Capital mobilization at agribank hoa lu branch situation and recommendations,graduation thesis

INTRODUCTION

Rationale

Capital is a fundamental input for business operations and is crucial for economic growth and development It is essential for achieving both the economic goals of the state and the specific targets of enterprises A significant influx of capital can greatly contribute to restructuring the economy and implementing socio-economic development strategies, facilitating the integration of the national economy into regional and global markets.

Commercial banks serve as crucial financial intermediaries, ensuring a steady supply of funds to meet the capital demands of the economy In Vietnam, the ongoing economic reforms have highlighted the significant role of these banks, which provide over 80% of the total capital, despite their equity capital representing only a small fraction of the overall capital structure The majority of their capital comes from mobilized and borrowed sources, emphasizing the importance of capital and capital mobilization for both the economy and the banking system.

The emergence of various foreign financial institutions and new national organizations, including insurance and stock companies, has led to a significant decline in capital inflow to commercial banks To thrive in this evolving landscape, it is crucial for commercial banks to prioritize enhancing the efficiency of capital mobilization while maintaining appropriate costs and stability, thereby boosting their competitiveness in the market.

Vietnamese commercial banks face significant challenges in mobilizing funds from residents, socio-economic organizations, and other credit institutions These shortcomings not only hinder their profitability but also pose risks to their overall financial stability.

To effectively harness potential sources and mitigate high business risks, it is essential to implement appropriate measures and policies These strategies will help reduce funding costs, stabilize business operations, finance asset portfolios, enhance profitability, and minimize risks.

The Vietnam Bank for Agriculture and Rural Development (AGRIBANK) plays a crucial role in national economic development, yet it faces significant challenges in fund mobilization due to the adverse effects of economic downturns on the banking sector To address these issues and enhance its capital-raising efficiency, AGRIBANK must implement strategic improvements.

In short, capital problems are urgently required in industrialization and mobilization of the country Recognizing the importance of capital and capital mobilization, I take

“Capital mobilization in AGRIBANK HOA LU branch: Situation and Recommendations” as my graduation thesis topic.

Research objectives

This research aims to explore the capital mobilization strategies of commercial banks, with a specific focus on the fund-raising status at the AGRIBANK HOA LU branch Through detailed analysis and assessment, the study provides insights and recommendations to enhance capital mobilization and improve the branch's business performance.

Questions

The thesis should be able to answer the following questions:

How does AGRIBANK Hoa Lu branch mobilize capital from 2013 to 2015?

What are shortcomings in capital mobilization of AGRIBANK Hoa Lu branch?

What are measures AGRIBANK Hoa Lu branch take to tackle problems and limitations?

Scope and limitations

This thesis focuses on the fundamental issues surrounding capital mobilization at the AGRIBANK HOA LU branch, analyzing overall business performance, current conditions, and the factors influencing both achievements and limitations It identifies the underlying causes and proposes measures to improve the branch's operational efficiency However, due to constraints in time and the availability of data, the analysis is limited to three fiscal years (2013-2015) and does not provide a comprehensive forecast or detailed plans for the branch's future business development.

Research methodology

This thesis employs a variety of methodologies, including statistical analysis, comparative studies, and synthesis of information It evaluates data from diverse sources, such as specialized journals, online resources, previous research, financial reports, and the historical context of commercial banks and their branches.

LITERATURE REVIEW

The overview of commercial bank

Throughout history, commercial banks have been defined by their key roles as financial intermediaries, facilitating the transfer of idle capital from savers to borrowers, while also serving as payment intermediaries that enable transactions for goods and services.

In the United States, a commercial bank is defined as any institution eligible for deposit insurance from the Federal Deposit Insurance Corporation (FDIC) Conversely, under Vietnam's State Bank Law and the 2004 Law on Credit Institutions, a commercial bank is recognized as a credit institution authorized to engage in all banking activities and profit-driven business operations.

A commercial bank is a crucial financial institution legally authorized to offer diverse products and services to individuals and organizations It primarily accepts various deposits from the public, particularly its customers, while also providing loans and mortgage lending By taking small, short-term deposits and converting them into larger, longer-term loans, commercial banks generate profits and play a significant role in promoting socio-economic stability and sustainable development within the national economy.

2.1.2 Main business activities of commercial banks

Commercial banks run their monetary business through raising capital, lending, investment and other activities

Mobilized funds, constituting approximately 70% of commercial banks' total capital, are essential monetary resources sourced from various economic sectors Effective fund mobilization significantly influences banks' business performance, enabling them to secure the necessary capital for operations and fostering economic growth To achieve this, commercial banks must strategically borrow from diverse sources, primarily from residents and households, as well as enterprises and economic organizations, offering competitive interest rates and flexible terms.

Based on its targets towards safety and profits, capital utilization of commercial banks focuses on three main ones: reserve, lending and investment

Commercial banks initially allocate capital for reserves, which are essential funds set aside to fulfill payment demands The State Bank mandates a minimum reserve ratio for specific periods, with interest payments on these deposits regulated by the government Reserves consist of primary reserves, designed to cover unforeseen large withdrawals, and secondary reserves, typically held in short-term instruments that can be swiftly converted to cash when extra liquidity is needed.

The level of reserves held by a bank, whether high or low, is influenced by the bank's economic scale, the dynamics of payment and transfer activities, and the temporary cash flow requirements.

Lending is a primary activity for banks, contributing the largest share of their total income However, increased profits come with heightened risks, including interest risk, liquidity risk, and particularly credit risk This credit risk can arise from the banks' subjective decisions, such as implementing ineffective strategies.

Evaluating credit profiles inaccurately and lending without adhering to fundamental principles can lead to significant risks, especially in the face of unforeseen events like fires and floods As the economy grows, lending activities are increasingly diversified to meet capital demands and enhance bank profitability In commercial banks, loans are categorized by duration into short-term, medium-term, and long-term loans, while also being segmented by sector, such as agricultural, industrial, and consumer lending.

In addition to their primary activities, banks allocate capital for investments, including securities and other ventures, typically by purchasing shares in companies or government bonds This strategy can generate substantial profits, particularly when banks struggle to find reliable borrowers However, it also exposes banks to significant risks, as their income becomes unstable and reliant on the performance of their investments Consequently, careful market analysis is essential for banks when selecting securities Additionally, commercial banks engage in other profit-generating investments, such as joint ventures and equipment financing.

Commercial banks engage in a variety of intermediary activities beyond fund mobilization and utilization, including remittance, payment collection and authorization, credit letters, security broking, and enterprise consulting They also participate in off-balance sheet activities such as foreign currency transactions and contracts involving interest and exchange, including swaps, futures, options, and other derivatives As banking technology advances, the diversity of these activities increases, leading to greater profitability for banks.

Intermediate activities are rapidly evolving and yielding greater profits for banks Consequently, a prevalent trend among banks is to engage in multifunctional activities across various sectors and in diverse formats.

The importance of mobilized capital of commercial banks

Debt financing refers to the mobilization of capital, including borrowed funds from individuals and organizations, which commercial banks utilize to meet business needs and facilitate expansion This approach significantly influences the performance of these financial institutions.

Capital serves as the foundation for all commercial bank activities, integrating labor resources, objectives, and efforts A substantial amount of capital is essential, as it reflects the bank's financial capacity and dictates the scale of its operations In the banking sector, capital functions not only as a business tool but also as a primary objective, marking both the initiation and conclusion of the bank's business cycle.

