Factors affecting the loan repayment of sme enterprises at vietinbank hoan kiem branch

BANKING ACADEMY Banking Faculty - - GRADUATION THESIS FACTORS AFFECTING THE LOAN REPAYMENT OF SME ENTERPRISES AT VIETINBANK – HOAN KIEM BRANCH Student’s name: Vu Ha Ly Class: K21CLCA Intake: 21 Student’s ID: 21A4010879 Supervisor: Assoc Prof Dr Le Van Luyen Hanoi, May 2022 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126247461000000 BANKING ACADEMY Banking Faculty - - GRADUATION THESIS FACTORS AFFECTING THE LOAN REPAYMENT OF SME ENTERPRISES AT VIETINBANK – HOAN KIEM BRANCH Student’s name: Vu Ha Ly Class: K21CLCA Intake: 21 Student’s ID: 21A4010879 Supervisor: Assoc Prof Dr Le Van Luyen Hanoi, May 2022 ANNOUNCEMENT I want to declare that the thesis is my independent research work Statistics used for analysis purposes in this thesis have clear and well-founded origins and were published legitimately following the current applicable Vietnamese regulations Research findings in this thesis are my independent, factual, and objective work that is in agreement with the situation in Vietnam These findings have not been published in any other studies before at the time of this thesis’s completion Hanoi, May 23th, 2022 Student Vu Ha Ly i ACKNOWLEDGEMENTS After four years of pursuing the Bachelor of Banking – Finance of Advance Program, Banking Academy, the contents designed for the curriculums and the dedicated instruction of the teachers helped me improve a great amount of knowledge and other soft skills This important knowledge and skills will help me a lot in my future career First and foremost, I would like to express my sincere gratitude to my supervisor Assoc Prof Dr Le Van Luyen guided me in doing these projects He provided me with invaluable advice and helped me in difficult periods His motivation and help contributed tremendously to the successful completion of the thesis Besides, I would like to thank all the teachers of the Banking Academy, especially the Banking Faculty, who helped me by giving me advice and broadening my knowledge Also, I would like to thank all staff of VietinBank – Hoan Kiem brach, every officer of the Corporate Customer Department, for giving me the materials and information necessary for this thesis They had taught me many important skills and supported me in my internship Last but not least, I would like to thank my family and friends for their support Without that support, I couldn’t have succeeded in completing this thesis ii CONTENTS TABLE OF ABBREVIATIONS .vi LIST OF TABLES vii LIST OF FIGURES viii INTRODUCTION .1 Rationale of the study .1 Previous study Significance of study Aims of the study 4.1 Overall objectives 4.2 Detail objectives 5 Objects and scope of the study 6 Research questions and method 6.1 Research questions 6.2 Research method Organization of the study CHAPTER 1: LITERATURE REVIEW 1.1 Credit and credit characteristics for SMEs 1.1.1 Definitions of credit for SMEs 1.1.2 Credit characteristics for SMEs 1.1.3 The role of credit for SMEs .11 1.2 Loan repayment ability of SMEs 13 1.2.1 Definition of repayment 13 1.2.2 Methods evaluating loan repayment 15 iii 1.2.3 The role of assessment and analysis of factors affecting the loan repayment of SMEs 20 1.3 Factors affecting the loan repayment of SMEs 20 1.3.1 Factors from SME enterprises 20 1.3.2 Factors from the loan side 21 1.3.3 Factors on the bank side 22 1.3.4 Factors on the economy 23 SUMMARY OF CHAPTER .25 CHAPTER 2: THE LOAN REPAYMENT OF SMES AT