CURRENT SITUATION OF CONSUMER LOANS AT KIEN LONGCOMMERCIAL JOINT STOCK BANK - DA NANG BRANCH...232.1.. ORIENTATION OF THE BANK''''S CONSUMER LENDING ACTIVITIES...46 Trang 3 Table 2.1: Sale
OVERVIEW OF CONSUMER LOANS'S THEORY BASIC
CONSUMER LOANS OVERVIEW
While the market economy is developing day by day with a variety of models and types of goods, consumer loans have been started by retailers due to the need to promote consumption of goods Some firms have to borrow from banks to compensate for the shortage of working capital.
First, in terms of the basis to conduct consumer loans, we are based on 2 dimensions:
- From a consumer perspective, the demand for consumer loans is increasing strongly, associated with the expanding demand for durable goods (houses, vehicles, furniture or tourism calendar) At the same time, consumers have a stable income to repay bank loans When the income level reaches a fair or high level, consumers tend to want to improve their standard of living (consuming good quality products, good food, good clothes, a fully equipped and modern life ) or increase the ability to train yourself to help you find more jobs with higher income than now.
- From a banking perspective, many businesses and organizations finance themselves mainly by issuing shares and bonds, many financial companies compete with banks in lending as market share for their businesses goods down This has forced banks to expand the consumer lending market to increase income Thus, people have introduced a specific concept of consumer lending activities: Consumer lending is a form of financing for individual household spending purposes. Consumer loans are an important source of funding for consumers to meet the needs of life: housing, transportation, living facilities, study, travel before they have enough financial ability to enjoy.
1.1.2 The basic feature of a consumer loan
- Subjects of consumer loans are individuals and households Their borrowing needs depend on their financial situation For low-income individuals and households, the credit needs are often not high, just to meet the family needs to create a balance between income and expenditure For middle-income individuals and households, the demand for consumer credit develops strongly because the desire to borrow to buy consumer goods is greater than their provision For high- income earners, the need for consumer credit arises to increase solvency or to finance a very flexible expenditure when their capital is already in the investment account.
At the same time, these individuals and households must be those with full legal capacity and clear borrowing purposes The loan purpose of customers must serve their consumption needs, such as: building or repairing houses, purchasing household items
- A consumer loan is cyclical: The customer's demand for consumer loans not only depends on the financial situation but also depends on the economic situation at specific periods.
In the stage of economic development, people feel optimistic about the future, especially they expect their income to be improved Therefore, it is inevitable that they will increase the demand for enjoyment so consumer loans tend to increase.
In a period of economic crisis, people feel no confidence in the future and unemployment increases Therefore, people will inevitably limit consumption at the present time
- The cost of a consumer loan is high: Consumer loans are usually not large while banks spend a lot of time and manpower to investigate and collect information of borrowers Besides, banks also have to manage small loans which account for quite a large volume Therefore, the cost of lending to interest-bearing consumer loans is often greater than that of commercial lending.
- Interest rates on consumer loans are high and quite rigid The interest rate on a consumer loan is the fixed rate Customers are less sensitive to interest rates, they are only interested in the monthly interest payable rather than the interest on the contract However, interest rate is not an important factor for individuals and households to care about when deciding to borrow more or less The factors that are considered more important are the level of income and education level, in particular: people with high income levels tend to borrow more than monthly income; And for people with high educational attainment, borrowing is to achieve the desired standard of living, not just an option to use in an emergency.
Because of the large costs and risks of consumer loans, most banks often set a rather high interest rate on consumer loans This includes the risk premium to the point where the costs and losses have to be significantly increased for new consumer credits to be unprofitable
- The source of customer debt repayment can fluctuate greatly: When the loan is for business, the source of debt repayment is the result of production and business activities When the loan is for consumption, it is the customer's income
- High risk due to the quality of customers' financial information is often not high, customers are cheating or interest rate risks when the cost of raising capital increases.
In terms of interest rate risk, we know that the "rigid" rate is applied to consumer loans while today's business loans usually apply rates that vary with market conditions Therefore, an increase in the cost of raising a bank also exposes interest rate risk.
In terms of risks from customers, it can be divided into two types: subjective risks and other important risks Subjective risks are when customers are not willing to pay debts to the bank and provide untruthful and accurate information The objective risk is that when customers die, get sick, or lose their jobs, banks will immediately have difficulty recovering their debts.
- The size of consumer loans is usually small, but the number of these consumer loans is very large.
Consumer lending is divided into several categories according to different criteria.
1.1.3.1 Based on the relationship between the bank and the customer
- Direct consumer loan is a form of lending in which banks and customers meet directly to carry out borrowing procedures.
1 Banks and consumers sign loan contracts.
2 Borrowers pay a part of the purchase amount in advance to the retail company.
3 The bank pays the remaining balance to the retail company.
4 The retail company hands over assets to consumers.
5 Consumers pay off loans to banks.
- Indirect consumer lending is a form of lending in which banks and customers do not meet directly to carry out borrowing procedures but through a third party.
The bank buys sales coupons from retailers of goods (this is actually a form of installment financing).
1 Banks and retail companies sign debt sale and purchase contracts Bank contracts typically state terms on who the customer can bear, the maximum amount to be sold, and the type of asset to be sold.
2 The retail company and the consumer enter into a sale and purchase contract to bear the goods, the consumer usually pays a portion of the value of the property upfront.
3 The retail company hands over assets to consumers.
4 The retail company sells the documents for sale to the bank.
5 The bank pays the retail company.
6 Consumers pay installments to banks.
1.1.3.2 Based on the purpose of the loan
- Real estate consumer loans are loans intended for real estate purposes such as buying, repairing or building houses and land The average size of a real estate consumer loan is often larger than the average size of a regular consumer loan, with a much longer term so the risk of a real estate consumer loan is also large than.
- Consumer loans are usually loans for the purpose of financial support for essential activities and needs in people's lives, such as: studying abroad loans, buying cars or traveling,
1.1.3.3 Based on the refund method
- Consumer loan installment is a form of consumer loan in which customers pay debts to the bank in installments (periodically during the loan term, depending on the bank's regulations), each time paying customers goods will proceed to repay both principal and interest of that period.