Capital plays a crucial role in shaping the scale of credit and banking operations It influences whether credit volume expands or contracts In comparison to larger banks, smaller banks typically have less diversified investment and loan portfolios, resulting in a narrower scope and volume of lending Their limited capital restricts their flexibility in responding to interest rate fluctuations, which in turn impacts their capacity to attract additional investment capital.

Capital is crucial for banks as it not only determines their payment capacity but also underpins their reputation in the business world A strong payment capacity is essential for banks to meet customer withdrawal demands while prioritizing capital preservation to achieve profitability In today’s market economy, a bank's brand and reputation significantly influence its growth and operational expansion Sufficient capital enables banks to enhance their prestige and build consumer trust, ultimately contributing to their success.

8 easier to borrow when banks face liquidity risk Large capital source shows banks business efficiency, in other way, banks’ reputation in the market

Capital is a key factor in determining the competitiveness of banks, as it enables them to expand credit relationships across various economic sectors The scale of capital, along with professional qualifications and advanced technology, attracts more funds and allows banks to manage terms and interest rates effectively By increasing their borrowed funds, banks can diversify their business operations, mitigate risks, and boost their total capital, ultimately enhancing their market competitiveness.

Sources of capital

In normal, when a commercial bank needs capital for its business operations, it can mobilize funds from main sources as ones listed below:

Owner's capital, or owner's equity, refers to the monetary value generated and owned by a bank through the contributions of its owners and its operational results Although it represents a small fraction of the total capital, it is a necessary legal requirement for establishing a bank This capital comprises charter capital, which is the total par value of issued shares, and supplementary capital, which is derived from reserve funds for charter capital supplementation, risk coverage, and retained earnings.

Owner's capital refers to the private funds provided by bank ownership and accumulated retained earnings, making it a stable source of financing that does not require repayment This capital is crucial for funding the bank's expansion activities, including branch network growth and joint ventures.

9 implement this task, the bank normally issue stocks, convertible bonds or receives allocations from the government’s budgets

Commercial banks primarily rely on deposits to fund their operations, as owner’s capital constitutes a small fraction of their total resources Since deposits are subject to specific time frames based on depositor needs, banks strategically mobilize funds by providing various deposit options, including demand deposits, time deposits, and savings deposits.

Banks often face challenges in meeting the lending and payment demands of their customers due to insufficient funds To address this, they can collaborate with the State Bank, other commercial banks, or even foreign financial institutions While borrowed funds from these sources represent a small portion of their capital structure, they play a crucial role in ensuring strong business performance.

Commercial banks can enhance their funding capabilities by leveraging various roles as agent banks, including serving as payment intermediaries, managing investment trusts, and participating in joint venture capital contributions.

Capital mobilization forms of commercial banks

Fund mobilization is a crucial activity for commercial banks to operate effectively While the methods of mobilizing funds are generally consistent across banks, they can be categorized differently based on various criteria, including customer types, the nature of the mobilization process, and the terms and types of currency involved.

2.4.1 Based on types of customers

According to types of customers, commercial banks can raise funds from residents; enterprises and social organizations and other banks and credit institutions

Mobilizing funds from residents is a key growth target for commercial banks, as it provides a stable resource for lending Banks attract idle money from residents and lend it to individuals seeking capital for business and investment To make this funding source more appealing, banks promote a shift away from traditional savings methods like gold and cash by expanding their network and offering diverse mobilization options at competitive interest rates.

Mobilizing funds from enterprises and social organizations constitutes a significant portion of commercial banks' total capital These businesses typically deposit large sums to benefit from banking services, allowing banks to fulfill their financial intermediary roles by opening accounts, accepting deposits, and facilitating payment needs Due to the interplay between accounts receivable and payable, banks maintain a certain level of deposit balance, enabling them to attract substantial funds However, this funding source has limitations, as it relies on the size and type of enterprises and is often unstable due to the fluctuating cash flow within the economy.

Mobilizing funds from other banks and credit institutions plays a significant role in banking operations Commercial banks maintain deposit accounts with one another to streamline transactions and payments Interbank loans provide valuable funding sources for business expansion; however, high borrowing costs and limited mobilized amounts make this option less favored among commercial banks.

2.4.2 Based on the nature of fund mobilization

Based on the nature of fund mobilization, commercial banks normally use two main raising sources including deposit and non-deposit

Deposits are a vital component of commercial banks' current liabilities, representing the funds savers transfer to borrowers through the banking system Without these deposits, banks cannot effectively serve as financial intermediaries in the economy They constitute a significant portion of total borrowed funds and provide a cost-effective, reliable source for economic growth Essentially, deposits are the lifeblood of commercial banks, enabling them to mobilize funds at lower rates and invest at higher rates, which is crucial for their operations The sources of deposits include both demand deposits and time deposits.

Demand deposits allow customers to withdraw funds at any time without prior notice, representing about 20% of banks' liabilities and playing a crucial role in mobilized capital Instead of accruing interest, these deposits are utilized by commercial banks for cash and check payments In Vietnam, demand deposits are referred to as payment deposits or checkable deposits However, due to their inherent instability, commercial banks primarily leverage these funds for short-term loans.

A term deposit allows customers to invest their money for a fixed period, ranging from one month to one year, with the primary goal of earning interest Unlike demand deposits, funds in a term deposit cannot be accessed until the term ends, unless the customer incurs penalties for early withdrawal Typically, longer terms yield higher interest rates, making term deposits more stable and profitable compared to demand deposits There are two types of deposits: term savings deposits, which offer attractive interest rates for a fixed duration, and non-term savings deposits, which allow for multiple withdrawals with interest rates calculated daily based on the account balance.

Non-deposit sources play a significant role in capital mobilization for commercial banks When deposit funds are insufficient to meet transaction demands, banks can borrow from the central bank, other financial institutions, or the interbank and money markets Additionally, they can issue debt instruments to secure necessary funds.

In emergencies, when commercial banks experience reserve shortages and illiquidity, they often turn to the central bank as a lender of last resort The central bank typically provides support through discounting, rediscounting commercial papers, and refinancing The national monetary policy's direction at any given time influences the volume, terms, and interest rates associated with these borrowed funds.

According to the Law of Credit Institutions 2010, commercial banks can borrow from both domestic and foreign credit institutions when facing liquidity challenges or cash shortages This highlights the necessity for financial institutions to collaborate for sustainable growth To ensure effective business operations and maximize profits, banks must support one another and seek capital from other entities within the banking system.

Valuable papers are debt instruments issued by commercial banks to raise funds in the market, addressing the growing demand for medium and long-term capital essential for sustainable national economic development and modernization of manufacturing As savings deposits alone are insufficient for business operations, banks issue these papers to gather idle funds from residents, enabling effective loans for individuals and economic organizations This process not only reduces cash circulation, helping to curb inflation and stabilize currency value, but is also commonly purchased by corporations and small businesses.

Wealthy individuals often seek investment opportunities in financial instruments When banks require short-term funding, they can issue valuable papers with maturities of less than 12 months, such as bank bonds, short-term certificates of deposit, and bank bills Conversely, for mobilizing medium to long-term funds, typically ranging from 3 to 10 years, commercial banks utilize long-term certificates of deposit and other valuable papers.

Generally, in comparison with deposit, the stability of non-deposit is higher However, it the amount of mobilized funds from this source is insignificant with high cost

2.4.3 Based on terms of fund mobilization

Classifying funds by terms is crucial for commercial banks, as it directly impacts the safety and profitability of mobilized funds, as well as the maturity required for customer refunds Fund mobilization is categorized into three types: short-term, medium-term, and long-term.

