In my position as a Head of Risk Management Department, I chose the topic "Loan quality for SME clients at Joint Stock Commercial Bank for Foreign Trade of Vietnam Vietcombank – Ba Dinh
INTRODUCTION
The reason of doing the research
According to the statistics from the Hanoi Department of Planning and Investment, by the end of the first quarter of 2021, Hanoi had 311,240 enterprises The number of SMEs account for 97% Thus, the number of SMEs in Hanoi have been playing an important role in creating jobs and increasing income for workers However, the COVID-19 pandemic has negatively impacted the operations of enterprises According to a survey of the Vietnam Chamber of Commerce and Industry (VCCI), there were around 87.2% of the country's enterprises have affected by COVID-19 at strong level, only 11% of enterprises have claimed that they were lucky with the low affected level and nearly 2% of enterprises have reported that they are totally positive Among enterprises affected by COVID-19, most of them were enterprises have been operating for less than 3 years only or the scale of micro-smaill and small enterprises The biggest difficulty for these enterprises was reaching clients, affecting cash flow, supply chain Therefore, accessing appropriate capital, especially the capital from banks may help SMEs in overcoming the difficulties and to stabilize the operations and improve competitiveness in the market, which is very necessary On the contrary, the SME market is a potential and profitable market from bank’s lending activity
Since December 31, 2022, the outstanding debt of lending activities at Joint Stock Commercial Bank for Foreign Trade of Vietnam - Ba Dinh Branch reached over VND2,110 billion The lending activities to small and medium enterprise account for a very high proportion and it is the field of activity that brings in the main source of bank’s revenue
However, in recent years this activity has encountered many difficulties: competition is increasingly fierce, demand for loans has increased in the context of the Government and State Bank applying tightening credit policies and in particular, the quality of loans to SME clients has shown signs of decline, causing a great impact on the business performance of Vietcombank - Ba Dinh Branch
With functions and tasks related to preventing and limiting risks in lending activities of banks, especially the task of advising on policy proposals, developing regulations, risk management measures, development plans, improving the quality of lending activities to SME clients are considered legitimate and really necessary reasons to study seriously Based on the research results, identify factors affecting the quality of loans to the SMEs In my position as a Head of Risk Management Department, I chose the topic "Loan quality for SME clients at Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) – Ba Dinh Branch” for my graduation thesis.
Object and scope of the research
Quality of lending activities for small and medium - sized enterprises (SME) clients - of Vietcombank – Ba Dinh branch
The data for analysis were collected over the past 3 years (2021-2023) at Vietcombank - Ba Dinh branch
Research purposes
Research focuses on basic issues as follows:
- Identify an important role in the quality of lending activities to SMEs clients - for business results of the commercial Banks
- Analyzing and assessing the status of lending activities for SME clients at Vietcombank – Ba Dinh Branch in recent times
- Propose practical solutions to improve the quality of SME’s loan at Vietcombank – Ba Dinh Branch
Research questions
- How is the ability to meet the demand for SMEs loan of Vietcombank – Ba Dinh branch?
- How do SME clients evaluate for the tangible tools and facilities of Vietcombank – Ba Dinh Branch?
- What about the services skills and attitude at Vietcombank – Ba Dinh branch?
Expected contribution of research
- Based on the theories to analyze and thereby provide a solution to Vietcombank –
- Research theories of lending activity and loan quality through literature and books
- The interviewee is responsible for answering questions asked by the interviewer including: managers and staffs to understand the principles of lending activity Collect and analyze actual data on lending to small and medium enterprise clients at Vietcombank – Ba Dinh Branch
- The survey is through consultation, communication of credit staffs working at Vietcomabnk – Ba Dinh Branch on causes affecting the loan quality and in order to propose solutions to improve loan quality for SMEs clients
- Interview the SME clients to understand their needs, difficulties with loans
- Interview some Managers and Heads of Division in the lending operation to get their advice and contributions in improving loan quality for SME clients
Structure of thesis
The thesis consists of 5 chapters:
Chapter 2: Theoretical literature of lending activities of commercial banks
Chapter 4: Quality of capital Lending Performance for SME clients at Vietcombank
Chapter 5 Propose a solution to improve the quality of SME loans in Vietcombank – Ba Dinh Branch
THEORETICAL LITERATURE OF LENDING ACTIVITIES OF
Theoretical literature of lending activities of commercial banks
2.1.1 Some important theoretical concepts related to credit quality include:
- Credit risk: This is the risk that a borrower will fail to make required payments on a loan or debt obligation Factors like the borrower's financial strength, cash flow, leverage, and collateral affect credit risk
- Default risk: This is the risk that a borrower will completely fail to repay their debt obligations Default can occur due to insolvency, illiquidity, or other factors
- Credit ratings: Independent rating agencies evaluate the creditworthiness of borrowers and assign credit ratings that reflect default risk Higher rated borrowers have lower expected default probabilities
- Probability of default (PD): This is the statistical likelihood that a borrower will default on their obligations over a given time horizon PD is a key input in credit risk models
- Loss given default (LGD): This is the percentage of the loan balance that is expected to be lost if the borrower defaults LGD is another important credit risk parameter
Besides, there are some added theories such as:
- Agency Theory: The relationship between lenders and borrowers can be viewed through an agency lens, where misaligned incentives and monitoring challenges can affect credit quality
2.1.2 The concept of lending activities of commercial banks:
Lending is the principal business of commercial banks to generate profits Revenues from lending activities offset deposit costs, reserve expenses, business and management expenses, floating capital costs, tax costs of all kinds and investment risk costs
Revenues from lending activities will be covered for deposit expenses, estimation expenses, business and management expenses, floating capital expenses, investment risk expenses, taxes and other fees The Law on Credit Institutions No
02/1997/QH10 and the Law amending and supplementing a number of articles of the Law on Credit Institutions No 20/2004/QH11 stipulated: Lending is a form of credit whereby the lender assigns or undertakes to deliver to the client an amount of money to be used for a specified purpose within a certain period of time as agreed upon on the principle of repayment of both capital and interest."