CRITERIA TO EVALUATE CONSUMER LENDING ACTIVITIES
Sales of CL activities in year n
Sales of CL activities in year n-1
- Loan sales are the amount of money the bank lends for a period (usually 1 year).
- This indicator shows the growth rate of sales of CL activities in year (n) over year (n-1) When this indicator increases, it shows that the Bank's sales of credit credit activities have increased in relative numbers, and it also shows that credit credit activities are being expanded.
An indicator reflecting all debts that banks have collected when they mature at a certain time, irrespective of the lending time.
This coefficient shows how many dong of business the bank will recover from
1 business coin in a given period The higher this coefficient, the more beneficial the bank is
Outstanding debt balance in year n Credit credit balance growth rate= - -x100 Outstanding outstanding loans for year n-1
- Outstanding balance is the total amount of money that the Bank lends at a time
- Total outstanding loans of a bank indicate its liquidity status and its ability to meet loan demands
- Outstanding balance to each specific customer indicates the relationship of the bank and the customer mentioned above
- This target shows the growth rate of outstanding credit loan balance in year(n) compared to year 9 (n-1) When this indicator increases, it shows that the bank's credit portfolio balances over the years have increased in relative terms, and at the same time, credit credit activities are expanding.
NPL ratio of CL activities = - x100
Bad debt (or problem debt, unhealthy debt, bad debt, bad debt ) is a debt with the following characteristics:
- Customers have not fulfilled their debt repayment obligations with the bank when these commitments have expired.
- The customer's financial situation is and tends to be bad, leading to the possibility that the bank cannot recover both principal and interest.
Collateral (collateral, pledge, guarantee) is assessed as the disbursement value not enough to cover debt and interest.
- Bad debts include: sub-standard loans; Doubtful debt; Irrecoverable debtsThis is an important indicator to evaluate the expansion of credit credit activity
FACTORS AFFECTING CONSUMER LENDING
Like other economic institutions, commercial banks operate and are influenced by the surrounding environment such as socioeconomic environment,regulatory environment, cultural environment, and economic policies health sector.The typical socio-economic environment is the level of economic development, national income, income per capita, the standard of living of the population together with the social regime that has a strong influence on the consumption goals of the population residential This stable environment is one of the conditions that motivates people to consume, thus leading to expansion of bank lending activities The legal environment including the system of state legal documents is another macro factor that has far-reaching effects on consumer lending activities of commercial banks The legal environment affects the order and stability and facilitates smooth consumer lending activities, ensures sustainable development, and limits troubles affecting the interests of a party to a borrowing relationship If the legal system fully regulates consumer lending issues, it will motivate consumers to turn to banks while also encouraging the activeness of banks to participate in this field On the contrary, if all regulations are generic and not clear, it will make both banks and customers difficult to come to a mutual agreement.
Cultural environment such as habits, psychology, education level, national identity (expressed through people's traits such as frugality or enjoyment) or factors of residence, workplace also greatly affects people's spending habits.
Consumer lending is also influenced by the system of state economic policies and programs, if the state increases investment or introduces open measures to encourage domestic investment and increase investment Foreign countries such as reducing cumbersome procedures, reducing taxes for newly established companies, creating jobs for workers This is clearly a favorable premise to develop consumer lending On the other hand, policies such as reducing income tax, applying preferential interest rates to farmers' loans, poor households, ethnic households in mountainous areas, poverty reduction programs to implement social justice All these measures will affect the consumption demand of the population in the immediate and long term
* Factors from the customer side:
In this group of factors, first of all, customer ethics is evaluated based on legal capacity and credibility Because if customers really have high, stable income to repay debts, even offer good guarantee conditions, they will not be sure to be willing to repay their debts Because, when taking a loan, maybe the borrower still has the intention to repay the loan fully, but in using the loan, it may be due to status, greed or want to get rich quickly, they use the promised purpose en Lenders do not always have complete information about the borrower On the other hand,with high risk areas, the ability to bring profits is also high so borrowers will find ways to get that loan So before lending, credit officers must rate a client's credibility on the basis of the borrower's honest province, the customer's determination in implementing all covenants in credit activities Used, which is partially reflected in the borrower's profile
Legal capacity is the specific legal provisions that borrowers need to have, which is the basis for forming debt repayment operations of customers in credit relations, through appraisal of legal capacity Can the Bank know whether the customer is currently involved in any lawsuit, collateral related to the lawsuit or disputes?
The financial ability of the customer is also one of the factors affecting the ability to repay the bank's debt families, especially necessities and for these people they are willing to pay the bank to avoid
Legal problems can affect their job career On the contrary, for individuals or households with unstable or average income, the bank's debt collection will face many difficulties because they do not know when they will receive the income. when and when will they accumulate enough to repay bank loans Today, the majority of consumer loans refer to the source of repayment as the regular income of the customer in the future, except for short-term loans.
Collateral is the legal basis for the second source of debt collection for the bank in addition to the first source of debt collection, which is a risk reserve. Although holding collateral, if a customer does not pay debt, the bank must face income risk because it takes time and other costs involved in selling the assets, not to mention there may be a time that the market value of an asset is not maintained as when a customer pricing for a loan Therefore, collateral does not play a decisive role in whether customers borrow or not but it is just a criterion for reviewing when lending.
Subjective factors affecting the annual consumer lending activities of commercial banks in the Bank's regulations and development directions If the bank does not have a comprehensive direction for the development of consumer loans, it also means that there is no activity for the development of this activity.
Working content and strict reward and penalty regime also have a certain impact on consumer lending activities, strict working rules will enhance staff's responsibility at work as well as their attitude for customers The strict reward and punishment will encourage the banks to learn and strive to improve their qualifications, the above factors not only create comfort for customers when coming to the bank, but also attract is interested by a large number of customers for the products and services that the bank provides.
If borrower ethics is ranked as the top objective factors, the ethics of credit officers are at an equal position in the group of subjective factors Many credit officers are for personal interests that harm both the bank and the customer In a fiercely competitive environment, customers are willing to look to other banks if they find that they are not trustworthy in the staff directly managing their loans, besides high professional skills and understanding Bank officials must always cultivate ethics, put the interests of customers and banks first, ready to refuse loans if there is a problem and not because of the urgent need of borrowers but force them to self-interest.