Short-term mobilized funds are primarily sourced from commercial banks through the issuance of short-term debt instruments and the acceptance of short-term deposits, such as payment deposits These funds are predominantly allocated for short-term loans and investments with a maturity of less than one year In situations where liquidity significantly decreases, some of these funds may be redirected towards medium and long-term loans Typically, due to their short maturity, interest rates for short-term funds tend to be low and volatile.

Medium-term mobilized funds are essential for banks to conduct investment operations, upgrade banking technology, and provide medium and long-term loans These funds have a mobilization period ranging from 1 to 5 years While commercial banks can utilize them for extended periods, they incur higher interest rates compared to short-term funds.

Long-term mobilized funds are increasingly raised and used for long-term investment projects on the grounds that they provide liquidity for a longer period of time Despite

14 high stability with mobilization term of more than 5 years and convenience for using, interest rate for long-term capital is normally higher than that for two above types

2.4.4 Based on types of currency

In term of types of currency, fund mobilization includes raising funds in domestic currency and foreign currency

The criteria to evaluate efficiency of capital mobilization at commercial banks

In today's competitive market economy, commercial banks and credit institutions face significant challenges that impact their operations and fund mobilization Even minor fluctuations can influence their business dynamics Therefore, the efficiency of capital raising is a crucial indicator of both fund mobilization status and a bank's ability to adapt and thrive in the marketplace.

Efficiency is defined as the relationship between the results achieved and the expenses incurred In banking, this means that effective operations occur when institutions generate the highest revenue from their capital while minimizing funding costs, including interest and other expenses.

Commercial banks use many different criteria to assess how effective fund mobilization is From the banker’s perspective, there are two main indicators including

Quantitative factors and Qualitative factors

The cost of funds represents the expenses incurred by financial institutions for utilizing funds in their operations, encompassing both interest costs (payments to depositors based on interest rates) and non-interest costs (such as salaries, technology, and marketing expenses) Effective management of the cost of funds is crucial for commercial banks, as fluctuations in capital structure or interest rates can significantly impact interest expenses and, consequently, net profits By maintaining a lower cost of funds, banks can offer customers reduced interest rates on both short-term and long-term loans, making the calculation of cost of funds essential for developing effective business strategies However, the actual calculation involves complexities that require careful consideration.

16 commercial banks apply to calculate cost of fund including weighted average cost of fund and marginal cost a, Weighted average cost of fund

Ik :Interest and noninterest fund-raising cost rate

A :Total fund raised rk :Reserve requirement ratio b, Marginal cost of fund

Change in total cost = New IR x total funds raised at new rate – Old IR x total funds raised at old rate

Additional mobilized funds = Total funds raised at new rate – total funds raised at old rate

2.5.1.2 The relation between raising capital and using capital

The capital coefficient indicates the relationship between capital mobilization and utilization, with a positive value approaching 1 signifying optimal use of borrowed capital, provided that banks operate within safe limits This suggests that capital is being utilized to its fullest potential.

In commercial banking, raising funds is essential for generating money to provide loans and make investments The capital available directly influences a bank's ability to expand or restrict its credit offerings When banks have sufficient capital, they can effectively meet borrowing demands and enhance their credit market and services Conversely, inefficient capital utilization can adversely affect a bank's profitability and capital mobilization, as most of their capital is sourced from high-interest borrowings.

Mobilizing capital and utilizing it are closely interconnected activities; mobilizing serves as the foundation for capital use, while utilization represents both the outcome and objective of capital raising Consequently, it is essential for banks to strike a balance between these activities to enhance business efficiency.

Total loans Using of mobilized fund coefficient =

Mobilized funds/ Owner’s capital: reflect the ability to raise money per unit of owner’s capital; in other ways, the financial leverage of commercial banks The higher this ratio

The safety of financial activities increases with the age of the business Unlike other types of businesses, bank owners contribute a relatively small portion of the total capital, with borrowed funds serving as the primary source of financing.

The ratio of total mobilized funds to total capital indicates the financial autonomy of commercial banks, with a higher ratio suggesting increased expenses for fund mobilization This metric is complemented by the ratio of total deposit balance to total mobilized funds; when this difference ranges from 0.9 to 1.1, it signifies that the banks' business operations are being executed effectively.

Total deposits/ Total mobilized funds: reflect the proportion of total deposits in total borrowed capital

Due to high funding costs, banks must strategically balance the mobilization of short-term deposits with appropriate interest rates Legally, banks are permitted to utilize a maximum of 30% of their short-term capital to support their medium and long-term loan portfolios.

Long-term deposits/ Total deposits: with lower funding cost, banks focus on raising more this source, especially when interest rate is forecast to increase in the future

Interest from lending / Interest from borrowing: reflect the difference between income of lending and expense of borrowing

The criteria are crucial for balancing capital sources and identifying potential gaps, enabling timely enhancement of fund mobilization tailored to each criterion and the lending structure of commercial banks.

In addition to quantitative indicators, essential qualitative criteria include product and service diversity, customer service quality, service flexibility, benefits offered, and the capability to integrate with other services.

Customer satisfaction is closely linked to service quality, which encompasses both the processes involved and the attitudes of customer service representatives High service quality significantly impacts customer satisfaction, particularly in terms of the capital that customers are willing to mobilize.

In today's rapidly evolving information technology landscape, the diversification of products enhances consumer choice while intensifying competitive pressure on manufacturers For commercial banks to thrive, it is essential to develop integrated strategies that focus on technology and human resources, alongside effective market approaches A key strategy involves enhancing the quality of products and services, which is primarily gauged through customer feedback By upgrading offerings to meet clients' demands for quality, quantity, and timeliness, banks can foster trust and attract more funds, ultimately boosting capital mobilization efficiency.

Factors affect commercial bank’s efficiency of capital mobilization

In a competitive market economy, banks must prioritize meeting customer demands to achieve business success Each commercial bank develops a unique business strategy tailored to its strengths, weaknesses, capabilities, and limitations This strategic direction is crucial for determining growth and expansion opportunities within the banking sector.

20 narrow the operational scale, change the proportion of sources in structure of capital, increase or decrease operational expenses

A business strategy focused on fund mobilization involves key elements such as pricing policy, deposit interest rates, commission rates, and service charges An increase in interest rates can attract more capital; however, this may lead to decreased efficiency in fund mobilization due to higher funding costs Ultimately, the volume of borrowed funds is largely influenced by the effectiveness of the business strategy implemented.

Marketing strategy significantly influences a bank's ability to mobilize capital As commercial banks navigate the challenges of economic development and rising customer demands, they require increased funding to swiftly innovate their equipment, technology, and workforce Effective marketing activities are essential for banks to offer mobilization options with suitable terms and competitive pricing that align with their developmental stages and customer expectations By conducting thorough market research, banks utilize various marketing tools to inform, explore, and analyze the market, customers, product offerings, pricing strategies, and distribution channels.

Banks’ interest rate policies play a crucial role in influencing both individual and organizational decisions regarding deposits The interest rate directly affects credit operations, lending practices, and overall bank profitability by impacting the difference between input and output interest As a vital tool for mobilizing and adjusting borrowed capital, especially in terms of deposit scale, banks must establish competitive and preferential rates to attract and retain funds from traditional customers However, simply offering high interest rates does not guarantee an influx of idle funds, as the effectiveness of these rates depends on various factors.

The actual income for depositors from a 21% interest offer depends on the bank's ability to set rates higher than the inflation rate, necessitating accurate predictions of inflation Banks must consider various factors when determining interest rates, including deposit maturity, term convertibility, risk levels, potential profits from alternative investments, and government regulations, particularly those from the State Bank regarding commercial lending rates Higher interest rates tend to attract more depositors; however, banks must also account for mobilization costs and ensure their rates remain competitive to maintain profitability.

