CHAPTER 1 PAGE 70 MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL DUONG THI HONG NGAN IMPROVING CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK MASTER OF BUSINESS[.]
MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL DUONG THI HONG NGAN IMPROVING CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK MASTER OF BUSINESS ADMINISTRATION THESIS 60.34.05 SUPERVISOR: DR DANG NGOC DUC HANOI-2010 ACKNOWLEDGEMNETS The preparation of this thesis has depended on the generous support, assistance of many people It is a great pleasure to offer my special thanks to them Firstly, I am very grateful to my supervisor Dr Dang Ngoc Duc whose insightful comments, suggestions and kindness that helped me a greater deal This thesis cannot complete without his valuable assistance My thanks are also given to my friends and teachers in National Economics University – Business School, who have helped me so much during this course I am particularly grateful to my colleagues in Techcombank for their kindness, constructive suggestion for my thesis Lastly, I would like to thank to the encouragement to tolerance of my friends, my family with their valuable ideas that helped me complete this thesis TABLE OF CONTENTS ACKNOWLEDGEMNETS .1 TABLE OF CONTENTS LIST OF FIGURE LIST OF TABLE EXECUTIVE SUMMARY .6 INTRODUCTION RATIONALE .7 RESEARCH OBJECTIVES RESEARCH QUESTIONS RESEARCH METHODOLOGY 4.1 Sources of data .8 4.2 Method of collecting data .9 4.3 Data analysis SCOPES OF RESEARCH AND LIMITATIONS .9 RESEARCH STRUCTURE .10 CHAPTER THEORETICAL BACKGROUND OF CONSUMER LENDING SERVICE QUALITY 11 1.1 DEFINITION AND CHARACTERISTICS OF SERVICE 11 1.1.1 Definition of service 11 1.1.2 Characteristics of service: 11 1.2 DEFINITIONS OF SERVICE QUALITY AND CONSUMER LENDING SERVICE QUALITY 13 1.2.1 Quality of the service 13 1.2.2 Overview of consumer lending service quality 14 1.3 SERVICE QUALITY INSTRUMENT 19 CHAPTER ASSESSMENT OF CURRENT CONSUMER LENDING SERVICE QUALTIY AT TECHCOMBANK 23 2.1 OVERVIEW OF TECHCOMBANK 23 2.1.1 Establishment and development 23 2.1.2 Organizational structure 24 2.1.3 Business performance of Techcombank over period of 2007-2009 25 2.2 ASSESSMENT OF CURRENT CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK 29 2.2.1 Current situation of consumer lending at Techcombank 29 2.2.1 Measuring consumer-lending service quality at Techcombank .36 2.2.3 New findings .47 CHAPTER 3: SOLUSIONS TO IMPROVE CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK 50 3.1 SOLUSIONS TO IMPROVE CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK 50 3.1.1 Human resource development 50 3.1.2 Diversifying products and services 52 3.1.3 Developing distribution channels .53 3.1.4 Improving customer care policies 54 3.1.5 Setting a reasonable pricing policy 55 3.1.6 Building "perfect" Call Center 56 3.2 RECOMMENDATIONS 57 3.2.1 Recommendations for Government 57 3.2.2 Recommendations for the State Bank 57 CONCLUSION 58 REFERENCES 59 APPENDIX 60 APPENDIX 61 APPENDIX 62 APPENDIX 63 APPENDIX 65 APPENDIX 66 APPENDIX 67 APPENDIX 68 APPENDIX 69 APPENDIX 10 70 LIST OF FIGURES Figure 1.1: “Five gaps” model of service quality 19 Figure 1.2: Dimension of SERVQUAL model 22 Figure 2.1: Organizational Structure at Techcombank 25 Figure 2.2: Deposit .29 Figure 2.3: Number of customers .32 Figure 2.4: Outstanding consumer lending growth 33 Figure 2.5: Profit of consumer lending 34 Figure 2.6: Rate of overdue dept 35 LIST OF TABLES Table 2.1: Some main figures at Techcombank 23 Table 2.2: Structure of corporate customers 27 Table 2.3: Total outstanding loan at Techcombank 27 Table 2.4: Loan industry 28 Table 2.5: International payment and trade finance 28 Table 2.6: Outstanding consumer lending growth .32 Table 2.7: Profit of consumer lending (VND million) .33 Table 2.9 Rate of overdue debt 35 Table 2.10: Rate of non performance loans .36 Table 2.11: The gap between customer’s perception and expectation on reliability dimension 40 Table 2.12: Loan interest rates of banks 41 Table 2.13: The gap between customer’s perception and expectation on responsibility dimension 42 Table 2.14: The gap between customer’s perception and expectation on assurance dimension 43 Table 2.15: The gap between customer’s perception and expectation on empathy dimension 44 Table 2.16: The gap between customer’s perception and expectation on tangiblity dimension 45 Table 2.17: Consumer lending products 46 EXECUTIVE SUMMARY Techcombank (TCB), a joint stock commercial bank of Vietnam, was established in 1993 and current chapter capital is VND 5.400 billion After operating 16 years, Techcombank has been one of the most active banks in term of transaction with large companies and financial institutions However, with current high competitive environment, Techcombank needs to improve more its products and services, especially consumer lending