Effective, no-frills and complicated appraisal techniques and procedures are one of the most important ways to attract customers However, this respect for these techniques and procedures is not only for that purpose but to make the right judgment about customers, and loans, from which to make the right lending decisions A reasonable, scientific and unified system of appraisal techniques is the deciding factor for the appraisal quality and therefore the quality of the loan.
Besides the above factors, the capital factor also plays an important role,affecting the operation of the bank in general and credit lending activities in particular Like other businesses, if you want to conduct banking business, you must also have capital The larger the equity capital of the bank, the more likely the bank will expand its scope for providing products and services On the other hand, when having large capital, banks can also invest in infrastructure, technology, improve the competitiveness and reputation of the bank while ensuring safety and term.processing risks in operations.
EXPERIENCE OF CONSUMER LENDING OF COMMERCIAL BANKS IN
1.4.1 Consumer lending experience in some countries A, Consumer loan activity in
• Consumer lending activities in the USA
USA Today, many banks use the scoring method to process consumer loan applications Many customers love the convenience and speedy speed that when their credit requests are processed with an automated scoring system, customers can call their bank to contact for a loan, through a system Internet connection, on the customer's database, within a few minutes the bank can report the credit result to the customer.
Consumer credit services are becoming more and more popular and encouraged to develop at Chinese commercial banks Since the late 1990s, China Kien Thi Bank (CCB) has been leading the development of this field in 1999, the mortgage loan term is extended from 20 years to 30 years; the value of the loan was also raised from 70% to 80% of the collateral value At the same time, since late
1999, CCB began to approve loans guaranteed by individuals, abolishing the requirement that borrowers need to be guaranteed by their employer.
Shanghai - Phu Dong Development Bank is also one of the early banks inChina with thriving consumer credit services The bank has partnered with real estate companies to simplify collateral procedures and reduce the number of times borrowers have to transact with a bank branch from 20 times to 3 times SinceAugust 1999, the Shanghai - Phu Dong Development Bank has cooperated with travel agencies to offer tourism loans The bank also extended the terms of university training loans from 2 years to 4 years and established a special fund for parents who want to send their children to private schools Expensive multiplication To implement these plans The Shanghai - Phu Dong Development
Bank has doubled the number of marketing staff for the consumer credit sector, accounting for 20% of the total salary fund.
The biggest challenge facing Chinese commercial banks is the ability to compete with foreign banks in the consumer lending sector: HSBC, Cubank, and Standard Chartered are emerging as very strong competitors China's domestic banks can let the consumer credit sector fall into the hands of foreign competitors if they do not immediately consolidate the service sector According to the consultants, the best way is that the consumer sector needs to be segregated into parts that can be self-employed, self-managed and profit-accounting independent from other banking operations
1.4.2 Lessons learned from commercial banks in Vietnam
- In most countries, banks are increasingly interested in developing consumer credit Up to now, the results of consumer lending activities in many countries have shown that this is a relatively low risk type, contributing to stabilizing income for banks, especially in countries where companies do business ineffective
- People's understanding of issues related to consumer lending significantly affects the results and quality of this activity.
- The development of consumer lending activities requires banks to have strict, meticulous regulations, procedures for monitoring and managing credit risks before, during and after credit granting) Full and up-to-date customer reviews because this form of credit is mainly from grape loans and has no guarantee
- To distribute on this form of credit and ensure the safety of banking operations requires close cooperation between the Central Bank of the credit institutions and the administrative administrative agencies
Consumer lending activities in regional countries are currently facing difficulties such as: people's income is not stable, personal credit information systems are not yet developed, policies and legal regulations Concerning incomplete consumer credit, competition is increasing with the increasing participation of foreign banks in this market.
CURRENT SITUATION OF CONSUMER LOANS AT KIEN LONG
OVERVIEW OF KIEN LONG COMMERCIAL JOINT STOCK BANK - DA
2.1.1 Introduction about Kien Long Commercial Joint Stock Bank - Da Nang Branch
Kien Long Commercial Joint Stock Bank - Da Nang Branch was established under Decision No 515 / QD - NHKL signed on 17/07/2007 and officially put into operation on October 29, 2007 The head office of Kien Long Commercial Joint Stock Bank - Da Nang branch is located at 114-116 Nguyen Van Linh, Thanh Khe District, Da Nang City.
Since its establishment up to now, the Branch has constantly changed the mode of operation, providing services, equipped with facilities to best meet the needs of customers.
• Vietnamese name: KIEN LONG SC KIÊN LONG
• Short for: NGAN HANG KIEN LONG
• English name: KIEN LONG BNAK
• Charter capital: On September 6, 2016, it reached VND 3,000 billion
During the past 5 years, Da Nang branch has been constantly developing and expanding from tissue to commercial banks' products and services such as: capital mobilization, lending, guarantee, international payment About network operation, the total number of affiliated units of Da Nang provincial branch by the end of 2017 is 13 units including 1 branch and 12 affiliated transaction offices The total number of employees is more than 160 people with good professional qualifications.
Regarding geographical location, Da Nang branch is currently headquartered in the city center, with spacious and modern facilities This makes it easy for banks to attract and create trust in customers At the same time, this location is very convenient for the branch to reach large customers in Hai Chau district, Thanh Khe district,
With the efforts of the staff of the branch's staff, Kien Long has affirmed its position as an efficient bank Kien Long Bank, Da Nang Branch, has created the trust of customers, attracting all classes of people to the branch, the branch's operations are growing strongly, the network is expanded, to Now the branch has 3 affiliated transaction offices In addition, the bank has conveyed capital to people in need of loans, production and business as well as efficient cons
Diagram2.1: The organizational structure of Kien Long Commercial Joint Stock
2.1.3 Functions and duties of departments
A branch director is the person who directly runs and is responsible to the General Director of Kien Long Bank and the law for all activities of his unit The Director directly directs and runs all activities of the unit according to the Bank's regulations and regulations.
