Viet Nam’s gross domestic product is forecast to grow 2.3% in 2020. Although lower than in recent years, it is a significant achievement considering many countries in the region are in economic freefall.

Policymakers, however, must consider if the economy needs further stimulus. Based on conventional measures, probably not. In addition to this year’s growth, the economy is expected to bounce back strongly in 2021 with the Asian Development Bank forecasting an expansion of 6.1%, which is broadly comparable to Viet Nam’s recent growth rates. With the Government Statistics Office reporting unemployment at 2.5% as of September 2020, the labor market seems strong.

Traditional metrics like GDP and unemployment, however, do overlook and can even contribute to inequalities. If the overall picture is strong, then governments may elect to forego additional support even though certain groups may be lost in the statistical shuffle.

In response, some economists have proposed more targeted metrics to measure recovery. For example, there are calls for the Federal Reserve in the United States to consider the unemployment rate of black Americans as opposed to the general unemployment rate when setting monetary policy.

Basing economic monetary and fiscal policy on the most economically vulnerable has the potential to address systematic inequalities, but how to import the concept to a middle-income country like Viet Nam?

Ask women. More specifically, ask women who own small and medium-sized enterprises.

Let’s break the idea into its constituent components beginning with four reasons for focusing on small businesses during a recovery. First, these businesses represent an important block of the economy. Including micro enterprises, they account for 98% of all businesses and around half of all jobs.

Third, unlike micro firms, they have already achieved a modicum of scale and so have the potential to be more economically efficient. Efficiency is important because it leads not just to jobs but to good jobs that can narrow economic disparities.

Fourth, small businesses can drive innovation, often having greater flexibility to pivot than less nimble large-sized enterprises. This can help Viet Nam to avoid the infamous “middle income trap.”

Finally, SMEs are particularly vulnerable to economic crises. They lack the financial resources of larger enterprises, and their access to finance—even during periods of economic health—is constrained. This crisis is no exception. During the first half of 2020, 29,200 enterprises suspended their operations during the first six months of 2020—a 38% year-on-year increase, and whereas lending in Viet Nam increased 2.1% from the start of 2020 through 15 June 2020, lending to small and medium-sized enterprises declined 0.7% over the same period.

Now within the broader universe of SMEs, women-owned enterprises are even more vulnerable because they have more difficulty in accessing finance. An International Finance Corporation report identified in 2017 that women-owned small businesses in Viet Nam face a $1.2 billion financing gap and that 37% of these businesses had borrowed from a bank in the past two years, which was significantly lower than 47% of SMEs owned by men.

Similarly, a 2019 study from the Vietnam Chamber of Commerce and Industry found that women-owned small businesses have, on average, loan terms that are 16% shorter than SMEs owned by men, despite having comparable business performance. These trends are likely to compound during a downturn when banks typically become more conservative.

These discrepancies are the product of documented biases, both conscious and unconscious, and are the rationale for using the economic vitality of women-owned businesses as a metric for economic recovery.

Focusing on the health of women-owned businesses
would also improve economic resilience.

Moreover, economic policy that follows the fortunes of these firms would benefit not just women but all economic participants. Most obviously, monetary and fiscal policy would have an incentive to look past the headline numbers and consider how the larger statistics on GDP and unemployment are filtering down to the less advantaged. This will create a bias toward greater support during a downturn.

Focusing on the health of women-owned businesses would also improve economic resilience. Women are more likely to be in economically vulnerable jobs than men, and with poorer access to finance, women-owned businesses are at greater risk of bankruptcy because of temporary liquidity issues rather than more serious solvency issues. Finally, it would lead to better socioeconomic outcomes. By ensuring that capital is equally accessible, it ensures its flows to those businesses with the most potential to generate growth and employment.

Women-owned businesses need more support from banks, especially in financially straitened times like these. This is gradually happening. An ADB grant funded by the Women Entrepreneurs Finance Initiative, for example, incentivizes banks to restructure existing loans to women-owned businesses hurt by the COVID-19 pandemic, and to extend loans to first-time borrowers. The grant will be disbursed through the Asia Commercial Bank, Bank for Investments and Development of Vietnam, Saigon-Hanoi Bank, Tien Phong Bank, and Vietnam Prosperity Bank—all of which have volunteered for the program.

Efforts like this will help. But if economic policy benchmarked to women-owned businesses is to become a viable policy tool, better data is required. Economic data in Viet Nam is generally not sex-disaggregated. It needs to be, and ADB is working with the Ministry of Planning and Investments to introduce it for the first time to Viet Nam’s 2021 economic census.

On many levels, women in Viet Nam fair better than women living in countries at a similar level of economic development. This can create an attitude that women’s economic interests are already fully secured. Yet, relative does not equal absolute performance, and as the discrepancies in access to finance indicate, women-owned businesses still face disproportionate barriers.

Let’s take a major step toward breaking down these barriers by making them the criterion by which economic stimulus decisions are set.

This was previously published in the Vietnam Investment Review and the Viet Nam Banking Times.