service quality The research objectives of the thesis are to systemize theoretical background of service quality, realise the gap between customer’ perception and expectation as well as reasons for consumer lending service quality problems at Techcombank, from that, propose solutions and recommendations to improve consumer lending service quality The methodologies is used in the thesis are quantitative and qualitative analysis Secondary data were collected from the annual reports, newspapers, textbooks, internets and primary data were gathered via in-depth interview with staffs and credits experts and survey Questionnaires of survey was designed based on five dimension of SERVQUAL model, including: Tangibility (5 attributes), Reliability (5 attributes), Responsiveness (4 attributes), Assurance (5 attributes), Empathy (4 attributes) Data collected were analyzed via Statistical Package for Social Science (SPSS) package and Excel The purpose of the survey was to determine the gap between customer’s perception and expectation The result of this research shows that there exists some problems about consumer lending service quality that is not high appreciated by customers such as customer care policy is not good; interest rate and fee are not reasonable; products are not diversified; network system limited; lack human resource This research would propose solutions to further improve consumer lending service quality at Techcombank, for example, human resource development and reasonable interest rates These solutions were recommended based upon studying of both theoretical aspect and reality assessment of consumer lending service quality Implementing solutions would enable consumer lending service quality at Techcombank to be improved best INTRODUCTION RATIONALE Today, globalization trend is ubiquitous all around the world, which affects every country, all organizations as well as all people Since Vietnam joined World trade origination – WTO in 2007, the finance market in Vietnam has been remarkably progressed and banks have also gotten benefits from this accession in term of mobilizing fund However, the competition amongst domestic banks themselves and with foreign banks and financial institutions are becoming fiercer than ever This is why banks are trying to have more innovative and creative strategies for their sustainable development Among those strategies is consumer lending, which is a challenge but profitable Moreover, with the approximate 86 million people in the 2010 census, Vietnam is considered a very potential market for consumer lending especially where the young adults and adolescences are dominant Techcombank is one of leading commercial banks in Vietnam with its orientation to the retail market in which consumer lending accounts for majority The bank has been aware of consumer credit market for years The bank joined in this market officially since 2000 and obtained certain achievements However, parallel to its success, the bank still has to improve its service quality in order to keep current clients and attract more customers Nonetheless, the benefits are shrinking due partially to strict requirements set by the Government and mainly to the harsh competition in consumer lending market when there are more banks to jump into fray thanks to its attraction and profit; foreign banks are not an exception Therefore, Techcombank, in the one hand, gets less benefit from this market and on the other hand, faces with tough and fierce condition Since the potentials in consumer lending market and the difficult conditions that Techcombank is facing, consumer lending is chosen as the topic for this MBA thesis The research aims to conduct consumer credit service quality studying in Techcombank and then conclusions and recommendations as well are drawn in order to improve Techcombank’s consumer lending service quality RESEARCH OBJECTIVES The major objectives in the research are to: - Systemize theoretical framework of service, service quality, consumer lending, benefits of consumer lending, consumer lending service quality, the impact of consumer lending service quality to bank’s performance as well as instrument to measure service quality gap - Analyze and evaluate current situation of consumer lending service quality at Techcombank based on the gap between perception and expectation of customers - Realize findings of consumer lending service quality at Techcombank - Propose solutions to improve consumer lending service quality at Techcombank RESEARCH QUESTIONS In order to achieve the objectives of the thesis, the following questions should be answered: - What is consumer lending service and characteristics of consumer lending service? What models and methods are used to assess quality of service and consumer lending service quality? - What is the gap between customer perceived