Branch Deputy Director: is the person under the Branch Director, on behalf of the Director handling the work of the unit when the Director is away, running the assigned and authorized unit of duties
The sales department serves as the sales department to bring in income for the branch Credit officers are assigned the task of proactively looking for clients' feasible projects and plans, collecting information about borrowers and guiding customers to carry out loan procedures and appraise loan conditions Responsible for the loan made by me Includes 2 small rooms: Personal customer room and Business customer room
Acounting ,treasury Department: The staff in this department are responsible for the following tasks:
- Accounting plan, monitoring, reflecting the situation of business operations, finance, management of capital and assets of the branch.
- Organizing domestic and foreign payment and money transfer services.
- Guide customers to open accounts at branches, set up procedures and pay savings and deposits from economic organizations and individuals; remittance payment service.
- Cash collection and payment, import-export only has the price for safe preservation of money and assets of the bank and customers.
- Preservation of collateral, pledge transferred by credit bureau.
- General archiving records, accounting documents; keep confidential documents, data
2.2 CURRENT SITUATION OF CONSUMER LOANS AT KIEN LONG BANK, DA NANG BRANCH
2.2.1 The situation of consumer loans at KienLongBank-Da Nang Branch
2.2.1.1 Sales of consumer loans a) Sales of consumer loans by term
Consumer loan sales of Kien Long Commercial Joint Stock Bank - Da Nang Branch increased over the years, demonstrating an increase in the number of consumer lending activities at the branch.
In 2018, sales were 1,966,400 million VND, by 2017 that increased to 2,906,840 million VND, an increase of 940,400 million VND (47.82%) compared to 2017 In 2019, that sales of consumer loans reached 409,958 million VND,increasing 40% compared to 2018 The growth rate of sales in 2018 has decreased due to competition pressure and the scarcity of capital mobilized in the market.According to the loan term, consumer loans are divided into short, medium and long term In which, medium-term loans have the largest proportion, reflecting the current situation of purchasing durable items such as cars and real estate The proportion of medium-term loans in 2017 was 58.40%, gradually increasing to
60.05% in 2018 and 62.46% in 2019 The growth rate of medium-term loan sales was also the highest compared to short-term and long-term Mid-term sales in 2017 were 1,148,460 million VND, but by 2018 there was a spectacular growth reaching 1,745,670 million VND, an increase of 597,210 million VND (52%) 2018 marked an expansion in people's consumption spending on durable goods By 2019, that medium-term sales growth rate will decrease but still reach a high level, 45.6% compared to 2018 and reach a value of 2,541,700 million VND.
Amount of money proport ion (%)
Amount of money proporti on (%)
Amount of money proport ion (%) absolute proporti on % absolute proportio n %
Total sales 1,966,400 100.00 2,906,840 100.00 4,069,580 100.00 940,400 47.82 1,162,740 40.00 Short-term 340,430 17.41 491,730 16.92 663,840 16.31 149,300 43.60 172,110 35.00 Mid-term 1,148,460 58.40 1,745,670 60.05 2,541,700 62.46 597,210 52.00 796,030 45.60
(Source: Report on business performance in 2017, 2018, 2019 of SC Kien Long Bank - Da Nang Branch)
The sales of long-term consumer loans of KienLongBank branch are mainly home loans with a repayment period of more than 5 years: VND 470,550 million (weight 24.18%) in 2017; VND 669,440 million (23.03%) in 2018 and reached VND 864,040 million (21.23%) in 2019 The growth rate was 40.77% in 2018, but that dropped sharply to 29.07% in 2019.
In general, the growth rate of consumer loan sales of Kien Long Commercial Joint Stock Bank - Da Nang Branch in the past 3 years is stable and at a high level. Total sales increased rapidly in 2018 due to economic growth reaching a high 7.5% and the living conditions of the people constantly improving, a large number of incomes then wishing to purchase expensive items money and durable However, in 2019, the growth rate of loan sales decreased slightly, due to factors such as epidemics, inflation, competition causing high mobilization costs, leading to increased borrowing costs, reducing sales for bank loan. b) Sales of consumer loans by purpose
Consumer loans can be divided according to the following purposes: home loan, home repair; car loan; student loans and other consumer loans.
• Loans to buy, repair and upgrade houses
Loans for the purpose of buying and repairing houses have the largest proportion in the total sales of consumer loans of Kien Long Commercial Joint Stock Bank - Da Nang Branch In 2017, the revenue was 1,437,800 million VND, accounting for 73.12% of the total sales, in 2018 it was 2,179,140 million VND, accounting for 74.97% and in 2019 that sales increased to 2,929,320 million VND, contributing 71.98% of total sales.
The fast growth rate of total sales in 2018 contributed a large part to the growth of home loan activity That revenue in 2018 increased by 741,340 million VND compared to 2017, the growth rate was 51.56%, higher than the growth rate of the branch's total sales of consumer loans However, after the real estate fever in
2018, in 2019 the real estate market froze, significantly reducing people's need to buy houses, so that growth rate decreased to 34.43% compared to 2018, low other than the increase in other consumer lending activities.
Loans to buy and repair home 1,437,800 73.12 2,179,140 74.97 2,929,320 71.98 741,340 51.56 750,180 34.43
(Source: Report on business performance in 2017, 2018, 2019 of Kien Long Commercial Joint Stock Bank - Da Nang Branch).
EVALUATION OF CONSUMER LENDING ACTIVITIES AT KIEN LONG
2.3.1 Achievements of NH Kien Long - Da Nang Branch
With the economic growth, the people's living standard is increasingly high, the demand for financial services of banks is also higher and more refined In recent years, instead of accumulating, people tend to get acquainted with bank credit products to create a fully equipped life with the support of the bank.
Facing the needs of the market, NH Kien Long - Da Nang Branch has provided many consumer loan products and is highly appreciated by many customers The credit loan segment is gradually becoming the strength of NH Kien Long - Da Nang Branch in the retail sector, consumer loan products that currently
NH Kien Long - Da Nang Branch is providing are: New, Genuine Cars, Study Abroad, Loans with Certificate of Debt and Personal Account Advance.