2.1.3 Classification of lending activities of commercial banks
- Based on clients: individual clients and SME clients (divided into 2 types: (Coorperate) and small and medium enterprises (SME)
- Based on the loan’s time: short-term loans, medium-term loans and long-term loans
- Based on the level of client’s creditworthiness: loans without collateral and loans with collateral
- Based on the value morphology of credit: lending with money and lending with assets
- Based on the repayment plans: installment loans, lump sum loans and revolving loans
A) The loan must be refunded after a certain period of both capital and interest; B) The loan must be of equal value as a guarantee;
C) Pre-agreed loan (the loan must be used on purpose)
Loan interest rate is the price of the right to use borrowed funds
For commercial banks, interest rates are one of the most closely monitored variables, it is not only a macro-regulatory tool but also a means to help banks compete in the market mechanism Usually bank interest rates are formed on the basis of market interest rates, so they are always fluctuating
In lending activities, interest rates typically have the following limitations:
2.1.6 The role of lending activities of commercial banks:
- The role of lending activities in banking business
The lending activities of commercial banks play a crucial role in the economy Here are some key aspects of commercial banks' lending activities:
Mobilization of deposits: Commercial banks mobilize funds from the public in the form of deposits, which then form the primary source for their lending activities Credit Creation: Banks are able to create credit by lending out a portion of the deposits they hold, while maintaining a fraction of the deposits as reserves This credit creation process expands the money supply in the economy
Lending mechanisms: Banks employ various lending mechanisms such as term loans, overdrafts, cash credits, and discounting of bills to extend credit to individuals, businesses, and other entities
Interest income: The interest earned on loans and advances is a major source of income for commercial banks, which helps them generate profits and maintain their operations
Risk management: Banks carefully assess the creditworthiness of borrowers and monitor the quality of their loan portfolios to manage the risks associated with lending activities, such as default risk and liquidity risk
- The role of lending activities of commercial banks in the economy
Economic Development: Efficient lending by commercial banks facilitates the flow of capital to productive sectors, supporting economic growth and development Monetary policy transmission: The lending activities of banks are influenced by the monetary policy actions of the central bank, which can affect the availability and cost of credit in the economy
Overall, the lending activities of commercial banks are crucial for channeling funds from savers to borrowers, supporting economic activity, and contributing to the overall stability and growth of the financial system
Concepts and characteristics of SMEs
2.2.1 Concepts and characteristics of SMEs
According to the provisions of Decree 91/2001/CP-ND of the Prime Minister issued in 2001, enterprises with less than 300 employees and legal capital of less than
VND 10 billion are considered small and medium-sized enterprises, regardless of small and medium enterprises These definitions are also relative, because whether an enterprise is really small when it has less than 500 employees depends on the field of operation Therefore, we can understand that SMEs operate independently in one business but do not dominate in its field
Typical characteristics of SMEs are enterprises with a compact production and management apparatus that is effective, dynamic and highly flexible SMEs exist and develop in all economic sectors, have low initial investment capital, and the ability to return capital quickly Competition between SMEs is perfect competition
2.2.2 Factors affecting lending activities to SMEs of commercial banks
2.2.2.1 From the banks: Lending policy for SME clients; Lending operations process; Internal control; Staff qualifications; Banking technology level; Credit ratings of small and medium enterprises; Clear lending policy, in accordance with regulations, standards for loan approval, authority and responsibility in decision making In addition, careful analysis of collected information is processed and signs of risk are promptly prevented to warn and handle problem debts
2.2.2.2 From the SMEs: reputation, ethics of borrowers; capacity and business management experience of SME clients; Client’s satisfaction with the bank's lending services such as: the reasonableness of deposit interest rates and lending interest rates, meeting the diverse requirements of clients on credit products, fast and convenient service time
2.2.2.3 Group of macro-environmental factors: economic environment; the political environment; legal environment; competitive environment; natural environment.
The role of improving loan quality for SMEs at commercial banks
In the overall business activities of commercial banks, lending activity always plays an important role, usually accounting for about 2/3 of the total assets and generating the majority of profits for banks
However, in lending activities, the risk factor is always permanent and at a relatively high rate, so at banks, special attention is always paid to control as well as measures to prevent and limit credit risks Ensuring the efficiency of loans benefits both commercial banks, enterprises in particular and the economy in general On the banking side, improving the quality of lending activities can bring some positive results:
- Improving the efficiency of lending activities will contribute to ensuring and increasing profits for banks, because lending is the main business that brings profits to banks
- Improving the efficiency of lending activities means that banks have the ability to collect debts fully and on time As a result, the bank has conditions to expand its ability to provide credit as well as other banking services by creating more capital from increasing capital turnover
- Improving the efficiency of lending activities will help the bank attract more clients by the form and quality of products and services, thereby creating a good image of the bank's logo and reputation, improving the bank's competitiveness in the market
- Improving the efficiency of lending activities will also increase the profitability of banking products and services by reducing delays, reducing operational costs, management costs and damage costs due to failure to recover loans The results obtained from the above improvement of lending efficiency will contribute to improving the bank's financial position, creating strengths for the bank in the competitive process
Thus, improving the efficiency of lending activities is an objective necessity for the existence and long-term development of commercial banks themselves
The need to improve the quality of lending:
In current conditions, improving the quality of lending activities is considered the top goal for many reasons The basic consists of groups of reasons: the interests of banks to the interests of borrowers and the interests of the economy
Improving the quality of the loan is a condition for the bank to increase its capital The bank as a credit intermediary and payment intermediary in the economy, borrowing for lending activities, if the quality of lending activities is good This is reflected in the flexible and effective application of capital mobilization, which will create a diversified and abundant source of capital, as a basis for creating profitable assets In addition, improving the quality of loans and lending effectively and being able to recover capital and interest, the commercial banks will not have to use its fund to compensate for it, which is partly from commercial banks, while most of the economy is retained by banks, and then, the commercial bank has conditions to preserve its capital and assets as well as the assets of the economy at the bank
Furthermore, improving loan quality is a condition for banks to increase profits, especially in the current situation in our country, credit often accounts for the largest proportion in the asset structure of all banks On the other hand, improving loan quality is also a condition for banks to enhance their reputation, maintain solvency and financial stability It is also a condition for the bank to increase its likelihood of extracting risk in accordance with international practice, ensuring the safety of the lending activity, increasing its efficiency
On the other hand, human resources will also be strengthened by improving the quality of the loan Professional qualifications as well as socio-economic knowledge of credit staffs will be enhanced thanks to training policies, the cultivation of experience and passion for the profession
Improving lending quality contributes to the healthy credit relations between banks and enterprises Credit activities carried out, complying with the principles and conditions on the basis that enterprises and banks are conscious of promoting and tightening mutually beneficial relations, will create quality credit, thereby helping enterprises regularly satisfy capital requirements to maintain and expand production and business, enjoy bank utilities and avoid credit discipline that affects business efficiency
On the other hand, improving the quality of the loan is required to enhance the enterpries’s production efficiency In a market economy, the enterprises have extensive connections with many partners, with the most important partner still being the bank The commercial banks are payment intermediaries for enterprises, both performing non-cash payment operations (collection mandates, payment mandates, checks, letters of credit) for businesses to save costs and time, and providing payment tools for enterprises Besides, commercial banks also act as credit intermediaries for enterprises, paying interest on temporarily idle funds of enterprises
Improving the quality of the loan is also a prerequisite to strengthen the accounting mechanism of enterprises in accordance with frequent banking requirements and advice
A bank is a type of enterprise in the economy, a type of currency trading enterprise that creates and trades financial products, is an important stage in the national financial system Therefore, if commercial banks operate effectively, it will be a factor to make the financial sector healthy, contributing to monetary stability and inflation, creating conditions for the State Bank to implement monetary policy well But the performance of commercial banks' business activities is largely determined by credit activities
Therefore, improving credit quality for commercial banks will contribute to stabilizing the financial sector, contributing to creating favorable conditions for economic development
Commercial banks improving credit quality will contribute to strengthening their capital sources to meet this constantly growing capital demand In the opposite case, if credit quality is not guaranteed, the bank will be cautious, not expanding credit, then the credit field will be stalled and from there the economy will also be affected and deteriorated.
RESEARCH METHOD
Research method
The thesis uses traditional research methods: through documents, books and newspapers to study theories of credit and credit quality; Collect secondary information through the source of reports on actual credit work of small and medium enterprise clients at Vietcombank Ba Dinh branch Secondary information analysis combined with systematic approaches, interview methods to be able to collect data in primary form, verify research results and make assessments and summaries
Qualitative method: Survey through exploration, consultation and experience exchange of credit staffs working at Vietcombank- Ba Dinh branch on the causes affecting credit quality of SME clients At the same time, apply the method of interviewing clients according to the available questionnaire to understand their needs and difficulties for business operations and for loans; Conducting thư interviews with branche’s leaders to gather their advice and contributions in improving credit quality And then find suitable solutions in improving SME credit quality at Vietcombank- Ba Dinh branch.