VIETINBANK HOAN KIEM BRANCH 26 2.1 Introduction of VietinBank - Hoan Kiem branch .26 2.1.1 History of establishment and development of VietinBank Hoan Kiem 26 2.1.2 Organizational structure 26 2.1.3 Business result 28 2.2 Method evaluating loan repayment for SMEs at VietinBank - Hoan Kiem branch .29 2.3 Credit activities of SMEs at VietinBank - Hoan Kiem branch 32 2.3.1 SME loan sales .32 2.3.2 SME loan sales structure 33 2.3.3 Non-performing debt, the overdue debt of SMEs 36 2.3.4 Provision for SMEs lan losses 37 2.4 Reasons for unable to repay loans of SMEs at VietinBank - Hoan Kiem branch .37 2.4.1 Factors from customers 37 2.4.2 Factors from the bank 38 SUMMARY OF CHAPTER .40 iv CHAPTER RESEARCH METHODOLOGY, FINDINGS, AND DISCUSSION 41 3.1 Theoretical models 41 3.2 Research process and framework 42 3.3 Research hypothesis .43 3.4 Data sources 43 3.5 Research methodology 45 3.5.1 Descriptive statistics 45 3.5.2 Correlation Analysis 47 3.5.3 Logit regression analysis 47 3.6 Summary and interpretation of findings .51 SUMMARY OF CHAPTER .52 CHAPTER RECOMMENDATIONS .53 4.1 Implications from research results .53 4.2 Recommendations for VietinBank and Hoan Kiem branch 53 4.2.1 For the process of appraising corporate customers in general and SMEs in particular 54 4.2.2 For credit policy .55 4.2.3 For the staff of VietinBank 55 4.3 Recommendations for SMEs 57 4.4 Recommendations for the State Bank of Vietnam 58 4.5 Limitations 59 SUMMARY OF CHAPTER .60 CONCLUSION 61 REFERENCES 62 APPENDIX 69 v TABLE OF ABBREVIATIONS Abbreviation CASA Explanation Current Account Savings Account CIC Credit Information Center EAD Exposure of Default EL Expected Loss FEM Fixed Effects Model GDP Gross Domestic Product IFC International Finance Company IT Information Technology LGD Loss Given Default MDA Multiple Discriminant Analysis NPL Non-performing Loan OLS Ordinary Least Square PD Probability of Default REM Random Effects Model ROA Return on Assets ROE Return on Equity SBV The State Bank of Vietnam SME Small and Mid-size Enterprise VCOMS VietinBank Credit Operation Management Support vi LIST OF TABLES Table Table’s Name Table 1.1 Classifying SMEs in Vietnam Table 1.2 Page Relationship between loan repayment ability and customer's debt classification results 14 Table 2.1 Business result of VietinBank Hoan Kiem from 2019-2021 28 Table 2.2 The customer’s rating classification at VietinBank 31 Table 2.3 Table 2.4 Table 2.5 Table 2.6 VietinBank Hoan Kiem’s SME loan sales structure 2019 2021 VietinBank Hoan Kiem's SME loan sales structure by lending sectors 2019 - 2021 Non-performing debt, the overdue debt of SMEs at VietinBank Hoan Kiem 2019 - 2021 Provision for SME loan losses at VietinBank Hoan Kiem 2019 - 2021 32 34 36 37 Table 3.1 Descriptive Statics of variables 45 Table 3.2 The loan repayment of the research sample 46 Table 3.3 Correlation of independent and dependent variables 47 Table 3.4 Omnibus Tests of Model Coefficients 47 Table 3.5 The results of testing the prediction level of the model 48 Table 3.6 Variables in the Equation 48 vii LIST OF FIGURES Figure Figure's Name Figure 2.1 VietinBank Hoan Kiem’s organization structure 26 Figure 2.2 VietinBank Hoan Kiem loan sales structure 2019 - 2021 32 Figure 2.3 Figure 2.4 Figure 2.5 Page VietinBank Hoan Kiem loan sales structure by terms 2019 2021 VietinBank Hoan Kiem loan sales structure by collateral 2019 - 2021 VietinBank Hoan Kiem’s SMEs non-performing debts, overdue debts 2019 - 2021 viii 33 35 36