With all their efforts in product development, Kien Long Bank - Da Nang Branch partly shows its orientation to become a leading retail bank in Vietnam. Bank Kien Long - Da Nang Branch also expanded to mobilize capital from many sources in the economy with all types of customers This means that when capital is expanded, consumer lending to customers will also expand to a much larger scale than before.
On the other hand, the increase in consumer loan balance also proves that the service quality of Kien Long Bank - Da Nang Branch is also enhanced, gaining prestige and attention for customers NH Kien Long - Da Nang Branch has made continuous efforts to improve both the quality and quality of its products and services, as well as reasonably combine its strengths in modern information technology The credit risk management system has been developed by Kien LongBank - Da Nang Branch for a long time and is considered as the main risk component because the total balance from credit activities accounts for more than50% of the total assets products of NH Kien Long - Da Nang Branch Therefore,the ratio of overdue debts next year will decrease compared to the previous year In addition, marketing activities for their consumer loans are also focused on developing by Kien Long Bank - Da Nang Branch in combination with the improvement of the organizational structure (the credit support department was born) , improving the quality and quality of the staff in general and the management board in particular.
2.3.2 Shortcomings in consumer lending at NH Kien Long - Da Nang Branch
In terms of macro environment such as law, economics, culture - society, geography Vietnam's legal environment has not been completed and synchronized with the banking regulations system, so it is easy for customers to cheat, take advantage of the loophole of the law to cause damages to the bank Or the real estate market goes up and down, causing risks for banks when making home loans.
In terms of geography, the bank has not been able to expand its scale across provinces and cities because in remote areas, there are no means of transportation, people's lives are limited This has made it difficult for banks to expand their scale.
In addition to the causes from the macro environment, the group of causes from the micro environment also has a great impact on consumer lending activities.
- Stemming from internal factors of the bank: Bank policies are still limited, not really flexible and flexible to create favorable conditions for the bank itself as well as customers Although the bank's products have been expanded with many new types and packages, in general the product characteristics are not really reasonable In addition, although the staff of Kien Long Bank - Da Nang Branch are always rejuvenated, consistent with the current development trend of the socio- economy, they face the problem of inexperience practice and expertise This is also the reason that the marketing department has not brought into play the highest efficiency Marketing activities in consumer lending have not met the development requirements, only stop at promoting the bank's image on television and newspapers Professionalism is not really uniform when implementing marketing strategies Finally, due to the influence of the inaccurate and incomplete information collection system from outside and the small distribution network (mainly concentrated in large, sparsely-populated provinces in remote central regions mind, mountains).
- The linkage, cooperation and development with units to support the bank's operations is still few Although the bank intends to expand its market share into socio-economic industries to achieve mutual purposes, it is still limited in terms of quantity and scale of socio-economic industries Competition is always the driving force for each bank's development, Kien Long Bank - Da Nang Branch has only searched and selected strategic partners to support each other at a low level.
- For customers, customers face a number of difficulties when borrowing for consumption at banks such as: borrowing capacity, tight credit conditions (scale does not meet loan needs, credit activities big or small too depends on collateral and the appraisal work is still cumbersome) when borrowing from customers. Customers do not meet the requirements given by the bank, so they cannot achieve their loan purposes This proves that the bank has not really launched the product package with features suitable to the needs of the customer or the package that the customer needs, but the bank has not yet provided it On the other hand, a bank will suffer losses if the customer is unable to repay the debt due to the due date, causing overdue debts of the bank to increase, causing losses to the bank, or as the customer borrows money for misuse purposes, cheating in declaring their intended use.
While the market economy is developing very strongly, the bank will always have to face with domestic and foreign competitors Especially when joining the WTO, Vietnam has been adopting a policy to attract foreign financial institutions to invest in Vietnam.These banks are not only strong in potential and prestige, but they also have strong consumer loan product package with very competitive interest rates with Kien Long Bank - Da Nang Branch.
2.4.3 Competitiveness in consumer lending at Kien Long Bank - Da Nang Branch.
* The level of competition in consumer lending the market.
Currently, the proportion of consumer loans in total outstanding loans of banks has increased compared to the previous years but is still quite low Recently, banks are actively launching new consumer loan products: unsecured consumer loans,online consumer loans (Asia Bank), car installment payments ( Military joint stock commercial, Bank for Foreign Trade, Sacombank, Techcombank) or loan products for employees (Joint Stock Commercial Bank for International Trade), student loans, "Young Family" package ( Techcombank),… In addition, many banks also link with agents in many products to make installment payments for customers (such as Southeast Asia Bank with Toyota and motorbike dealers).
In the market, the emergence of many foreign banks and foreign financial companies with products intended for individual customers is consumer credit This has put a fierce competition pressure on domestic banks One of those banks is a major bank in the world like HSBC that allows customers to have a net income of 3 million dong / month or more to qualify to borrow 10 times their income.
* Competitiveness of consumer loans at Kien Long Bank - Da Nang Branch Regarding operational efficiency, Kien Long Bank - Da Nang Branch is now the leading retail bank in the commercial banking sector Particularly at the Head Office of Kien Long Bank - Da Nang Branch since its inception, consumer lending has become the focus of credit.
In addition, the ratio of overdue loans to total consumer loans is only approximately 0 Therefore, it has proven the effective operation of consumer loans at Kien Long Bank - Da Nang Branch.
Regarding the operational quality of the bank, in general, there have been many steps to improve the organizational structure, adding appropriate departments and organizations A special feature of Kien Long Bank - Da Nang Branch is the rejuvenation of the staff and at the same time combining with training activities to improve the qualifications of each bank officer The quality of the staff of KienLong Bank - Da Nang Branch is always carefully screened and selected in terms of qualifications and ethics In the process of implementing the consumer loan process,Kien Long Bank - Da Nang Branch also improves safety and accuracy to ensure that it does not waste time and costs for customers and their own Transaction procedures when customers come to borrow for consumption purposes are also streamlined and organized as quickly as possible In addition, the speed of processing transactions is also much faster than before (customers spend less time waiting for results of financial appraisal, appraisal of capital use purposes and collateral appraisal) All these factors work together, helping NH Kien Long - Da
Nang Branch to improve the quality of its operations, to keep the reputation and reliability of customers.