The quality of human resources is crucial in the banking sector, as it directly impacts competitiveness among commercial banks Highly skilled bankers enable quicker, more precise, and effective procedures, enhancing customer interactions and encouraging transactions Employing well-qualified professionals boosts productivity, lowers costs, and improves overall business efficiency, allowing banks to offer higher mobilization interest rates while maintaining profitability.

Advanced information technology in banks significantly enhances the quality of products and services, leading to improved customer satisfaction As a result, banks that leverage cutting-edge technology are more successful in attracting and retaining capital.

Modern banking technology enhances transaction speed, convenience, and accuracy, leading to improved service quality This, in turn, helps banks attract new customers while retaining their loyal clientele.

Banks’ reputation: Bank’s reputation is created from the level of customers’ satisfaction in previous transactions, acquaintances, advertisement, etc Banking

Many services in the banking sector are intangible, making it difficult for customers to evaluate them prior to use Consequently, customers often rely on the bank's reputation and credibility when making transaction decisions This reliance on perceived trustworthiness is a fundamental factor that enhances a bank's competitiveness in the market.

The legal environment significantly influences all business activities, including those of commercial banks, which are regulated by government laws and specific regulations from the State Bank of Vietnam (SBV) These regulations encompass various aspects such as interest rates, reserves, and lending limits, impacting the size and quality of fund mobilization activities Given the high-risk nature of the monetary sector, strict adherence to government regulations is essential for commercial banks operating as corporations.

A stable socioeconomic, political, and cultural environment is characterized by the absence of inflation, crises, or wars, which significantly impacts the operations of commercial banks and fund mobilization Rapid economic growth leads to increased and stable incomes, heightening the demand for savings and resulting in a rise in deposits and mobilized funds As capital usage demands grow, banks can expand their credit volume by raising interest rates to encourage higher deposits Conversely, during economic recessions, fluctuations in real incomes diminish customer confidence in currency stability, leading to reduced savings and increased withdrawals, ultimately affecting the overall liquidity in the banking sector.

23 difficulties in funding, managing reserves, strengthening customers’ confidence in bank system

A nation's development is heavily influenced by its political stability, as an unstable political environment can hinder progress The stability of political and foreign policies significantly affects the capital relationships between commercial banks and other countries, both regionally and globally This stability also plays a crucial role in the mobilization of funds within banks.

The cultural environment significantly influences the financial psychology and habits of residents, impacting banks' ability to mobilize funds Additionally, community attitudes towards risk and saving play a crucial role in shaping collective behaviors related to spending, saving, storing, depositing, and investing.

The competitive landscape for commercial banks is intensifying due to a rise in licensed banks and the emergence of non-banking institutions, coupled with limited idle resources from residents and businesses This shift diminishes the monopoly of banks, impacting their performance Unlike other industries, banks face less diverse competition, leading to heightened competitiveness primarily centered around interest rates In Vietnam, banks must strategically set their interest rates to attract funding while maintaining profitability; higher rates can lead to increased lending rates, while lower rates may hinder customer attraction Consequently, this fierce competition drives up mobilization rates and enhances deposit-related services.

Residents’ Savings: Fund mobilization of banks mainly comes from amounts of idle money of residents This source is accumulated with people’s expectation – saving

Current consumption patterns significantly impact future spending and capital mobilization, as savings are essential for investment in production The saving behavior of clients is influenced by various factors, including income levels, cash consumption habits, and economic stability In times of economic volatility, individuals often convert domestic deposits into foreign currencies, invest in stable assets like jewelry or real estate, or seek other secure alternatives Additionally, the distribution of the population across different regions contributes to variations in psychology, culture, and lifestyle Therefore, banks must understand these psychological factors to develop effective strategies for mobilizing funds.

THE STATUS OF CAPITAL MOBILIZATION AT AGRIBANK

The introduction to AGRIBANK HOA LU branch

3.1.1 The history of establishment and development

The AGRIBANK HOA LU branch, established in 1998 under business license No 0164/NH-GP from the Vietnam State Bank, operates as a dependent accounting unit with its own legal status and seal Over its 18 years of development, the branch has successfully organized key departments including credit management, personal and enterprise banking services, and accounting treasury and investment Committed to overcoming challenges, the branch aims to enhance both the quantity and quality of its services AGRIBANK HOA LU aspires to be a modern bank with robust financial capabilities and sustainable growth, focusing on improving customer service by understanding individual needs and implementing effective solutions to meet their demands.

Located in a densely populated area with numerous economic agencies and organizations, the branch benefits significantly from capital raising and utilization By continuously innovating its business mechanisms to align with market demands and enhancing fund mobilization, it effectively meets the practical capital needs of various economic sectors Furthermore, the diverse development of technical facilities for business manufacturing enables the branch to tap into domestic capital resources, thereby contributing to the economic development goals of HOA LU District.

In general, with Vietnam AGRIBANK support, AGRIBANK HOA LU branch system becomes increasingly stable and asserts its position in local economy

AGRIBANK HOA LU branch is committed to enhancing its financial capacity to boost shareholder value, recognizing that the development of human resources is crucial for improving competitiveness and serves as a foundation for future economic growth.

The bank is gradually establishing itself as a professional institution, focusing on positive reforms for successful integration and sustainable development In the coming years, its ambitions include providing tangible benefits to clients, increasing market share, fostering long-term relationships with strategic customers, collaborating with international organizations, and contributing to the advancement of national finance.

Making loans fosters job creation, alleviates extreme poverty and hunger, and promotes comprehensive manufacturing AGRIBANK HOA LU branch aims to expand its business network to every residential area, mobilizing idle funds from residents and economic organizations while offering competitive interest rates and advance interest payment options By leveraging its extensive network, the branch strengthens and develops the rural credit market through direct loans to households, encouraging smaller borrowing amounts to support local economic growth.

To support agricultural and rural development, it is essential to provide loans of up to 10 million without collateral, streamline loan procedures, modernize payment methods, and enhance branch liquidity These improvements will help retain traditional customers while attracting new ones.

3.1.2 The branch organization and functions of departments

AGRIBANK HOA LU branch is one of 100% state-owned commercial banks in Vietnam with staff system including 60 people arranged to the following departments

Organization framework of AGRIBANK HOA LU branch

(Source: Annual Report of AGRIBANK HOA LU branch)

The Board of Directors, consisting of one director and two deputy directors, oversees all branch activities, ensuring adherence to functions, duties, and guidelines set by superiors They are responsible for making decisions regarding organizational issues, including staff appointments, dismissals, rewards, and disciplinary actions.

Banking services Department (personal and enterprise customer department): meet a variety of service demand of personal customers as well as enterprise ones

Administration and Personnel Department: manage general administration such as document management, protocol, security and so on

Credit Management Department: receive and approve loan applications; analyze, assess, predict general situations of customers such as financial positions, mortgages, etc

The Accounting Treasury Department is responsible for managing customer transactions while ensuring the highest standards of quality, timeliness, and professionalism It oversees cash collection and transmission processes, actively works to detect and prevent counterfeiting, and establishes cash flow standards Additionally, the department is tasked with safeguarding cash, documents, valuable papers, and collateral contracts.

Accounting and Customer Services Department: support cash transactions and domestic remittance of customers, additionally, account and monitor funds, and store accounting documents

Transaction Offices: do transactions with customers, including, cashing a check, loaning, depositing, etc

For 18 years, AGRIBANK has embraced the slogan "Bringing prosperity to customers," focusing not only on traditional clients but also on expanding its services to a diverse range of customers from various economic backgrounds The bank offers a wide array of products, adapting to trends by enhancing traditional services while also introducing modern solutions like ATM cards, mobile banking, and internet banking This approach not only improves financial efficiency for clients but also strengthens AGRIBANK's consumer banking capabilities, fostering customer trust and broadening its customer segments.

