary. Access to industrial land varies significantly between localities, and support for digital transformation and innovation remains fragmented, with no centralized information platform to help businesses navigate available programs. Surveys show that around 79 per cent of SMEs have never accessed government-funded legal advisory services, while 77 per cent have never received official business support information. Efforts to encourage household businesses to formalize have likewise produced limited results.
Reforming policy design and implementation
Experts argue that amending the Law should begin with redefining both who receives support and how support is delivered. Mr. Pham Ngoc Thach, Deputy Head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), said the criteria for classifying SMEs should better reflect the characteristics of different industries. In manufacturing, for example, businesses often generate high revenues because of significant raw material costs while operating on relatively thin profit margins. As a result, many manufacturers quickly exceed the current SME revenue threshold and lose eligibility for support despite remaining financially constrained.
He proposed raising the revenue ceiling for priority manufacturing sectors to better nurture domestic production capacity. Tax incentives, he added, should also extend beyond micro-enterprises and newly-established businesses to include companies investing in expansion and technological upgrades.
Regarding access to finance, Mr. Thach called for detailed regulations on valuing intangible assets and intellectual property, providing banks with a legal basis to shift from collateral-based lending toward financing based on cash flow and business credibility. He also recommended stronger incentives for large corporations to integrate SMEs into their supply chains while reducing compliance costs that discourage household businesses from scaling up.
From a broader institutional perspective, Dr. Ha Huy Ngoc, Director of the Center for Strategy and Policy at the Institute of Vietnam and World Economy, said both the SME Development Fund and the Credit Guarantee Fund should be reformed along market-oriented principles. Rather than focusing solely on preserving State capital, these funds should prioritize supporting business development and sharing risks with commercial lenders.
He also called for diversifying financing channels beyond bank credit by expanding venture capital funds, startup investment funds, crowdfunding platforms, growth capital markets, and public-private co-investment schemes.
More importantly, Dr. Ngoc argued that government support should shift from an input-based approach to an outcome-based model. Programs supporting digital transformation, green transition, and innovation should be evaluated based on measurable improvements in revenue growth, technology adoption, and job creation rather than the number of seminars or training sessions conducted.
He further proposed developing a national digital one-stop platform linking business registration, taxation, social insurance, banking, and business support agencies. Such a platform would allow SMEs to submit information just once while enabling policymakers to monitor program effectiveness in real time.
Tailoring support
Ms. Le Thi Yen, Director of the Hanoi Tax Consulting Co., believes the challenges facing SMEs extend well beyond financing. Many businesses also lack management expertise, professional services, market access, reliable data, and mechanisms to protect them when unintentional compliance mistakes occur.
The needs of businesses differ significantly depending on their stage of development.
“The needs of businesses differ significantly depending on their stage of development,” she explained. “Startups need guidance on how to begin correctly. Household businesses transitioning into formal enterprises need support on taxation, accounting, invoicing, social insurance, and legal compliance. Micro-enterprises require basic governance systems, while small businesses need management upgrades. Medium-sized enterprises need greater access to capital, technology, and markets.”
Rather than adopting a one-size-fits-all approach, Ms. Yen argued that the revised Law should introduce differentiated support programs for startups, transitioning household businesses, micro-enterprises, small enterprises, and medium-sized enterprises.
Such an approach, she said, would enable the government to allocate resources more effectively, identify which services should be publicly-funded and which could be delivered through vouchers, competitive procurement, or public-private partnerships. It would also provide policymakers with a clearer picture of the health of the SME sector, helping identify which business segments require urgent support and which have the greatest growth potential.
Experts broadly agree that the amendment to the Law on Support for SMEs should represent more than an expansion of existing support measures. Rather, it should establish a transparent, flexible, and results-oriented ecosystem that enables businesses to access the right support at the right time and at the appropriate stage of development. Only then can Vietnam’s SME sector fully realize its potential as a key driver of long-term economic growth.
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