service quality and customer expected service quality? - How is consumer lending service quality at Techcombank? - How to improve consumer lending service quality? What are the best ways to improve consumer lending service quality at Techcombank RESEARCH METHODOLOGY The methodologies is used in the thesis are quantitative and qualitative analysis 4.1 Sources of data The data for this study are both primary data and secondary data Secondary data Secondary data were collected from sources as following: - Bank’s financial reports and annual report; - Credit documents of Techcombank; - Legal regulations and documents about bank; - Magazines, textbooks, the internet; - And other media which can provide necessary information for the research Primary data Primary data were obtained from in-depth interview and survey 4.2 Method of collecting data In-depth interview Depth-interview method was conducted through internal credit experts/managers and staffs at Techcombank with questions prepared in advance Contents of the questions focus on their appraisals about current consumer lending service quality, and how to improve consumer lending service quality at Techcombank Questionnaires The survey was conducted with customers using consumer lending service at 18 branches at Techcombank in the whole country; as a result, 133 questionnaires were answered Questionnaires designed for this research would be based on SERVQUAL model A total of 23 attributes were categorized under five dimensions as follows: - Tangibility (5 attributes) - Reliability (5 attributes) - Responsiveness (4 attributes) - Assurance (5 attributes) - Empathy (4 attributes) The purpose of the survey was to determine customer’s expectation and perception, from that to find out gap between expected quality and perceived quality 4.3 Data analysis Statistical package for social science (SPSS) package and Excel were used to analyze the data collected SCOPES OF RESEARCH AND LIMITATIONS The study was conducted at Techcombank only as follows: The research time was a period from 2007-2009; Subject: The research was conducted with focus on consumer lending service quality at Techcombank Customers: The research focuses on clients with using consumer lending at Techcombank Geographic scope: the primary data would be collected in 18 branches at Techcombank in the whole country Limitations: This research focuses only on consumer lending service at Techcombank and the data were 2007-2009 It also gave out solutions to improve consumer lending service quality at Techcombank only, not for the whole economy and other banks or other services at Techcombank Limitations of the thesis also lie on its sole research on the consumer lending business environment, instead of comparing working model on consumer lending of Techcombank to those of other banks who have succeeded in this field > So this research is for Techcombank, if it were applied for another, we should take further and supplemental study RESEARCH STRUCTURE The research is divided into chapters as below: Chapter 1: Theoretical background This charter includes theoretical background, which presents concept of service, quality service, characteristics of service and consumer lending, and quality of consumer lending service In addition, SERVQUAL scale instrument is also mentioned Chapter 2: Assessment of current consumer lending service quality at Techcombank Overview of Techcombank together with analysis and assessment of consumer lending service quality via appraisals of internal staffs and expert/managers and survey conducted with customers, questionnaires were designed suitable for consumer lend banking industry from that determining the gap between customer’s perception and expectation then giving out existing problems Chapter 3: Solutions to improve consumer lending service quality at Techcombank This chapter would propose solutions to further improve consumer lending service quality at Techcombank, for example, human resource development and reasonable interest rates These solutions were recommended based upon studying of both theoretical aspect and reality assessment of consumer lending service quality Implementing solutions would enable consumer lending service quality at Techcombank to be improved best ... CURRENT CONSUMER LENDING SERVICE QUALITY AT TECHCOMBANK 29 2.2.1 Current situation of consumer lending at Techcombank 29 2.2.1 Measuring consumer- lending service quality at Techcombank. .. theoretical framework of service, service quality, consumer lending, benefits of consumer lending, consumer lending service quality, the impact of consumer lending service quality to bank’s performance... - What is consumer lending service and characteristics of consumer lending service? What models and methods are used to assess quality of service and consumer lending service quality? - What is