Subjects, characteristics of subjects of interviews, surveys
3.2.1 Subjects of interview and survey:
In this thesis I conducted interviews and surveys through the following subjects:
Interview and Survey for Vietcombank staffs at Vietcombank-Ba Dinh Branch: o Interview the leaders at Vietcombank-Ba Dinh Branch o Interview the managers at level of divisions and professional main staffs
Survey the clients of SMEs, who have a credit relationship with Vietcombank Ba Dinh Branch
Interview enterprises about the judgment, viewpoint and current status of SME’s credit quality at Vietcambank-Ba Dinh Branch
Table 3.1 Subjects of interview and survey
1 SMEs clients having a credit relationship at VCB-Ba Dinh
Source: VCB- Ba Dinh branch’s Report, Dec 2023 3.2.2 Characteristics of the interviewer, survey:
Bank officials were surveyed and interviewed based on position, working time and professional qualifications, specifically:
Table 3.2: A summary of the qualifications and experience of officers working on credit
For SME clients with a credit relationship with the bank surveyed characteristics expressed in terms of type, enterprise size, business areas and duration of credit relationship with VCB-Ba Dinh branch, as shown in table 3.3, 3.4:
Table 3.3: Type and size of SMEs
Source: VCB- Ba Dinh branch’s Report, Dec 2023 Table 3.4: SME’s field of business and duration of credit relationships at the bank
Duration of credit relationships at Vietcombank –Ba Dinh Branch Total
Source: VCB- Ba Dinh branch’s Report, Dec 2023
Collect data and analyze
Primary and secondary data are collected through interview the leaders, managers, staffs at Divisions of Vietcobank-Ba Dinh branch, the enterprises and historical data of the Ba Dinh branch
After collecting, the data is analyzed to apply in the process of assessing and writing this research according to each specific section and chapter At the same time, typing the question templates for face-to-face interviews and interviews via to questionnaire to get the most general view of the problem to be researched Based on the analysis results, propose solutions as well as remedies to bring optimal efficiency in lending activities to small and medium enterprise clients for Vietcombank Ba Dinh branch to have the most general view of the problem to be researched.
The criteria of loan’s quality
Some key criteria would be used to assess the quality of credit for SMEs include:
- Loan approval rate for SME applicants
- Average processing time for SME loan applications
- SME loan portfolio performance metrics:
- Non-performing loan (NPL) ratio
- SME client satisfaction with the loan application and approval process
- Availability and utilization of specialized SME loan products/programs
- Turnaround time for SME loan disbursements
- Incidence of collateral-related issues or disputes
- Breadth of SME client segments served (by industry, size, life cycle stage, etc.)
- Alignment of SME lending practices with regulatory guidelines
Content of questionaire
My thesis uses the direct and indirect interview methods via survey to leaders, managers and, credit staffs, SMEs clients, who have been dealing credit relationships at Vietcombank-Ba Dinh branch The questions are categorized of content in accordance with the research of the topic, revolving around the main content as follows:
3.5.1 For leaders, managers and credit staffs at Vietcombank Ba Dinh Branch: Debrief the following issues:
- How is the quality of the bank's credit management process?
- What is the support and application of IT for credit activity?
- What is the manager's ability for SME’s credit quality?
- What is the role of the manager towards credit staffs?
- What is the manager's support for credit staffs?
- What is the coordination between departments in the bank?
- What are the views on loan’s quality indicators to assess?
- What is the competence of credit staffs to assess?
- How is the coordination of steps in the process of providing loan?
+ Application reception + Appraisal of documents + Disbursement
+ Monitoring after disbursement General assessment of loan’s quality of Vietcombank- Ba Dinh branch on client-related issues:
- What is the client's financial situation?
- What is causes client's bad debts?
- What is the solution to improve loan’s quality?
Details: Refer to " Appendix 1": Questionnaire for interviews with bank leaders, manager and credits staffs on loan quality
3.5.2 For small and medium enterprise clients who are having credit relationships at Vietcombank -Ba Dinh branch
The indirect interview via questionnaire with some of the following issues:
- How is the debt status of enterprise at VCB- Ba Dinh branch?
- What is the client’s view on factors affecting credit quality?
- The status of client’s loan at the bank?
- The client's point of view on factors affecting credit quality?
Financial capacity of the enterprise (Financial autonomy = Equity/Total assets)
Management ability of enterprise’s CEO Economic/industry development situation Suitability of credit products
Interest rate policy Competence level of credit staffs Loan/repayment period
The bank's cooperation with clients + Questions about the credit management situation of the VCB – Ba Dinh Branch:
- How about the process of granting credit at VCB –Ba Dinh branch?
- How long does it take to grant credit?
- What is the advisory ability of the credit staffs?
- What is the Bank's support to clients in difficult situation?
- What is the relationship of the credit officer to the client?
+ Questions about SME’s business results:
- What is the client's profitability?
- Ratio of bank debts to total liabilities?
Details: Refer to "Appendix 2": Client’s survey.
Interview schedule
The interview was divided into three steps with different time frames as following:
Schedule of interview for each subject at Vietcombank – Ba Dinh branch with the appropriate time
Time and duration Applicability Result
Branche’s leaders Schedule an interview
Number of actual Leaders: 3 people
Interview the clients through questionaire and collecting survey paper for SMEs clients with a credit relationship (survey form filling)
Survey with all 25 SMEs clients Collected 23 questionaires (92%) with full information
Interview the leaders and credit staffs of Division of credit (face-to-face communication and survey form filling)
Interviewing and filling out the form for 21 people obtained Collected 18 questionaires with full information.
STATUS OF LENDING QUALITY FOR SMALL AND MEDIUM-
Overview of Vietcombank
The former Bank for Foreign Trade of Vietnam, now known as Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was established and officially put into operation on 01/04/1963 with the predecessor organization of the Central Foreign Exchange Management Department (under the State Bank of Vietnam)
As the first state commercial bank chosen by the government to conduct a privatized pilot, Vietcombank officially operated as a commercial equity bank on September 02, 06/2008, after successfully implementing the privatization plan through the initial public offering On 30/6/2020, Vietcombank (stock code VCB) was officially listed at the Ho Chi Minh Stock Exchange
Over the course of 60 years of construction and maturity, Vietcombank has made important contributions to the stability and development of the country's economy, leveraging the role of a major foreign bank, effectively serves domestic economic development, while also exerting significant influence on the regional and global financial communities
From a business bank that serves the foreign economy, Vietcombank today has become a multi-disciplinary, multi-disciplinary bank that provides clients with a full range of financial services in the international trade sector; in traditional activities such as capital trading, capital raising, credit, project funding as well as modern banking services: foreign currency trading and derivatives, card services, electronic banking Having a modern banking infrastructure with the successful conversion of Core Banking in early 2020, Vietcombank has many advantages in applying advanced technology to automated processing of banking services, developing electronic banking products and services is based on a high-tech platform Digital trading spaces and multi-facility digital banking services provide to individual, business clients such as: VCB Digibank, VCB - Ib@nking, VCB
CashUp, VCB DigiBiz has been, and will continue to attract large numbers of clients with convenience, fast, secure, efficient, creating a habit of making cash-free payments to a large number of clients
4.1.2 Overview of Vietcombank-Ba Dinh Branch:
Vietcombank-Ba Dinh branch is one of the 121 branches of the Vietcomabank system in Vietnam, founded in 2004, is now the leading branch of the Vietcombank system as well as in the capital with outstanding business performance By the end of June 2022, the branch's total capital mobilization had reached VND 5 18,803 billion, with credit reaching VND 20,953 billion Vietcombank Ba Dinh has 04 transaction offices operating under the head of quarter
Vietcombank- Ba Dinh branch located at: 72 Tran Hung Dao, Hoan Kiem, Hanoi, it is equipped with facilities, the construction architecture meets modern banking standards, accentuated by a new trading space designed with more personal counters to meet clients' needs consulted deeper in terms of financial services, banking, securities, insurance Especially the Digital Banking Chain experience provides clients with a variety of unique experiences, from digital banking for institutional clients with VCB Digibiz digital solution kit and Vietcombank business card products Visa Business, to the latest utilities deployed on VCB Digibank include: Account opening does not require a bank; free to select account number by phone number; issue virtual card (non-physical card); cash withdrawal at ATM without a card In particular, the latest digital utility for individual clients, a chip- mounted Citizen identity withdrawal (CCCD) service has also been deployed by Vietcombank at the Ba Dinh Branch With wisdom and heart, the generation of Vietcombank staff the Ba Dinh branch has been, and will always work to contribute to the development of Vietcombank, sustainable, as of 2030, it is 1 one of the 200 largest banking companies in the world, one of the 700 largest global listed businesses, contribute to Vietnam's sustainable development