The number of new products that NH Kien Long - Da Nang Branch provides is always supplemented to suit all subjects, all consumption needs NH Kien Long -
SOLUTIONS AND RECOMMENDATIONS FOR ENHANCING
ORIENTATION OF THE BANK'S CONSUMER LENDING ACTIVITIES
Credit credit activities currently have many favorable economic, political and technological conditions for development This is also an area where many banks focus on expanding investment The size and quality of CL products has become one of the factors evaluating the bank's operations and position in the public. Foreseeing that situation, the branch of NH Kien Long - Da Nang Branch determined that besides the traditional business and production loan segment, it is necessary to maintain its position, CL activities also need to be paid attention to expand To achieve this goal, branch leaders as well as departments with the center as individual customer department must agree on a specific development strategy as a guideline for consumer credit activities The branch also needs to invest in a combination of all resources, ensuring success in this new and exciting field.
SOLUTIONS TO EXPAND CONSUMER LENDING ACTIVITIES AT BANKS
Increasing capital scale is a premise to expand any bank's credit activities including credit credit activities With an abundant capital source, banks can increase the value and quantity of loans while ensuring their liquidity Especially,Kien Long Bank - Da Nang Branch is the first flag of Kien Long Bank in providing capital to serve production and business, most of the mobilized capital is used for lending in this area Therefore, in order to achieve the goal of maintaining the leading position in corporate lending in the area and expanding the market forCVDs, Da Nang branches need to increase mobilized capital Promoting capital mobilization has created a financial basis for banks to perform credit services, while helping the bank expand customer relations to deposit money, attracting these people to borrow money when they need to spend The characteristic of CL at the branch is that the proportion of short and medium term CV is very high (over 90%), which is also a profitable form for the bank, so the fund mobilization of the branch should focus on short and medium term capital In addition, as the consumer loan purpose of the population is increasingly diversified, the demand for long-term credit also increases, this is an inevitable trend, so banks cannot take capital mobilization lightly long-term Some measures a branch can take:
- Implement diversification of mobilization forms The scope of operation of the branch is in Da Nang, where the population density is high and the people's life is quite stable, the idle capital in the population has not been fully exploited. Therefore, the branch needs to continue to develop traditional forms of capital attraction such as savings deposit; Deposit payment; issuing certificates of deposit, promissory notes, and bonds, continuing to apply the ladder of savings, increasing the attractiveness of deposit products The Bank can also provide new services such as demand savings linked to personal accounts, overdraft on accounts, education savings, retirement accounts, remittances, etc suitable with residential needs.
- Actively advertise, propagate to attract capital through many ways such as through the media, organizing seminars, sponsoring cultural and social programs of mass nature The branch should also announce staff directly introduces and provides information about new services and its benefits to customers, collecting constructive feedback from customers on fundraising activities Especially for individuals and households wishing to deposit money, capital staff can introduce them more about the bank's CVD service, creating a close relationship with each object in both segments capital mobilization and credit extension.
The first important thing to attract customers to the bank is the quality of the bank's products Therefore, in order to expand CL, it is essential to improve the quality of existing products The quality of this credit product can be measured by its ability to provide capital quickly and promptly; the borrower's utility level in terms of the amount to be borrowed, loan procedures, interest rates and repayment period; the enthusiasm and openness of the credit officer Loans to finance real estate, transportation, living facilities or to sponsor a branch's study abroad must always ensure those factors well For each type of CL branch should also have improvements to increase the attractiveness Specifically:
- Branch can provide a package service for individuals to study abroad. Through establishing relationships with overseas educational and training institutions, the branch not only finances customers' learning but also advises schools, provides information about training programs Create as well as the school's scholarship policy, carry out foreign currency sales and foreign currency payments This form has many benefits for customers, contributing to perfecting the existing student loan services.
- Branches can provide full-service services for housing, household appliances, and transportation to create a stable and comfortable life for customers Users of this package service will enjoy the lower interest rate applicable to each type of loan by the branch This form of sponsorship is very suitable for young couples who always want to enjoy modern life but their financial conditions have not yet allowed - Branches can link with sales units such as supermarkets, shopping companies to offer incentive programs such as reducing interest rates, extending debt repayment terms, reducing sales prices, giving gifts for Household individuals use capital provided by banks to buy goods in the above units This form helps the bank to expand consumer credit, both building good relationships with both borrowers and sales organizations, facilitating for other activities of the bank such as raising capital, lending for production and business development.
- Besides, the bank should also combine the credit credit service with other services so that borrowers can fully use the bank's products and utilities Affiliates can implement a product package policy, providing a product portfolio with many benefits to customers such as:
+ For high-income individual customers, the bank can build a product package including: the core product is home loans and the product surrounded by high-limit credit cards, automatic payment authorization for living expenses, life insurance + For individual customers with good average income, the product package includes a core product of low-interest installment loans and surrounding products including savings deposit, automatic payment order, and money, ATM card + For low-income individual customers: the core product is low-interest installment loans and surround products using ATM cards, cash cards The Bank must also have a suitable and flexible interest rate policy for each type of loan, increasing the competitiveness of its products For example, the bank may apply a low interest rate for the first time to international students, then when their study and life are more stable, the interest rate will be raised to a new level for more suitable Customers who use many of the services or package services offered by the branch can also enjoy preferential interest rates Completing these traditional services will contribute to improving the prestige and creating a firm foothold for the bank in the consumer credit market Branches should also regularly collect people's opinions about CL services to make adjustments accordingly, to maximize the utility for customers The methods of collecting opinions that branches can use are sending questionnaires, holding conferences, communicating with customers, or sending credit officers to talk directly with borrowers The issue that affiliates must pay special attention to in the product development strategy is diversification of the product portfolio The services that banks are providing are traditional, do not have new and unique services, which reduces the competitiveness of banks in the consumer credit market On the basis of basic services and available relationships with borrowers, banks should expand lending types, creating a rich product portfolio for customers to choose from Card lending is a promising form that banks can deploy The Vietnamese card market is growing rapidly and card sales have increased accordingly However, the number of cards issued and the proportion of card payment is still too small compared with the potential and compared with other countries in the region as well as internationally The economy is developing, people's lives are improving day by day, the demand for study, medical treatment, and traveling abroad is increasing, which is a very attractive market for banks to extend credit by Credit card loans to meet personal spending needs At present, the number of students is increasing, in fields of learning are increasingly plentiful, education and training costs are increasing The branch should expand the scope of funding for educational activities Funding will be provided to not only those studying abroad but also to students who do not have sufficient financial conditions to study This form will significantly increase the amount of the loan, and at the same time with the human nature, it also contributes to building the reputation and image of the bank Another form that branches should take is indirect CL In this form, the bank does not have direct relationship with customers but lends through intermediaries that are retail companies and distribution agents CL indirectly benefits both banks, customers and suppliers However, this market in our country is still open Exploiting this new market, the branch can attract a large number of customers, expand credit relationships and increase profits from CL.