In detail, banking services of AGRIBANK HOA LU branch are referred in the following table:

Products and services of AGRIBANK HOA LU branch

(Source: AGRIBANK’s official website: http://www.agribank.com.vn/home.aspx)

The overview of the branch’s business performance (2013 - 2015)

As mentioned above, raising funds is a traditional business operation as well as a basic one to decide the existence and development of any bank

Despite challenging socio-economic conditions, a significant rise in the Consumer Price Index (CPI), intense competitive pressures, and difficulties in securing funding, the sector has experienced positive growth in capital mobilization through diversified methods.

Figure 3.1: Capital mobilization of AGRIBANK Hoa Lu branch 2013-2015

(Source: Financial report of AGRIBANK HOA LU branch 2013-2015)

Between 2013 and 2015, the branch experienced modest growth in capital mobilization, with borrowed funds increasing from 239.6 million VND in 2013 to 258.23 million VND in 2014, reflecting a growth rate of 7.7% This upward trend continued in 2015, reaching 271.468 million VND, an increase of 5.1% from the previous year These figures indicate that the branch successfully maintained its liquidity and fulfilled the requirements for credit investment operations.

In today's highly competitive landscape, the branch's growth stands out as a significant achievement This success is attributed to the effective implementation of capital mobilization strategies at the year's outset, which include enhancing customer service, retaining existing clients, exploring new potential customers, expanding transaction office networks, and promoting products with attractive offers.

The branch offers 31 local services through social media, providing a diverse range of deposit products and competitive interest rates for substantial loans from financial institutions Additionally, it emphasizes increasing fundraising efforts from the community.

Credit performance is a crucial aspect of capital activities, significantly influencing local economic development The bank's credit growth directly fosters business expansion, generating positive indicators for the economy Over the past three years, credit operations have yielded notable results, highlighting their importance in driving economic progress.

Table 3.1: Credit performance of AGRIBANK Hoa Lu branch 2013 – 2015

(Source: Financial report of Agribank Hoa Lu Branch 2013 – 2015)

Between 2013 and 2015, the branch saw notable fluctuations in its credit balance In 2013, total loans were recorded at 135.7 million VND, which rose significantly to around 174 million VND in 2014, accompanied by a slight increase in overdue debts to 2.81% However, by 2015, total loans gradually decreased to 160.03 million VND.

32 million VND The reason for this decline was that the increase in the amount of overdue debts in 2014 made the bank hesitate to lend to customers

The total volume of loans has significantly increased; however, the overdue debt ratio remains high While this performance may align with the branch's current operational scale, it falls short of the expectations set by the director and staff Therefore, the bank must implement strategies to address this issue and foster credit growth By enhancing product and service quality and offering competitive lending rates, a substantial increase in loan activity is anticipated in the coming years.

The branch is increasingly promoting international payment and export financing, particularly through the issuance of letters of credit (L/C) Additionally, guarantee services have been successfully implemented, leading to significant profits from financial guarantees since 2014 Furthermore, foreign exchange trading has rapidly developed, contributing to the branch's revenue growth.

3.2.4 Business result of the branch

The AGRIBANK HOA LU branch has achieved significant results due to the synchronized development of capital sources, credit, and banking services, along with the enthusiastic leadership and support from headquarters and other branches in the AGRIBANK system, as well as the continuous efforts of all staff members.

Figure 3.2: Business result of AGRIBANK HOA LU branch in 2013-2015

(Source: Financial report of Agribank Hoa Lu branch 2013-2015)

Net profit, the difference between total revenues and expenses on an income statement, is a crucial indicator of business performance A low or negative net profit in a bank can signal various issues, including declining sales or poor expense management, while increased profits typically reflect operational efficiency Investors often analyze a bank's profitability history to assess potential financial risks associated with their investments.

From 2013 to 2015, the branch experienced an upward trend in business results, although the increase was notably unstable In 2013, the net profit was recorded at 58.83 million VND, accompanied by a steady rise in total revenues, which grew from 135.68 million VND to 158.36 million VND.

34 made this figure reached about 70.24 million VND in 2014 However, it declined to 68.1 million VND in 2015 due to a slight fall in revenue

Despite the performance not being particularly impressive, it highlighted the effective use of funding sources and the collective efforts of the branch in its operations With anticipated revenue growth, the branch aims to strengthen investor confidence and attract increased capital for business development.

The real situation of capital mobilization of AGRIBANK HOA LU branch from 2013 to 2015

3.3.1 Capital mobilization by type of customers 2013-2015

Figure 3.3: Mobilized funds by type of customers 2013-2015

Credit institutions and State Bank Economic organizations

(Source: Financial report of AGRIBANK Hoa Lu branch 2013-2015)

The chart illustrates the mobilization of funds by a bank from various customer types, including credit institutions, the State Bank, economic organizations, and individuals between 2013 and 2015 Notably, there were contrasting trends: while the bank's borrowed funds from credit institutions and the State Bank significantly declined, deposits from economic organizations and individuals surged In 2013, the bank primarily sourced its capital from the State Bank, totaling 167.78 million VND, which represented 70% of its total mobilized funds However, by 2015, the bank shifted its focus towards attracting deposits from enterprises and residents, leading to a remarkable increase in deposits to 68.18 million VND from economic organizations and 116.852 million VND from individuals, while borrowed capital from the State Bank fell to 86.436 million VND, marking a 50% decrease from the initial year.

The encouraging results indicate that the bank's funding needs can be fully met independently, without relying on the State Bank of Vietnam (SBV) as a last resort This demonstrates a gradual shift towards a more self-sufficient capital mobilization strategy for the bank.

Table 3.2: Deposits sources of fund by types of customers 2013 – 2015

(Source: Financial statement of Agribank Hoa Lu Branch 2013-2015)

The provided table demonstrates that the amount of deposit mobilized from two source economic entities and residents rapidly increased from 2013-2015

To begin, in 2013 AGRIBANK HOA LU branch just borrowed a modest amount of money from economic entities and individuals, 30.3 million VND and 41.52 million

In 2014, there was a significant increase in deposits, with individual deposits rising sharply to 113.16 million VND, representing over 65% of total customer deposits Although the proportion of deposits from economic organizations fell slightly to 33%, their total amount surged to 56.59 million VND, nearly doubling from 2013 By the end of the period, both individual and organizational deposits maintained a stable upward growth trend.

The branch achieved remarkable success in increasing its deposit sources, particularly from individual customers This growth can be attributed to the expansion of business manufacturing, which has led economic entities to prefer depositing funds into the bank's payment accounts.

To maximize growth, the branch should actively target a significant number of economic organizations by providing preferential services and competitive interest rates to boost deposits Additionally, implementing tailored strategies to attract capital from residents will enhance borrowing capacity, ensure liquidity, and ultimately increase profitability for the bank.

According to terms, mobilized capital of AGRIBANK HOA LU branch is divided into two types: demand deposits and term deposits

Figure 3.4: Deposits from consumers by terms 2013-2015

(Source: Financial report of AGRIBANK Hoa Lu branch 2013-2015)

The provided table illustrates that there was an upward trend in the amount of both types of deposits from 2013 to 2015

In 2013, the branch successfully attracted 45.533 million VND in demand deposits from customers This figure saw a significant rise in 2014, reaching 113.732 million VND, and continued to grow to 130.723 million VND by 2015, demonstrating a strong growth rate in this financial source.