4.1.3 Characteristics and operating market of Vietcombank Ba Dinh branch: 4.1.3.1 Business location:
From its inception, Vietcombank was based in 521 Kim Ma, Ngoc Khanh Ward, Ba Dinh, Hanoi In July 2022, Vietcombank moved to its new headquarters at 72–6 Tran Hongshan, which is considered a densely populated area, close to the business district with many conditions favorable for the development of banking and financial activities
Source: Vietcombank- Ba Dinh Branch
Since 2008, according to the project of transforming the organizational model of TA2 (according to the diagram above), the departments operating at Vietcombank Ba Dinh branch have been separated into departments under the direct management of the director and deputy directors of branches according to specific functions and tasks
4.1.3.3 Market share of VCB –Ba Dinh branch:
SME clients of Vietcombank Ba Dinh branch are mainly enterprises operating in the metallurgical industry, manufacturing machinery equipment, chemicals, building materials, food processing, wood processing, pottery, textile industry, leather, garment and dyeing
In recent years, the branch has expanded its clients who are enterprises investing in manufacturing products for healthcare, logistics, transportation, and warehousing However, the largest proportion of outstanding loans is still concentrated in small and medium-sized enterprises operating in the field of logistics, transportation, and warehousing
DIVISION OF SME CLIENTS RELATION
Office of Personal and Administraion Affairs
Office of Finance and Accounting
Office of General Plainning Office of IT
Business activities and current status of SMEs loan quality at Vietcombank -Ba
Despite the impact of the COVID 19 pandemic, the branch's capital raising still has grown The growth rate did not have a spike, only a slight increase and the timely implementation of the capital mobilization plan In 2021 it increased by 16.5%, in 2023 it increased by 14.1% compared to the previous year Where:
Perpetual capital mobilization: mainly from current deposit accounts of organizations and individuals (of main organizations), which is a source of money used for frequent use, abnormal fluctuations
Term of capital mobilization: is the source of savings of the population, temporary idle money of organizations whose projects are in the investment stage but have not yet been used Deposits with maturities are concentrated for less than
12 months due to abnormal fluctuations in financial and gold markets at home and abroad recently Account holders only focus on short-term deposits to expect rising interest rates to redeposit or in the event of a reduction to divert savings in the form of gold reserves
Table 4.1 Data reflecting the capital mobilization in the period
II Term 641.113 727.880 86.767 13.5 852.090 124.210 17.1 II.1 12 months 22.135 24.320 2.185 9.9 23.750 570/P1 -2.3
Source: Financial Report Vietcombank - Ba Dinh Branch 2021-2023
Outstanding credit has a growth rate higher than the growth rate of capital mobilization Vietcombank Ba Dinh branch had to borrow additional sources from Vietcombank Head Office to finance investment capital in the area 2023 has been on a downward trend compared to 2022 The main reason is still the characteristics of the area of operation is mountainous and highland provinces, the economy and life of the people are very difficult, the per capita income is low, the accumulation and financial savings are not much, while the need for capital for infrastructure development, for investment in projects, production and business plans for economic development and high demand for loans for consumption
Outstanding loans to enterprises accounted for a high proportion, focusing mainly on loans for metallurgical processing, manufacturing machinery equipment, chemicals, construction materials, food processing with medium and long-term outstanding loans Due in part to Vietcombank's history, the tradition of Vietcombank's operation Previously, the main function was to provide loans, allocation, payment, investment of credit capital according to the state plan for basic tasks
However, one of the limitations of Vietcombank Ba Dinh branch is that lending focuses on a few areas, data in the table was evidence for it
Table 4.2: Data on SME’s credit balance by business sectors
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
The proportion of medium- and long-term loans is too high, leading to great potential risks in portfolio management, detailed in the table 4.3
Table 4.3: Data on SME’s credit balance based on loan’s term
Business number for loan Business
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
4.2.2.2 Letter of Credit and Guarantees activities:
LC issuance and guarantee activities at Vietcombank-Ba Dinh branch are associated with the credit structure (in the field of investment), clients who have been dealing in loan relationships:
LC issued for the purpose of importing equipment for hydropower plants financed by Vietcombank Ba Dinh branch Therefore, LC issuance sales from 2021 to 2023 fluctuated unevenly, depending on the recovery of each business after the
For guarantee activities: mainly guarantees for client’s operating in the field of manufacturing products for the medical industry: bid guarantee, contract performance guarantee, advance refund guarantee, warranty guarantee Guarantee payment to food processing enterprises to purchase raw materials for the production process
Guarantee activities depend on economic and social factors, especially public expenditure and investment of the Government In 2021, guarantees decreased markedly due to the struggling economy, rising interest rates, and inflation The government has taken many measures to curb inflation including reducing public investment In 2023, with the economy gradually stabilizing, production activities of enterprises are allocated capital, continue to be implemented, guarantee activities have developed again, detailed according to the tables 4.4, and table 4.5
Table 4.4: Data on SME’s guarantee balance, LC in the period 2021-2023
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
Table 4.5: Data on SME’s revenue from guarantees, LC in the period
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
+ Current status of SME’s loan according to collaterals:
The ratio of outstanding loans with collateral of enterprises at Vietcombank Ba Dinh branch is not high (In 2021, 2022, 2023, it is 74%, 69%, 70% respectively): because operating enterprises often have large demand and loan balances, the fixed asset value of enterprises used to ensure limited loans equity mainly to supplement working capital On the basis of the reputation of the enterprise in the process of credit relations, the bank shall consider lending without collateral in accordance with regulations on Vietcombank's client’s policy
Table 4.6: Situation of outstanding debt, guarantees and collateral assets in the period of 2021-2023
V Ratio of outstanding loans and guarantees with collateral (%) 74 69 70
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
+ Credit market share in the area:
In Hanoi, the level of competition between banks is very fierce Some foreign banks have also expanded their scope of operations, established branches Therefore, the competition becomes fierce, the attraction of clients between banks often occurs In 2022, the market shares of Vietcombank Ba Dinh branch decreased, by 2023 it has been partially restored thanks to specific strengths
Table 4.7 Credit market share in the period 2021-2023
Source: National Bank Statistical Report 2021-2023 4.2.2.3 Relationship between capital mobilization and loan capital
Vietcombank- Ba Dinh branch had to borrow additional sources from Vietcombank Head Office to finance investment capital in the area due to the capital mobilization in the area was low compared to the outstanding loans The proportion of credit financed by self-mobilized capital in 2021, 2022, 2023 is: 61%, 57%, 56%, respectively
Table 4.8: The relationship between capital mobilization activity and lending in the period 2021-2023
4 The proportion of credit financed by self-mobilized capital (%)
56 Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023 4.2.2.4 Income from credit activities:
Interest rates from lending activities account for a large proportion of
Vietcombank-Ba Dinh branch’s total income in 2021: 95%; 2022: 94.9% and 2023-96%, respectively) That proves that the Bank's business performance depends too much on lending Other service activities account for a low proportion, especially some activities affected by credit activities such as guarantee activities, payment services
Table 4.9: Revenue structure in the period 2020-2022
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
Data reflecting credit quality at Vietcombank-Ba Dinh branch shows that group 1 still accounts for a large proportion but tends to decrease (in 2021, 2022,
2023, 95.82%; 90.46% and 88.35%, respectively) The proportion of group 3 to group 5 debts (bad debts) is not high but tends to increase gradually (in 2021, 2022,
2023 is 1.88%; 3.99% and 4.03%, respectively) and shows signs of latency because group 2 debt also tends to increase over the years (2021, 2022, 2023 is 2.31%; 5.55% and 7.62%, respectively)