3.2.3 Solutions to conditions and process of credit credit
The current branch's credit limit conditions are limited, making it difficult for many customers to use bank capital Loosening credit conditions to a certain extent will help banks quickly expand credit institutions For example, a branch can increase the loan level and loan term applied to its employees, allowing them to borrow large amounts of money in the long run, for the purpose of buying a house,for treatment Branches should also simplify a number of requirements in the loan application, both expanding the lending audience and reducing disbursement time,quickly responding to customer needs In terms of business processes, sometimes there is no continuity between the steps, leading to prolonged time, making it difficult for both banks and customers The bank can use modern technology to automate the business process automation Customers just need to send their demand through the automated system without having to go directly to the bank .
Customer data will be combined with the credit scoring system to make loan decisions and provide automated services This mechanism has been adopted in developed countries, creating convenience for individuals who want to borrow from banks to spend Each lender, each form of loan has its own specificity, so the design of the process, filing procedures, interest policy, service fees, marketing policy on the flyer system, the service manual is very important Many commercial joint stock banks have built and offered to customers specific business processes for each type of product from procedure instructions, documents, transaction processes to price policy, interest rates, and customer care Meanwhile, the branch's credit card operation up to now has only been based on the general regulations on credit credit issued under Decision 066 / QD-HĐQT-Kien Long Commercial Joint Stock Bank
19 dated April 3, 2006, without a detailed process for for each form, borrower, this makes banks sometimes confused when implementing loans For example, the loan profession for studying abroad is having many opportunities to develop because of the increasing demand in the market, less risks and significant profits However, loans to sponsor studying abroad at branches are almost only a few loans that are not very professional The reason is that there are no specific guidelines such as: determining the cases that need to deposit to prove financial, the margin level, the disbursement of opening savings books / certificates of deposit at the bank for borrowing and account blockade The formation of a specific process for each type of loan will surely pave the way for the branch to simultaneously deploy all CL products Currently, a number of banks have opened many conditions for customers to access bank capital as quickly as Asian banks with 24-hour super loan service committing to disburse within 24 hours from when Receiving complete documents,Eximbank with loan service within 48 hours The need for loans is increasing, there are more and more urgent needs such as travel or unexpected nature such as medical treatment, so the loan application appraisal department at the branch must always flexible for each customer, each situation, each type of loan to satisfy customers at the highest level For example, loans for urgent purposes such as medical treatment or traveling, studying abroad should be considered in the shortest time possible to quickly finance, meet urgent requirements in terms of time for people borrow. Many loans at branches do not have synchronization in storing information, some loans do not have sufficient customer data such as ID number, date of birth, occupation, making it difficult to control debt recovery Especially, for some loans with manager change, the lack of information has not been detected and timely supplemented Therefore, when examining the loan procedures, the credit officers must pay close attention to avoid causing errors that incur costs to the bank Along with the simplification of loan conditions, procedures and professional processes, the appraisal, monitoring and inspection of loans must always be paid attention to ensure safety in credit credit.
Vietnamese people often have the habit of saving and then spending, or if they have to spend, borrow money from relatives, but are very afraid to come to the bank to borrow money Due to such psychological characteristics, the expansion of the market share of CVDs must always be associated with Marketing, because this is an activity that plays a huge role in attracting customers to the bank However, because the branch has prestige and position in the market, the marketing activities have not been paid due attention by the branch The individuals and households who borrow money at the branch are mainly bank employees, or those who know and have relationship with the bank before With the current fierce competition conditions, if a bank does not carry out marketing activities, any one bank may lose market share.Therefore, quickly implementing Marketing activities in the field of CL is an urgent issue for branches The bank can implement the following solutions: First, the bank needs to intensify market research and identify the target market CL audience is very wide, including all individuals and households who wish to use banking services to cover their expenses Their consumption behavior is volatile and influenced by many different factors Therefore, market research is essential.Market research involves understanding the individual household needs and influencing factors; review customers' behavior of buying financial products and identify factors influencing their choice of banks This is the basis for the bank to segment the market, identify the target market to proactively welcome opportunities, prevent challenges, and then exploit the market in the best way.
- The bank must regularly monitor information on the housing market, the automobile market, and the development of education to make accurate predictions about the needs of the population For example, when Vietnam joins the WTO, many imported goods including cars will be exempt from income tax, so the increase in demand for car loans in the coming time is reasonable.
Periodically or before market fluctuations may affect spending needs, banks should send questionnaires, directly interview customers, open Internet forums to evaluate and anticipate guess the consumer demand of the market.