Meanwhile, for term deposits, in 2013, the figure stood at 26.287 million VND Until

In 2014, the branch saw a significant increase in term deposits, reaching 56.018 million VND, which was more than double the amount from the previous year However, this figure gradually declined to 54.309 million VND in 2015, indicating an unstable growth rate for this financial source.

Between 2013 and 2015, capital mobilization showed positive trends, with demand deposits representing over 60% of total branch deposits This highlights demand deposits as a crucial mobilization channel for the bank By prioritizing deposits with lower funding costs, the bank effectively reduced its cost of funds and implemented higher lending interest rates to attract more customers, ultimately enhancing the efficiency of fund mobilization.

3.3.3 Mobilized funds by types of currencies

Table 3.3: Deposits structure by types of currencies 2013-2015

Deposits in foreign currencies(USD)

(Source: Financial report of AGRIBANK Hoa Lu branch 2013-2015)

The data indicates that, similar to other commercial banks in Vietnam, the proportion of mobilized funds in VND significantly exceeds that of foreign currencies This trend is attributed to domestic deposits being a cost-effective and dependable funding source, particularly valuable for developing countries facing challenges in accessing international capital markets Furthermore, the table reveals a substantial increase in both VND and USD funds from 2013 to 2015.

To specify, the foreign currencies (USD) saw a sharp climb from 3.81 million VND in

2013 to 11.88 million VND before rising 18.9 million VND in 2015 This growth of amount of foreign currencies significantly supported the demand in international payment and business of foreign currencies of branch

In the first year, the bank successfully mobilized approximately 68 million VND in domestic currency deposits from customers This figure saw significant growth, reaching 157.87 million VND in 2014, which is a remarkable increase of about 2.5 times compared to 2013, and continued to rise to 166.542 million VND in 2015.

In recent years, the international business network has successfully mobilized funds in foreign currencies, particularly USD, showing positive growth To prevent future dollarization, it is essential for the branch to maintain a reasonable level of these funds while prioritizing the development of foreign currency deposits with terms of 3 and 12 months.

To attract foreign capital, it is essential for the branch to implement a competitive interest rate policy and foster strong, ongoing relationships with foreign joint venture companies in the region.

The efficiency of capital mobilization of AGRIBANK HOA LU branch

As mentioned above, cost of fund is considered one of the most important criteria to assess the efficiency of capital mobilization of commercial banks

Table 3.4 Interest expense and net income of Hoa Lu branch 2013-2015

(Source: Business result report of AGRIBANK Hoa Lu branch 2013-2015)

It can be seen from the table there was a significant increase in the total net income of the branch over the period of 2013-2015

In 2013, the bank's operations were ineffective, resulting in a net income of only 2.75 million VND However, in 2014, the branch focused on expanding its fund mobilization and utilization activities, leading to a significant increase in net income to 4.52 million VND, despite incurring interest expenses of 8.07 million VND By 2015, net income continued to rise to 5.11 million VND, driven by the bank's strategy of offering preferential interest rates on medium and long-term savings to attract more customer deposits, which in turn boosted interest and similar income.

This criterion assesses a bank's capital utilization efficiency A low ratio suggests that while the bank can mobilize funds, it faces challenges in lending Conversely, a high ratio reflects effective capital use, leading to increased revenue.

41 to maximize the potential of raising capital, the bank needs to balance between mobilizing capital and using capital

Table 3.5: The efficiency of using mobilized funds 2013-2015

(Source: Financial report of AGRIBANK Hoa Lu branch 2013-2015)

The analysis of mobilized funds over three years reveals a declining and unstable efficiency trend Initially, the capital coefficient stood at 0.71, but it improved to 0.79 in 2014, reflecting an increase of 0.08 from the previous year.

2015, this figure fell down to 0.67 It is the decline in total of loan balance to Vietnam AGRIBANK’s subordinate unit (mainly stock companies) in 2015 that led to this instability

The branch's performance fell short of expectations due to the adverse effects of high inflation on banking operations Additionally, efforts to attract potential customers have proven ineffective, and the bank remains reluctant to extend loans to non-state enterprises To address these challenges and navigate economic fluctuations, the branch should allocate more mobilized funds towards investments, thereby improving capital efficiency and mitigating lending risks.

General assessment on capital mobilization of AGRIBANK HOA LU branch

As the national economy and commercial banking system have evolved, AGRIBANK HOA LU has established a strong presence, achieving significant success in its overall business operations, particularly in fund mobilization.

Figure 3.5: Capital structure of AGIBANK HOA LU branch 2013-2015

(Source: Annual report of AGRIBANK Hoa Lu branch 2013-2015)

The graph illustrates that mobilized funds consistently account for over 60% of the bank's capital structure, showing a steady growth rate despite challenging national and global economic conditions AGRIBANK HOA LU branch aims to effectively utilize a significant amount of idle resources from various economic entities, including residents and credit institutions This strategy not only enhances the bank's capital sources for improved business performance but also ensures timely payment and transaction services for its clients.

The branch diversified its sources of mobilized funds by varying terms, currency types, and deposit categories, leading to an increase in medium-term and long-term funding over the years This growth has actively supported the expansion of lending activities and investments Additionally, the increase in foreign currency deposits has further enhanced foreign business operations.

The bank's capital structure underwent a significant transformation between 2013 and 2015, shifting from primarily relying on loans from credit institutions and the State Bank of Vietnam (SBV) to increasingly attracting deposits from economic organizations and residents By 2015, idle funds from these deposits surged to 116.852 million VND, representing over 50% of the total mobilized funds This shift indicates a growing independence from the State Bank, allowing the bank to enhance its business operations and improve the efficiency of its fund mobilization strategies.

The influx of residents significantly increased total demand deposits, which typically represent a larger share of a bank's deposit sources This growth not only enhances the bank's balance but also lowers input costs, as demand deposits generally carry the lowest interest rates, often close to zero Additionally, this increase in demand deposits allows banks to broaden their funding-related services, such as issuing cards and other financial products.

It is undeniable that the following reasons make great contribution to above encouraging results:

The branch successfully implemented fund mobilization strategies by promoting the significance of interest rates and adapting to market fluctuations By applying flexible interest rates within permissible limits and diversifying capital-raising methods, the branch attracted more clients, enhancing business efficiency and fostering sustainable development.

The branch enhances customer relationships by offering a diverse range of services and products tailored to various customer needs Simplified transaction procedures at both the branch and AGRIBANK enable quicker and more convenient banking experiences While focusing on maximizing profits, the branch remains committed to prioritizing the benefits of its clients.

The branch implemented several positive strategies to enhance its business processes, adapting its fund mobilization structure to meet the growing demand for medium and long-term capital in the economy This transformation significantly boosted the bank's capital mobilization growth Additionally, the branch was encouraged to participate in lucrative investment projects with promising economic organizations, thereby increasing its share of financial service income.

The bank widely developed the network of transaction offices on financial streets where there is intensive concentration of companies, shops, especially, high-income people

AGRIBANK's strong reputation fosters increasing customer trust, bolstered by its history of establishment and sustainable development The branch effectively leverages AGRIBANK's branding campaign to draw in both individuals and enterprises.

During these years of development, in addition to achievements, the branch also remains some limitations as showed below:

Firstly, the source of mobilized capital mainly depends on deposits from residents Despite being diversified, the forms of fund mobilization are not various and

45 traditional Thus, the bank has not yet thoroughly utilized this idle capital source at maximum

While there has been a notable rise in fundraising from economic organizations through deposit accounts, this source still represents a small fraction of the total mobilized capital However, it offers greater stability compared to other funding sources and is primarily utilized for medium and long-term loans Consequently, this reliance on deposit accounts may restrict the bank's ability to expand its lending activities to customers.