Table 4.10 The data reflecting the debt structure for the period 2021-2023
Source: Financial Report -Vietcombank Ba Dinh branch 2021-2023
Assessing the SME’s loan’s quality at Vietcombank –Ba Dinh Branch in the
Under the impacts of the COVID 19 pandemic, business activities of Vietcombank -
Ba Dinh branch were significantly affected, but the staff of the branch also achieved certain results in terms of scale, structure, income , in particular:
- Credit scale: in the difficult context of the economy, however, the credit scale has a relatively stable growth (In 2022: 23.3%; In 2023: 18% meet the majority of credit capital needs in the area The credit market share is well maintained in the context that non-state joint-stock commercial banks are actively expanding their networks, having many policies to attract and attract clients to develop in the area of business of Vietcombank-Ba Dinh branch
Credit structure: there has been a positive change trend – the proportion of loans for the production of construction materials decreased, other fields of food processing, production of products for the health sector, trade, tends to increase Contributing to risk dispersion, gradually reducing the proportion of outstanding loans of high- risk sectors (production of construction materials)
Ba Dinh Branch’s leaders have been paying the special attention to SME clients (expecially SMEs) due to the branch’s interst from credit activities always accounts for a large proportion of its total income, so it is necessary to approach SME clients and in order to serve and guide them in developing the credit relations with VCB-
Ba Dinh branch At the same time, the internal inspection of the branch is also inspected and controlled to avoid errors and promptly adjust and detect potential risks early to suggest the solutions
The credit analysis process is also more strictly regulated: Risk assessment, client’s classification based on the internal credit rating system (standardized according to international standards) Credit stages are separated from receiving client’s profile, proposals, risk appraisal, disbursement and control the client’s credit after disbursement to prevent risks Besides, it ensures that mutual control between stages and divisions to limit unnecessary errors
The encouragement for credit staffs in the performance of their duties as well as propaganda about obligations and powers through the contest to learn the Code of Professional Ethics at Vietcombank Ba Dinh branch is focused on The branch also always upholds the professional ethics of credit staffs in their duties This is also the criterion to evaluate and remind to everyone in the branch's internal training program every quarter
Through collecting data on credit activities, the financial statements of Vietcombank-Ba Dinh branch show that there are still the following limitations: The number of clients is still small and not yet diverse in business lines, client structure and credit structure are still unbalanced:
Clients operating in the field of construction materials production have outstanding debt accounting for a high proportion of the total outstanding debt of SME clients (792/1,149 billion VND in 2021; 812/1,497 billion VND in 2022 and 812/1,765 billion VND year 2023) Outstanding loans to small and medium enterprises account for a low proportion of total loans Medium and long-term loan terms account for a high proportion while short-term outstanding debt accounts for too small a proportion of the total outstanding debt (from 2021 to 2023 were 33%, 32% and 32%)
Loans can be cover the risky such as SMEs loans for construction material production due to the general economic impact after the COVID 19 pandemic This has affected the abilcity to circulate capital In the debt structure, the bad debt situation has tended to increase (the proportion increases gradually over the years: from 2021 to 2023 were 1.88%, 3.99% and 4.04%)
The procces of loan approval and disbursement have taken a long time with many stages and control divisions These caused to credit processing time have extended and clients often complained In particular, divisions did not have direct contact with clients, and here staffs were not flexible in applying processes, regulations and sanctions Basically, the branch's human resources are still limited compared to the requirements in fact The ability of staffs to access the market or their initiative and agility in doing business of funtionality have revealed many weaknesses.
Analyzing data through a survey of loan quality for SME clients at
Analyzing data based on the content and information have drawn from surveys and interviews with branche’s leaders, credit staffs and SME clients will identify factors affecting loan quality for SMEs
• Conduct in-depth interviews with credit staff at the branch to understand their perspectives on the challenges and drivers of SME loan quality
• Gather insights on the current lending policies, procedures, and practices from an internal viewpoint
• Identify potential solutions and recommendations from the staff's domain expertise
• Interview SME clients to understand their financing needs, pain points, and satisfaction with the bank's lending services
• Gather feedback on the client experience throughout the loan application and management process
• Uncover unmet needs and areas for improvement from the customer's perspective
Interviews with Branch Managers/Executives:
• Consult with lending division heads and branch managers to get their strategic inputs
• Understand the bank's overall SME lending objectives, policies, and roadmap
• Obtain insights on potential organizational, operational, or technological changes to enhance loan quality
Through surveys and interviews with leaders and credit staffs to evaluate credit qualityz specifically as following:
Table 4.11: The results of surveys and interviews the credit staffs
Quantitative assessment Opinion of Branch’s leaders
Opinion of Division’s manager's & credit staffs
Comments on credit quality assessment indicators
Completely basic, reflecting the current state of loan quality
However, the important thing is the reliability and how to get data to calculate according to those credit criteria
The criterias fully and closely reflect loan quality But it requires information and data to be transparent and reliable
The competency of credit staff on credit quality
People are the core of problems For credit activities, credit staffs are the first people who directly process documents and monitor clients
Therefore, the ability of credit staffs has a decisive influence on loan quality Promptly detecting signs of risk, proposing suitable measures & behaviors contribute to improve
The competency of credit staff has a direct impact on loan quality due to credit staffs are the ones who directly receive and evaluate client records, markets, and social relationships of previous clients during the process loan application
Credit staff is the person who directly supervises and grasps
4.57 loan quality for SME clients at the branch the situation of production and business activities of clients
The impact of the application receiving stage on credit quality
Application is the initial step in the credit relationship process, influencing throughout the process Guidance and receipt of complete documents, ensuring legality will contribute to reducing the volume and processing time of the next steps
This is the first and very important appraisal stage, which must ensure completeness and accuracy according to regulations and in accordance with the field and business line And it is the basis for taking the next steps
The importance of credit appraisal to the quality of lending activities
This is a very important step, evaluating and analyzing the completeness and legality of documents, clients, and projects
Calculate efficiency and ability to repay loans and projects It is the basis and basis
Credit appraisal is very important, it directly affects the credit quality of the bank During the appraisal process, the factors must be carefully evaluated and fully evaluated, which is the basis for making the bank's
4.05 for making decisions to lend or not lend
Good appraisal contributes to determining credit quality, minimizing risks, improving the bank's business efficiency decisions (to lend or not) If the credit appraisal is good, the credit quality is basically good, but if the appraisal is poor, it does not evaluate the surrounding factors that will affect the credit quality after lending
Impact of disbursement on loan quality
This is the specific step, detailing the conditions and tasks after appraisal and making a loan decision It is an operational stage in the credit granting process This stage must control operational risks (risks caused by credit staffs intentionally making mistakes)
Disbursement of loan based on the decision to grant the credit to clients Ii is the stage of gathering, checking documents, and comparing conditions according to the credit grant decision The disbursement stage is well controlled, contributing to improving credit quality at the bank
Impact of supervision after disbursement on loan quality
This is a very important step, having a great impact on loan quality It is the process of monitoring
After the disbursement step, the bank checks whether the client uses the loan money client’s business, reviewing and closely monitoring client’s performance and the effectiveness of loaned capital Early detect signs of risk, thereby proposing preventive measures and solutions to recover loan capital at risk of capital loss as committed or not