- Operating in a large district, stable people's life, relatively good income, abundant capital source, ensuring financing for a large amount of loans, Da Nang branch should develop services loans to purchase large-value assets such as real estate, new cars, luxury goods with target customers who are high-income individuals and households Branches should organize meetings, travel, give gifts, apply incentives when using services other than traditional customers Second, the bank needs to develop a specific and effective communication-promotion strategy. The Bank can increase advertisements on newspapers, television, leaflets, and create a good impression on products with customers; arrange direct transaction staff to introduce banking services through meetings, dialogues, phone calls, mailing, customer conferences Credit credit activity is an activity that requires aggressiveness, flexibility and creativity of credit officers, and product marketing is an indispensable stage However, at the branch, the employees of the individual customer department mainly provide services to the familiar objects, have not followed closely, go into the market, directly introduce products to other objects.Therefore, the bank should have a policy of promoting the form of service marketing through its credit officers The individual customer office should appoint credit officers to market their products in residential areas, women's unions,businesses, and labor-intensive organizations On the other hand, banks can also deploy public relations - a new form which is increasingly popular in society.Branches should coordinate using a variety of tools such as participating in charitable activities, sponsoring television programs, organizing thematic seminars , in order to build and maintain broad understanding among the masses.about the bank In order to do this a branch must quickly build its own website — a general and comprehensive information channel for the affiliate to reach everyone.Affiliate product promotions should be strengthened during sensitive times when the market is hot to maximize efficiency Specifically, during the wedding season,couples with many needs to shop for houses, branches can introduce products via the Internet, advertise on TV, hang banners at hotels and restaurants When the student finishes the course, he / she wishes to study abroad, branches should distribute flyers, hang banners at the schools, provide information on the Internet Information about CV services to buy houses Land, cars, and other assets can also reach future customers of the branch through brochures, pictures, and drawings at home consulting centers, automobile manufacturing and trading facilities Linking with these locations will contribute to attracting the attention of individuals and households who are and are planning to borrow money from banks to spend Third,branches should apply promotions for borrowers, especially when the consumer credit market is not active The branch can promote promotion by giving gifts, free service, organizing the winning dial-up programs For customers with large value loans, repaying debts before maturity should also be created by the bank and incentives like being served at home, not bank Fourth, developing modern distribution channels is also an effective solution The area of operation of the branch is a large district, so CL customers are often highly educated Taking advantage of that advantage, the bank can distribute products through automatic transaction channels, through phone-banking, home-banking systems, meeting customers' needs with the highest level of convenience Fifth, branches should recruit and train specialized marketing staff in consumer finance, working in individual customer rooms Currently, the branch does not have any specialized staff responsible for consumer credit marketing The activities of these employees are like a bridge between the branch's CL service with individuals and households, promoting the meeting and cooperation process between borrowers and banks with absolute satisfaction of both both sides.
SOME RECOMMENDATIONS
The expansion of credit credit activities at Kien Long Bank - Da Nang Branch not only requires the efforts of all leaders and staff of the branch, but also requires the support of the Government, the authorities, the commercial banks as well as Kien Long Bank.
For Government and related ministries
The operation of the bank in general and credit card operation in particular are strictly controlled by the Government and ministries Whether or not CL expansion is successful is in no small part thanks to the favorable conditions from these agencies, including:
- Issue a complete and unified legal framework for lending and credit credit activities as well as other activities related to the consumer sector such as real estate law, tax law, creating a legal foundation for consumer credit activities expanded quickly and effectively.
- Stabilize the macro economy, create a healthy environment to promote creditworthiness The Government needs to make changes and adjustments to stabilize prices and exchange rates, maintain inflation at a reasonable level, to ensure that the spending needs and demand for credit services are not out of the bank's expectations row.
- Investing in the development of consumer goods manufacturing industries, diversifying products in the market to stimulate spending, create momentum for the increasing demand for consumer credit, is the basis for promoting consumer loans.
- Accelerating the process of issuing certificates of land use rights, home ownership, creating opportunities for many individuals and households to come to the bank, to expand creditors Certificates of land use or home ownership are required for real estate mortgages Currently, many individuals and households have difficulty in applying for these documents, so they cannot access bank capital.
- Authorities at the location of customers need to cooperate with banks in verifying customer information, as well as implementing overdue debt collection, contributing to improving the quality of consumer loans use.
- It is necessary to have a coordinated coordination between banks, courts and state management agencies to quickly resolve disputes, protecting interests for the parties involved.
For Kien Long Commercial Joint Stock Bank
- Kien Long Commercial Joint Stock Bank needs to promulgate specific regulations on the field of credit credit, ensuring this activity follows the right orbit. Having a clear and strict legal framework will help banks feel more secure when making lending decisions, expanding the number of loans, and meeting people's consumption desires.
- Limiting sponsorship for state-owned banks, promoting the flexibility and initiative of the bank, especially in new fields such as CL.
For Kien Long Bank, Da Nang branch
Kien Long Bank, Da Nang branch, should have incentive policies for the expansion of credit institutions.
- Plan a strategy to develop credit credit activities, determine appropriate measures to expand credit institutions to the bank to achieve the highest results.
- Directing banks to focus on investment in technology and human resources - two factors are considered the key to open the door to success in the credit credit sector.
-Provide a list of consumer credit products that banks can offer based on research and learning experiences from domestic and international credit institutions.
-When there are changes in the regulations and policies on credit credit, it is necessary to promptly notify the branches, especially to guide in detail each case, avoiding unnecessary errors.
The economy develops strongly, people's income has been raised, their spiritual and material life has been improved, so the spending needs in the economy also increase constantly, leveraging the expansion CL If a bank's monetary business is like a chain of constant movement, credit credit is an indispensable link, it not only brings revenue but also has a positive impact on promoting the departments other development together Promoting consumer credit is an indispensable trend in market economic conditions, as well as a potential strategy, target and market of commercial banks Operating in a large area, high living standards, and abundant capital resources, Kien Long Bank, Da Nang branch has many advantages to expand credit institutions This credit activity at the bank has seen an encouraging growth in Kien Long Bank, Da Nang branch in recent years, but in order to achieve success, the management board also needs to effort a lot On the basis of the theory of credit credit and the current status of this operation at Da Nang branch, the thesis proposes a number of solutions to expand consumer credit at the branch, and at the same time boldly raised a number of recommendations forState agencies, in order to best exploit this potential credit market.
1 National Economic University, Commercial Banking Curriculum, Statistics Publishing House, 2004
2 National Economic University, Business Finance Textbook, Statistics Publishing House, 2003
3 Peter Rose, Commercial Banking Manager, Finance Publishing House, 2004
4 Banking Academy, Bank Credit Curriculum, Statistics Publishing House, 2003
5 Annual Report of Kien Long Commercial Bank, Da Nang Branch, 2017- 2019
7 Journal of Financial - Monetary Market
9 Some websites: kienlongbank.com.vn