The rapid increase in the proportion of demand deposits signals positive growth for the branch's business development However, if consumer demand deposits rise significantly while the bank secures fewer term deposits, it may negatively impact banking operations.

Despite its involvement in the SWIFT system, the bank faces limitations in sourcing foreign currency funds, which hinders its ability to attract more customers in the export-import sector As a result, the branch has not fully capitalized on this potential revenue stream.

The reasons for these are that:

The bank's customer policy lacks reasonableness, as it primarily focuses on attracting new clients rather than retaining loyal customers and identifying potential ones, which hampers its ability to raise funds effectively Additionally, the bank's interest rate policy is not competitive, as fluctuations in interest rates directly impact its income and overall business performance Due to local competition, the bank employs varying interest rate strategies, but the limited appeal of its term deposit rates fails to incentivize customers to commit to long-term deposits.

Inflation and currency fluctuations in the current economy significantly impact consumer purchasing power and psychology As a result, many consumers are reluctant to deposit their idle money in banks, opting instead to invest a portion in various business activities This trend may contribute to a decline in the amount of borrowed funds from banks and negatively affect overall banking mobilization efficiency.

As economies develop, competition among commercial banks intensifies, particularly in densely populated areas where numerous banks and credit institutions emerge This heightened competition places significant pressure on banks to effectively mobilize funds To thrive in such an environment, banks must adopt strategic business approaches, offer competitive interest rates to attract customers, and diversify their products and services to enhance market competitiveness and improve capital mobilization efficiency.

SOLUTIONS AND RECOMMENDATIONS TO IMPROVE

General development orientations

In early 2015, the economy faced significant challenges, including rising inflation, weak banking liquidity, and high capital costs for enterprises However, these difficulties are anticipated to be temporary and solvable in the short term To stabilize the macroeconomy, the Government must balance economic growth with inflation control, while also reducing the budget deficit and maintaining a stable balance of payments Consequently, commercial banks are oriented towards achieving a credit growth rate of 18-20%, with banking operations becoming more proactive, flexible, and prudent Capital supply will primarily focus on manufacturing and investment, while discouraging investments in non-manufacturing sectors.

In the upcoming year, the Government has established key macroeconomic targets, including a GDP growth of 6.7%-6.8%, a CPI increase of 5%, an export growth of 8%, and a budget deficit of 6.1% of GDP However, forecasts from reputable organizations suggest that Vietnam has the potential to achieve even greater results.

In 2016, the macroeconomic environment, both foreign and domestic, presents both challenges and opportunities for the banking sector, particularly for AGRIBANK HOA LU branch Building on previous achievements while addressing limitations, the Board of Directors aims to implement the plans set forth by the General Assembly of Shareholders and the Board of Affairs This includes continuing the operational restructuring strategy to foster growth and ensure sustainable development in the coming years.

For capital mobilization, at the end of the year, the total of capital reaches about

400.000 million VND, including mobilized funds in local is 285.500 million VND, increasing 5.2% compared with the data in 2015 Besides, the proportion of deposits

48 from residents accounts for more than 60% in total of mobilized funds in local, simultaneously step by step improve the structure of capital source in effective way

In credit operations, medium and long-term lending constitutes 60% of the total lending balance, reflecting a 10% increase since 2015, while the bad debt ratio remains below 2% of the overall loan balance.

For financial activities, total revenues gains 165.000 million VND while excess profits credit is 10% at minimum and the rate of other expenses is 2% in total expenses

Business orientations in competitive environment:

Populous urban areas, home to a significant number of high-income individuals, present numerous opportunities for retail market development, driven by the presence of shops and private enterprises.

AGRIBANK Ninh Binh province operates 13 branches and 24 transaction offices, strategically positioned in HOA LU district, which hosts numerous commercial banks and financial institutions This competitive landscape presents both opportunities and challenges for AGRIBANK HOA LU branch, allowing the bank to enhance its market access and exploitation Additionally, the trend of establishing large-scale, highly competitive banks is a common goal among local commercial banks.

Solutions

In addition to setting development targets, AGRIBANK HOA LU branch also needs to take appropriate measures based on analysis about limitations and causes above:

4.2.1 Diversify products and services by types of customers

Nowadays, competition in banking industry is becoming more severe, in both quantity and quality of provided products and services Market classification helps bank

49 managers estimate demands to invest resources in the market which has high profit potentials Based on this method, banks will be able to build appropriate effective business strategies

To diversify products and services by types of customers which are compatible with its targets and financial capacity, the branch can classify into the following ones:

Enterprise customers: for different demands and characteristics, the bank can divide it into 2 sections including state owned enterprises and non-state enterprises

State-owned enterprises typically require diverse and complex payment solutions due to their large scale, prioritizing service quality over cost By delivering exceptional payment services, banks can secure low-cost funding from these enterprises Therefore, to establish trust and credibility, banks must enhance their payment processes to ensure accuracy, speed, and security.

Non-state enterprises typically exhibit seasonal business characteristics, leading them to prioritize term deposit products over payment options To enhance capital mobilization, banks should focus on offering a wider range of term deposit products with diversified interest rates, thereby attracting more funds from these businesses.

As economic growth boosts residents' incomes, individuals are accumulating more capital, prompting banks to provide suitable products to effectively tap into this pool of idle money To cater to diverse customer needs, banks can offer a variety of banking products and services.

Customers with stable jobs and incomes primarily seek payment services Banks should offer transferable savings products and promote the opening of salary accounts, which can be utilized for regular expenses such as electricity, water, and mobile bills.

Senior citizens often rely on long-term savings and home banking services, making it essential for banks to offer tailored products such as welfare and retirement savings accounts These services can include the option to withdraw funds before maturity at a low interest rate in the event of unexpected incidents, providing financial security and flexibility for this demographic.

Merchants and businesspeople often operate with limited idle funds and frequently move capital for transactions, prioritizing the convenience of banking services like deposits and withdrawals over interest rates To meet their needs effectively, banks should ensure that tellers are readily available for prompt service While a fast payment process may incur higher costs, this approach can still draw in a significant amount of low-cost capital for the bank.

The bank's diverse product offerings tailored to various market segments will facilitate gradual success Furthermore, in addition to analyzing the local market, the bank should explore opportunities beyond provincial borders to enhance business growth.

4.2.2 Promote the forms of fund mobilization

Diversifying borrowing methods and terms while anticipating market fluctuations allows for the development of tailored financial solutions This approach effectively meets the deposit needs of economic entities and maximizes the utilization of available capital.

For demand deposits: open accounts for customers who usually make transactions with the bank

To effectively diversify your investment strategy with term deposits, consider the various available durations offered by the bank, including one, three, six, nine, twelve, eighteen, and twenty-four months Additionally, the bank plans to introduce more options with longer terms in the near future, providing even greater flexibility for investors.

To optimize savings deposits, banks should not only enhance traditional offerings but also innovate new products that cater to the needs of both borrowers and lenders, ensuring a balanced approach to capital mobilization and utilization.

Purposed savings are designed for long-term goals such as purchasing houses or cars Depositors can request the bank to transfer a portion of their salary monthly into a purposed savings account While the interest rate on this account is lower than that of standard savings, it allows depositors to secure a loan from the bank once their savings reach two-thirds of the agreed asset value This approach not only encourages more residents to save but also enhances the bank's medium to long-term capital.