If done well, disbursed loan will be recovered quickly and the possibility of overdue debt and bad debt will be prevented In addition, post- disbursement monitoring helps businesses and bank clients to be honest in using loan money for the right purpose to serve business activities Directly affects loan quality
General assessment of the current loan quality for SMEs of Vietcombank
There are still many issues to be concerned about, high bad debt ratio, large risk provisions, reducing business efficiency
Bad debt shows signs of increasing, some debts still have potential risks, and are likely to be moved to a debt group with higher risk
There are still many potential risks due to the unreasonable credit structure, the proportion of medium and long-term credit is too high, and the client base is less concentrated on a few clients The client's main field of activity is hydroelectric construction and
Outstanding debt is also concentrated on a group of clients in the government's priority investment areas investment Clients have not been diversified and developed, so risks have not been dispersed Client management by credit staffss is not really complete and has many limitations
Detailed results according to Appendix 3: Summary table of interview results, bank credit officer survey by importance Score criteria and Appendix 4: Summary of opinions from leaders and credit staff, showing:
Credit officer competencies have a number of decisive impacts on credit quality: People are at the center of everything, in credit work, the credit officer is the first, the person who processes records directly, tracks the client Meanwhile, 100 percent of the staff employed in the new branch were undergraduate and had less than
3 years of service at a large share (54.2%) The number of credit staffs with a working period of 5 years or more is mostly department leaders (25%) (Table 3.2)
According to a general assessment by leaders and credit staffs, the current credit quality of the Ba Dinh Branch has many issues of concern, high debt rates, high risk redundancy, diminish business performance Bad debts show signs of increasing, some debts are potentially risky, potentially moving down to a higher risk debt group The credit structure is yet to be rational, the high long-term medium credit density, and the focus is on a group of clients in the field of metallurgy and contruction material manufacturing
4.4.2 Regarding the bank's credit management:
4.4.2.1 Review of leaders and credit Staff:
After the survey, interview with the leaders, managers and credit staffs, the results show the following table:
Table 4.12: Study results from interview the leaders, managers and credit staffs
Quantitative assessment Branch’s leader’s opinion
Manager’s and credit stafs’s opinion
The quality of credit management process
It's a full, tight, clear process
There is a specific process, separating the steps in the lending process
It support, application to credit activities
The role of IT is very important for management
However, it has not contributed much to the management of the branch
Currently, the management is dependent on annual reports from divisions
It's suitable for operational activities, not for management
Database system for credit management
Abundant variety in primary form, difficult to exploit and use
Enough push in rough form The use of Credit Management is also difficult due to details
There is software and the specific regulations on updating client’s information
However, in the process of operation, it is not incomplete in filling, there are no uniform regulations in the way of declaring client’s name
Updated but not detailed (legal profile), difficult to apply Updates when clients change information are not timely
There is no credit analysis software, officers also have to analyze by themselves according to subjective opinions
There is no credit analysis software (there is new internal credit scoring and rating software) Self- implementation officers increase the workload, lack of criteria in the evaluation process
Has been constructed, updated daily, full of industry documents, information, and be updated in full and timely text 3.1 related business activities
Manager's competency for credit quality
The competence of the manager has a role, greatly affecting credit quality At the branch are all qualified, basic trained and professionally competent
The competence of the manager is the fundamental factor affecting credit quality At the branch, the manager has competence and qualifications in credit work
The role of the manager to the employee
The role of a manager is a guider, and trainer for employees to perform their task well
The role of the manager is directly related to the work efficiency, methods and working style of the staff At the branch, the manager performed his well role
Necessary for dismantling, to address the employee's work bottlenecks At the manager's branch often raise, close to the employee's
With the aim of addressing scientific work, being rational according to plan, business experience, and life The manager at the branch is very
3.57 work, there are promptly directed and instructed in the course of the officer's job history interested, supporting the employee in the job
Although there have been specific regulations on specific functions and tasks of each division, it is necessary for credit activities, the coordination has not been smooth causing many problems and controversies
Handling work is still not flexible, affecting the progress of processing documents for client
A good combination will ensure that processing time is minimized, better meeting client’s needs The rooms, teams at the dominant branch, work together at a normal level, not really close
Detailed results according to Appendix 3: Summary table of interview results, bank credit officer survey by perspective scoring criteria, and Appendix 4:
A summary of opinions from leaders and credit staff Through the results of the interview, the content needs to be addressed is:
- It supports the application to credit: it has not made much contribution to management of the board of directors and general credit management
- Database system: using the primary data for credit management was also difficult due to undetailed, specific circumstances
Factors affecting the quality of loans to SME client’s
4.5.1 The credit managers and staff’s reviews:
After the interview, the survey of leaders and credit staffs at Vietcombank-Ba Dinh branch showed that there are many factors that play an important role in affecting credit quality (Refer the Appendix 3: Summary of interview results, survey of credit staffs of the bank according to importance scoring criteria), focused on:
The quality of the credit process
Manager's competence for credit quality
The role of manager in guiding to staffs
Coordination between divisions at the branch
The quality of credit staffs affecting to the credit quality
The appraisal of credit documents affects credit quality
The monitoring after disbursing affects credit quality
The satisfaction of clients who have been dealing the credit at Vietcombank-Ba Dinh branch
Financial situation of clients who have been dealing the credit at Vietcombank-Ba Dinh branch
Solutions/measures to improve credit quality at Vietcombank-Ba Dinh branch
According to clients comments of factors affecting credit quality after being quantified from 1 to 5 equivalent to very unimportant to very important, showing: Assessements by clients for the factors affecting credit quality after having been quantized between 1 and 5 (from “strong unimportant” to “strong important” level The contents such as: Competence level of credit staffs and collaborating of banks with SME clients The averaged score from clients are 4-5 It is equivalent to the
“important” to “strong important” (refer Appendix 5: Summary of client survey results) Thus, clients have appreciated the influence of collaborating of banks with SME clients and the qualification of credit staffs at high level Comparing with the interview results at VCB-Ba Dinh branch found that the qualifications of credit staffs in advising and processing are very necessary and important
In difficult times of enterprises, the close collaboration of the bank to jointly come up with measures and solutions to remove difficulties for enterprises This is necessary factor also It also affirms that businesses need capital financing from banks to maintain business operations
Chapter V SOLUTIONS TO IMPROVE THE LOAN QUALITY FOR SMEs AT
Solutions to improve the loan quality for SMEs at Vietcombank-Ba Dinh
Based on the analysis of survey results of the branch’s leaders, managers, credit staffs and clients at Vietcombank-Ba Dinh branch, the research’s result has shown that there are still many problems to be solved These are solutions to improve efficiency as well as the quality of credit activities including:
- Ability to meet the demand for SME loans at the Vietcombank - Ba Dinh branch:
- The branch should have a good understanding of the local SME market and the typical loan needs They should be able to assess credit risk accurately and make timely lending decisions
- The branch's lending policies, procedures, and approval processes should be efficient and customer-friendly to meet SME demands in a responsive manner
- The branch should have sufficient lending capital allocation and be empowered to make loan decisions within their authority limits
- The branch staff should be well-trained on SME lending and have the necessary skills to evaluate applications, structure appropriate loan products, and provide advisory services
• External perspective from SME Clients:
- Clients will assess the branch's physical infrastructure, equipment, technology, and overall presentation/ambiance
- Key factors could include availability of private meeting rooms, self- service kiosks, adequate seating, access to WiFi, etc
- Clients will expect a professional, modern, and welcoming branch environment that facilitates their banking interactions
- Evaluation of service skills and attitude at the Vietcombank - Ba Dinh branch:
- Clients will assess the branch staff's product knowledge, responsiveness, empathy, and overall customer service orientation
- Key factors could include staff's ability to understand client needs, provide clear and helpful guidance, process requests efficiently, and demonstrate a positive, solution-oriented attitude
- Clients will expect a high level of personalized attention and an overall pleasant banking experience
Two group of solutions I propose to improve the credit quality at Vietcombank- Ba Dinh branch as follows: The first group of solutions is related to credit quality; And the second group of solutions is related to credit management
5.1.1 Group of solutions for loan quality:
5.1.1.1 Training and encouraging self-study to improve the quality of human resources:
Vietcombank Ba Dinh branch should to organize its own training or request the Head Quater to invite domestic and foreign banking and finance experts for specific training in the following areas:
Training to improve the qualifications and operational skills of staff to declare and update client’s information to ensure that client’s information is updated in detail (about legal records, identity ), easy to exploit, apply, timely when client s change information
Training skills in appraisal of client profiles, financial health, loan plans/investment projects, collateral (legal, transferable) are issues that directly affect the credit quality of the bank as well as ensure the accurate, and assess the financial health of clients who are able to participate in investment projects, the level of risk to propose appropriate risk prevention solutions to minimize possible risks, contributing to improving credit quality after lending
Training for credit staffs the communication skills, consultancy, negotiation skills, with colleagues in order to enhance the ability to advise clients on credit profiles, effectiveness of investment plans/projects, capital source plans and capital use, financial structure of enterprises Increase the ability to negotiate reciprocal terms between banks and clients
Strengthens coordination, ability to exchange harmonious relationships among different departments at the bank, increases job efficiency, reduces processing time, and rotates records across departments Aim for collective goals, shorten credit record processing time, satisfy and best meet time needs for clients
Increase visibility, inference across actual work and situations and market conditions to detect potential risk indicators early, suggest preventive solutions, the appropriate conduct of the credit officer contributes to the quality of credit at the branch
Promotes motivational mechanisms, mechanisms to encourage self-study banking staffs, research to improve their professional proficiency (university and beyond), namely:
Facilitate, streamline work and set up time (during contract work) if the employee has a need to study for self-study, study in-class, in-depth courses
Partially assisting learning funding reduces financial pressure for staffs (levels may be: 30, 50, 70%) when they self-participate in advanced learning courses
In a timely manner, commend in many forms (mental and physical) to self- study self-study personnel that enhance their proficiency, especially those who have good academic performance
5.1.1.2 Arranging the branch's human resources for credit activities appropriately:
Arrange at least 50% of staff with more than 3 years of experience (excluding staff working in department management) The reason is that during the first 3 years of work (experience less than 3 years) is the period when staff are learning, accumulating practical experience, understanding and perfecting basic training knowledge in schools
Employers of 3 years or more are staffs with hands-on experience combined with trained knowledge, are staffs of sufficient maturity and have the ability and independent self-employment to perform well At the same time, these staffs, in addition to their assigned duties, are responsible for helping, training for inexperienced staffs (less than 3 years)
5.1.1.3 Promoting the inspection, supervision, loans and quality in using the bank’s capital and collaterals:
Regularly updating client’s' business activities and monitoring the use of loan money is a measure to evaluate the effectiveness of the loan based on information about the industry and market fluctuations for timely risk warning, specific quantifying losses before occuring the risks
The client’s financial situation, production, human resource in business activities should to be analyzed regularly to propose measures in management Besides, the branch may provide advice on finances and plans/projects for client, supporting enterprise’s owners make feasible decisions that contribute to improving the financial efficiency This allows ensuring revenue and improving the capacity to repay the loans for bank On the other hand, it helps credit staffs in updating the information on market, clients and loan information to promptly handle arising the disadvantage situations to the bank
Combining the checking client’’s collateral assets on the condition of the collateral assets (in the original state, or with new additional investments ) and other documents of the collateral assets such as periodic inspection, property insurance
5.1.2 Group of solutions for credit management:
5.1.2.1 Developing the specialized software to serve credit management First of all, it is necessary to develop and apply a software for credit analysis that includes financial/ non-financial indicators as well as indicators to calculate the effectiveness of loan options/projects in order to:
+ Increasing accuracy and objectivity in analyzing and evaluating clients' credit profile on finance and effectiveness of loan plans/projects
+ Reducing the amount of manual work of credit staffs, thereby shortening application processing time
The orientation and goals for improving loan quality of Vietcombank Ba Dinh
Ba Dinh Branch in the coming period
Sticking to the strategic direction, industry policies, policies, deep scrutiny of the situation, socio-economic task and leadership, direction of the superior bank, the direction of Vietcombank's operations in the coming years is: Closely follow the strategic orientation, mechanisms and policies of the industry, deeply grasp the situation, socio-economic development tasks and the leadership and direction of the superior bank, orient Vietcombank's operations Ba Dinh branches in the coming years are:
Completing the branch's operating model according to the orientation and goal of the Head Quater to improve capacity and management role for monetary, credit, payment and banking activities Proactively advise and propose to the mother bank and local authorities in implementing and organizing the successful implementation of mechanisms and professional policies of the industry, directives and resolutions of the Party and State on banking activities
Appreciating the staffs, practicing in the good way for arrangement for staffs Implementing step by step distribution according to labor Timely reward the staffs who complete tasks well This will stimulate staff's enthusiasm and sense of responsibility Fomulating a team of bank staff with sufficient capacity and quality to meet the requirements and tasks in the new situation, preparing for regional and world economic integration
Be proactive and creative in operating and operate with a focus on the goals of the business plan On the other hand, profound and comprehensive management is based on thoroughly understanding the branch's operating situation, client developments, and regularly asking for guidance from superior banks on difficulties and problems to ensure that client’s legitimate needs are met
Continuing to implement the goal of modernizing banking technology, the
TA management system transformation project phase 2 - regarding the organizational model Implement the policy of innovating and perfecting professional processes, ensuring convenience, speed, and safety Effectively apply new advances in science and technology, paying special attention to software technology in the fields of payment, management, administration, and operations
Continueing to maintain sustainable development; step by step adapting our operating structure to international standards and practices in accordance with common roadmap; Promote capital mobilization combined with the support of the entire system to gradually build a stable capital base, meet credit investment requirements and balance payments Credit growth is associated with safety, efficiency and risk control; Strongly develop banking services, especially those that are the potential strengths of the branch to gradually improve the income structure; Implementing the risk provisions well to offset risks, improve business efficiency, ensure income, and stabilize life for staffs at Vietcombank -Ba Dinh branch
5.2.2 Orientations for improving credit quality in the coming period:
In order to achieve the results according to the general orientation and goal of Vietcombank- Ba Dinh branch's business activities, the credit activities should to achieve certain goals according to the following directions:
Enhancing SME Credit Scoring Models: Develop more sophisticated credit assessment models that incorporate both quantitative and qualitative factors specific to SMEs
Strengthen Relationship Banking: Invest in building deeper relationships with SME clients through dedicated relationship managers, advisory services, and tailored product offerings.