Retirement savings in Vietnam represent a hybrid product that combines elements of both insurance and banking This unique life insurance offering, provided by banks, is designed to complement the existing insurance market in Vietnam It is specifically tailored to align with the psychological characteristics and preferences of the Vietnamese population.

Mobilizing funds through valuable papers provides a stable capital source for the branch, enabling active business operations To enhance financial stability, the branch should implement strategies to increase funding through this method in the future.

To better meet customer demands for capital, banks should adopt more flexible interest payment methods, such as advance payments, which can create the perception of higher interest rates for customers Additionally, offering interest payments at specific intervals—such as every 3, 6, or 12 months—can enhance customer satisfaction Furthermore, if depositors choose not to withdraw their funds at maturity, the interest can be capitalized, providing an added incentive for long-term savings.

4.2.3 Apply reasonable interest rate policy

Interest rates play a crucial role in the fund mobilization strategies of commercial banks, directly influencing both bank revenue and depositor income Higher interest rates incentivize individuals to deposit money, thereby increasing the total mobilized funds However, elevated borrowing costs can lead to decreased bank profits Therefore, implementing a balanced interest rate policy is essential for optimizing financial outcomes for both banks and their customers.

Recommendations

AGRIBANK HOA LU, as a vital branch of AGRIBANK, significantly influences the overall business performance of the bank To enhance the effectiveness of the HOA LU branch, it is essential for AGRIBANK to implement strategic changes that address current limitations These include restructuring capital mobilization, regulating funds to align with development goals, and establishing a cohesive interest strategy across all branches Additionally, investing in modern technology and software applications, actively promoting AGRIBANK's brand image, facilitating regular inter-branch meetings for experience sharing, and providing training to enhance staff skills and improve facilities are crucial steps for fostering growth and success.

To enhance its operations, Vietnam AGRIBANK should establish strong connections between the AGRIBANK HOA LU branch and other branches within the bank, as well as with various commercial banks This approach will facilitate the modernization of the payment system and ensure the effective implementation of new payment mechanisms.

To attract more medium and long-term funds for economic growth targets, SBV should takes some effective measures as below

The State Bank of Vietnam (SBV) plays a crucial role in formulating and executing monetary policies and overseeing the operations of commercial banks across the nation To ensure alignment with global integration trends, it is vital for the SBV to maintain a stable monetary policy This involves implementing a flexible monetary strategy that adheres to reasonable interest rates, reflecting the laws of supply and demand in the economy, while also making necessary adjustments to respond to market fluctuations.

The State Bank of Vietnam (SBV) needs to develop a comprehensive strategy for competition and international integration As a member of the World Trade Organization (WTO), Vietnam's economy has undergone significant transformations, providing SBV with enhanced opportunities to collaborate with foreign economic organizations This collaboration will enable SBV to attract more foreign funding, improve capital mobilization, and boost its competitiveness in the international market.

Promoting the development of financial and monetary markets is crucial for the growth of banks and the national economy To enhance this market, the State Bank must focus on upgrading its components, particularly in domestic and foreign currency operations Despite being operational for many years, this market continues to require support from the central bank for further advancement.

The State Bank should persist in researching and updating banking transaction mechanisms and technical processes, particularly by aligning documentation with international standards Additionally, it is essential for the SBV to enhance internal controls across the banking system and develop staff inspections to quickly identify shortcomings and prevent fraud, thereby improving its banking supervision capabilities.

The government must establish a sustainable macroeconomic environment, as it significantly influences the ability of banks to mobilize funds While a stable macroeconomic climate offers numerous benefits, it can also present challenges that hinder effective fund mobilization.

In Vietnam, stabilizing the macroeconomic environment involves maintaining reasonable inflation, ensuring positive real interest rates for depositors, and stabilizing the currency The recent global economic crisis, particularly the monetary crisis in Europe, has impacted economies worldwide In these challenging conditions, the Government and State Bank must implement macroeconomic policies to regulate and adjust investment structures, ensuring stable growth.

To foster a stable and synchronous legal environment in Vietnam, it is crucial to address the inadequacies in the current economic law The government should implement constitutional laws aligned with global standards, such as those governing private assets and commercial paper, to safeguard investor rights Effective regulations will influence the dynamics between consumption and saving, encouraging a shift from gold, foreign currencies, and real estate towards investments in manufacturing and banking deposits Additionally, Vietnam's accession to the WTO necessitates the introduction of laws reflecting global trends, including competition and bankruptcy laws, which will promote a healthy competitive landscape and attract foreign investment into the banking sector.

The government must guide the transformation of the social environment to enhance banking activities Psychological factors and cultural backgrounds significantly influence how individuals and nations approach saving and spending Presently, consumers continue to favor cash transactions and traditional saving methods, highlighting the need for strategies that encourage deposit mobilization.

To foster socioeconomic development, it is essential to attract savings from residents and economic institutions Banks play a crucial role in stimulating idle funds within society Therefore, the Government should collaborate with commercial banks to promote the advantages of non-cash payment systems Additionally, addressing unemployment and enhancing citizens' educational levels are vital steps to improve living standards, making it easier for individuals to adopt modern payment methods.

The government is advised to reform its external economic policy, maintain an open-door approach, and enhance economic cooperation with foreign nations Additionally, it is essential to progressively improve the domestic investment climate and reform import-export policies to foster economic development.

In the pursuit of national industrialization and modernization, aimed at elevating our country from its current underdeveloped status and enhancing the material and spiritual well-being of its citizens, a robust financial capacity is essential This need has led to the establishment of commercial banks, which serve as financial intermediaries that mobilize funds for loans and investments Consequently, the mobilization of funds is crucial for the growth of the banking sector, particularly for AGRIBANK, as it significantly influences the bank's scale and market position.

The AGRIBANK HOA LU branch prioritizes an optimal capital structure, focusing on the efficiency of fund raising as a key operational goal Over the years, the branch has achieved positive outcomes in fund mobilization, credit management, and international payment operations However, challenges persist, particularly regarding the balance between capital raising and utilization, which remains unstable.

In the near future, the branch aims to leverage its qualified staff and extensive network to develop targeted business strategies that address current challenges and ensure sustainable growth, thereby strengthening its local presence and contributing to the national economy.

"Cam nang huy dong von cua Agribank (phien ban 1) (2002) Agribank

"Tap chi thong tin Ngan hang Nong nghiep" (2015)

AGRIBANK (n.d.) Retrieved from www.agribank.com.vn

AGRIBANK HOA LU branch (2013-2015) Annual financial statements

Beikzad, J K (2012) Effective factors on bank resource mobilization

Bolton, R D (1991) A longitudinal analysis of the impact of service changes on customers attitudes The Journal of Marketing,1-9

Dr.Nguyen Van Tien (2010) "Ngan hang thuong mai" (4th edition) Ha Noi:

Statistics Publication, Vietnam Bank Seta, ''Walk Proud"

Dung, T T (2014) Xác định các nhân tố ảnh hưởng đến khả năng sinh lời của ngân hàng thương mại Việt Nam

Eriksson, P a (2008) Qualitative methods in business research (1st) London: SAGE

Frederic Mishkin (2004) "The economics of money, banking and financial markets"

(7th edition) the United State of America

Hai, D T (no.5/2014) Nang cao hieu qua huy dong von Vietnam Finance magazine

Khazra, N (n.d.) "Factors affecting mobilization of financial resources" Sarmayeh

Kormendi, R a (1985) Macroeconomic Determinants of Growth: A Cross-country

Study, Journal of Monetary Economics 6, 141-163.