Promoting the principle of credit growth in accordance with the growth rate of capital mobilization to ensure gradually increasing the ability to self-balance loan capital, gradually reducing capital dependence on Vietcombank Head Quater
Proactively analyzing, assessing scale, structure and credit efficiency for major economic industries: Metallurgy, machine building, chemicals, etc., economic components to adjust to the business of Vietcombank- Ba Dinh Branch
Mid- term, long-term lending must ensure a limit on weight on total debt balances in accordance with Vietcombbank's regulation and administration and complying with safety ratios in credit activities according to regulations of the State Bank and Vietcombank
The bank's lending activity has an important role and is closely linked to social economic development, having mutual impact and motivation for each other to grow Bank credit is an important tool, economic leverage to stimulate economic growth and development
In the current Vietnamese banking system, credit is generally a major source of income, which accounts for a large share of the bank's total revenue It is also a springboard to drive other bank activities to grow in parallel such as: guarantee services, payment services etc
In particular, at Vietcombank the Ba Branch has a high-density SME client debt ratio that is critical to the Bank's business performance Meanwhile, at Vietcombank the three Credit strikes branch still has many inadequacies, credit quality tends to decline, bad debt and debt asymptotes with bad debt increasing over time
With this research subject, the author has surveyed the reality of the leadership, Department regulators and credit staff and surveys from clients who are on the side of credit relationship at Vietcombank Ba Dinh Branch, conduct analysis and review to make statements about their existence, restrictions Accordingly, propose solutions that apply to implementation in order to contribute to the quality of SME’s credit at Vietcombank Ba Dinh Branch I am looking forward to the advice of teachers in the international school - the National University, to contribute to the study being perfected and practical./
1 PGS.TS Nguyễn Văn Tiến, 2010, Quản trị rủi ro kinh doanh ngân hàng, Nhà xuất bản thống kê, Hà Nội, 703 trang;
2 PGS.TS Nguyễn Văn Tiến, PGS.TS Nguyễn Mạnh Hùng, 2017, Cẩm nang quản trị rủi ro trong kinh doanh ngân hàng;
3 Thông tư số 06/2023/TT-NHNN sửa đổi Thông tư 39/2026/TT-NHNN về việc cho vay của tổ chức tín dụng của Thống đốc Ngân hàng nhà nước;
4 Thông tư 11/2021/TT-NHNN về phân loại tài sản có và trích lập dự phòng rủi ro, sử dụng dự phòng để xử lý rủi ro trong hoạt động của các tổ chức tín, chi nhánh ngân hàng nước ngoài;
6 Vietcombank, 2020, Báo cáo thống kê
7 Vietcombank, 2021, Báo cáo thống kê
8 Vietcombank, 2022, Báo cáo thống kê
9 Vietcombank – Chi nhánh Ba Đình, 2020, Báo cáo tài chinh
10 Vietcombank – Chi nhánh Ba Đình, 2021, Báo cáo tài chính
11 Vietcombank – Chi nhánh Ba Đình, 2022, Báo cáo tài chính
APPENDICES APPENDIX 1 QUESTIONNAIRE For the bank’s employee LOAN QUALITY AND THE FACTORS IMPACTING ON
I PERSONAL INFORMATION THE INTERVIEWEE a Full Name:
……… ……… d Experience in credit work (under 3 years; from 3-5 years; 5-10 years; over 10 years): e Qualification:
The questions for credit management activities
- Please let us your opinion: Is the bank's credit management process good or not?
- Could you please evaluate the support and application of IT for credit activities?
- How’s the client information system?
- Could you please assess the manager's competence for SME’s credit quality?
- Could you please tell us about the manager's role towards employees?
- Could you please tell us about the manager's support for employees?
- Could you please tell us about the coordination between division at the branch?
The questions for credit quality
- Would you like to give your opinion on the credit quality assessment criteria?
- Could you please assess the competence of the credit officer?
- Could you please evaluate the application process?
- Could you please evaluate the credit appraisal step?
- Could you please evaluate the disbursement?
- Could you please evaluate the monitoring step after disbursement?
- Could you please assess the current credit quality of Vietcomban Ba Dinh branch?
- Could you please tell us your satisfaction with the credit activities at Vietcombank Ba Dinh branch?
- Would you please comment on the enterprise's financial situation?
- Could you please tell us what causes bad debts of enterprise?
- Could you please offer some solutions to improve credit quality?
APPENDIX 2 For clients I/ Client’s information
❑ Metallurgical processing ❑ Machinery equipment ❑ Contruction material ❑ Chemicals ❑ Food processing
II/ The client’s history for credit activities
1 Time for a credit relationship with Vietcombank Ba Ding Branch?
2 Current business debt status at Vietcombank Ba Ding Branch?
❑ Debt in ❑ Debt overdue ❑ Bad debt
3 What is your assessment of factors affecting credit quality?
(It is recommended to rate from 1-5 by tick in the appropriate box below 1 = strongly disagree, 2 = somewhat disagree, 3 = neither agree nor disagree, 4 = somewhat agree, 5 = strongly agree)
CEO 3.3 Development situation of the industry/economic 3.4 Suitability of credit products
3.5 Loan term/repayment to the bank 3.6 Interest rate policy
3.7 Competence level of credit staffs 3.8 The bank's cooperation with enterprise
III/ Assessment of the bank's credit management situation:
Please give your opinion on the credit management situation of the bank with the following contents:
(It is recommended to rate from 1-5 by tick in the appropriate box below 1 = strongly disagree, 2 = somewhat disagree, 3 = neither agree nor disagree, 4 = somewhat agree, 5 = strongly agree)
1 The bank's credit management is very good
2 The bank's credit process is transparent and clear
3 Fast, clean time for credit proccesing
4 Professional competencies, consulting the credit officer's business is very good
5 The relationship of credit staffs with enterprieses is good
6 The support policies of the Bank for enterprise in difficulties situation timely
7 The bank's credit products are very suitable
IV/ The business results of enterprise:
Please tell us about your enterprie’s business results in the prerriod from
2021 to 2023 Stick (x) in the selection box
YEAH Content Increase Decrease Other
3 Bank loan/Total debt ratio
V/ Other comments for the Bank to improve credit quality
Thank you for your time to answer the question
(1-5 by tick in the appropriate box below 1 = strongly disagree, 2 = somewhat disagree, 3 = neither agree nor disagree, 4 = somewhat agree, 5 = strongly agree )
1 The quality of credit management process 5 10 6 4.05
2 It support, application to credit work 4 12 4 1 3.10
3 Database system for credit management 1 5 9 6 2.95
7 Manager's competency for credit quality 4 8 9 4.24
8 The role of the manager to the employee 6 5 10 4.19
10 The combination of divisions in the bank 1 3 9 8 4.14
Effect of credit staff’s competency on credit quality
2 Impact of application on credit quality 3 9 8 1 3.33
3 The importance of credit appraisal to credit quality 5 10 6 4.05
4 Impact of disbursement on credit quality 5 12 4 2.95
The effect of monitoring step after disbursement on credit quality
The client’s satisfaction with credit activities at
Vietcombank Ba Dinh branch in and relationship with the bank
The financial situation of clients having credit transactions at Vietcombank
The solutions to improve credit quality at
THE RESULTS FROM INTERVIEW WITH THE LEADERS AND THE CREDIT STAFFS
No Criteria Branch’s leader’s opinion
Manager’s and credit stafs’s opinion Notes
The quality of credit management process
It's a full, tight, clear process
There is a specific process, separating the step in the lending process
It support, application to credit activities
The role of IT is very important for management
However, it has not contributed much to the management of the branch Currently, the management is dependent on annual reports from divisions
It's suitable for operational activities, not for management
Database system for credit management
Abundant variety in primary data, difficult to exploit and use
Push enough at the primary data The use in credit management still faces many difficulties due to lack of detail and specificity
There is software and the specific regulations on updating client’s information
However, in the process of operation, it is not incomplete in filling, there are no uniform regulations in the way of declaring client’s name
Updated but not detailed (legal profile), difficult to apply Updates when clients change information are not timely
There is no credit analysis software, officers also have to analyze by themselves according to subjective opinions
There is no credit analysis software (there is new internal credit scoring and rating software) Self- implementation officers increase the workload, lack of objectivity in the evaluation process
Has been constructed, updated daily, full of industry documents, information, and related business activities be updated in full and timely text
The competence of the manager has a
The competence of the manager is the credit quality role, greatly affecting credit quality At the branch are all qualified, basic trained and professionally competent fundamental factor affecting credit quality At the branch, the manager has competence and qualifications in credit work
The role of the manager to the employee
The role of a manager is a guider, and trainer for employees to perform their task well
The role of the manager is directly related to the work efficiency, methods and working style of the staff At the branch, the manager performed his well role