Planning a credit strategy for agribank dong da branch in the period 2021 – 2026 = hoạch Định chiến lược tín dụng tại ngân hàng nông nghiệp và phát triển nông thôn việt nam chi nhánh Đống Đa giai Đoạn 2021 2026

Planning a credit strategy for Agribank - Dong Da Branch in the period 2021 – 2026 = Hoạch định chiến lược tín dụng tại Ngân hàng Nông nghiệp và phát triển nông thôn Việt Nam - chi nhánh Đống Đa giai đoạn 2021 - 2026

INTRODUCTION

Rationale of the research

Vietnam is on the path of development and deep integration The country has joined many new generations Free Trade Agreements (FTAs), such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and European-Vietnam Free Trade Agreement (EVFTA), etc with extensive and comprehensive commitments, which will significantly impact businesses in general and commercial banks system in particular The international economic integration has brought many opportunities and threats to the business environment, fierce competition not only within the industry has forced banks to choose decisions to make important changes at strategic level

Also because of the rapid development of the economy, credit institutions have massively expanded their network of activities and especially focused on market share, which makes the financial market more vibrant, the competition is getting fiercer and the business is getting more and more difficult

Bank for Agriculture and Rural Development of Vietnam - Dong Da Branch (Agribank - Dong Da Branch) affiliated to the Bank for Agriculture and Rural Development of Vietnam (Agribank) is also gradually making efforts to affirm position, and at the same time improve competitiveness in the exciting banking and financial market

Due to a part of the general impact of the economy, in the period from 2015 to 2018 the business performance at Agribank Dong Da Branch encountered many difficulties, leading to low efficiency From 2019 up to now, one of the urgent issues for Agribank Dong Da is to build a strong enough system in all areas including capacity for planning, implementing policies, and operating capacity, business management, modern technology and techniques, etc to adapt to the market mechanism, quickly dominate the market, improve competitiveness, expand and promote products and services banking and finance, and at the same time must make a remarkable difference, bring many conveniences and added values to

2 customers However, Agribank Dong Da so far have not developed sustainably its financial indicators, the bank's products and services are still not good as well as not deeply exploiting the market, losing the market share in which they have a competitive advantage, especially the credit operations

From learning, research and practical activities, the author recognized the importance of planning a business strategy for the Vietnam Bank for the Agriculture and Rural Development - Dong Da Branch The research on a concrete business strategy such as a credit trategy is a pratical case-study for commercial banks to improve their credit policies Hence, the author has chosen the topic "Planning a credit strategy for Agribank – Dong Da Branch in the period 2021 – 2026 " with the desire to further improve efficiency in business activities and lead Agribank - Dong Da Branch to a new position in the Vietnam Bank for Agriculture and Rural Development in particular and the Vietnamese banking system in general.

Research objectives

To propose a strategy in credit activities for Agribank - Dong Da Branch in the period 2021 - 2026 To accomplish the above objective, the thesis has the following specific objectives:

- Clarifying the theoretical basis of planning the business strategy of commercial Banks

- Analyzing the external environment to clarify opportunities and threats in credit activities of Agribank – Dong Da Branch

- Analyzing the internal environment to clarify strengths and weaknesses in credit activities of Agribank - Dong Da Branch

- Proposing a credit strategy for Agribank - Dong Da Branch in the period

Research subjects and scope

The research subject is Planning a credit strategy at banks

- In terms of space: Agribank - Dong Da branch; The branch operates in the target markets including Hanoi and several provinces and cities nationwide

- In terms of time: this research evaluates secondary data from 2015 to 2020

Structure of the study

The study includes 5 chapters as follows: Chapter 1: Introduction

LITERATURE REVIEW

Literature review and Research gap

2.1.1 Literature review of foreign studies

Generally, bank credit plays a vital role in every commercial bank Consequently, credit strategy is a matter of interest to bank leaders and researchers

Up to now, in the world, there have been several of theoretical studies on strategic theory in organization and credit strategies The most prominent are studies on the following issues:

Alfred Chandler (1962) defines strategy as the process of determining the primary long-term goals of an organization, choosing ways or courses of action, and allocating the resources necessary to realize those goals According to this definition, strategy is a process with the content of defining goals and ensuring resources and critical policies are followed while using these resources to achieve the goal A strategy can be defined formally as a plan or general business map that directs the organization toward the desired goal

Stelian Pânzaru (2011) concluded that the current state of development of financial markets and financial system, and environmental developments in which they operate have imposed a different perspective approach to economic risk issues generally and the banking in particular As instability has already become a dominant feature of the economic environment, banks face new risks To meet the new challenges one must identify risks and determine their causes and their influence, developing procedures, techniques and tools for measuring, mitigating and avoiding them, knowing that banking risks are a source of unexpected expenses Therefore, commercial banks have strategies to identify, commensurate and minimize global banking risks

Alves, Antonio José and Dymski, Gary A and de Paula, Luiz Fernando

(2008) has clarified the relationship between individual banks and banking industry behaviour in banks’ credit stategy The research argue that the balance sheet structure of an individual bank is only partially determined by its management's

5 decision about how aggressively to expand credit; it is also determined by the balance sheet positions of other banks This relationship is shown explicitly by a simple disaggregation of the variables that enter into the economy-wide money multiplier well-suited to integrating micro and macro levels in Keynesian banking analysis

Glen Bullivant (2010) has stated that in credit mamagemnet, the issue of cash flow and cash flow management is the central and the most important issue As the results, credit control is mentioned in detail, including guidance on credit policy, credit functions management, credit risk assessment, management and modeling, modeling insurance, export credit, consumer credit, credit law and credit services

The credit situation in Korea and Thailand in the years after 1997-1998 was studied by Valderama, D in “Credit Situation in Korea and Thailand after the crisis years 1997-1998” (2004) The Korean and Thai governments have tried to boost the economy by expanding domestic credit Research has pointed out that there is a big concern about whether the rapid expansion of credit will ensure that capital is used and distributed efficiently, especially when banks cannot effectively control the distribution of credit

2.1.2 Literature review of Vietnamese studies

Master thesis: "Business strategy planning at Buon Ho Bank for Agriculture and Rural Development" by Nguyen Duc Viet (2016) at the University of Danang

In this thesis, the author systematizes the fundamental theoretical issues of strategic planning applied to personal banking and analyses the current situation of business strategy at Buon Ho Bank for Agriculture and Rural Development Hence, the author recommends the main guidelines for business strategy planning at Buon Ho Bank for Agriculture and Rural Development from 2015 to 2020

Master thesis "Business strategy planning at Saigon Thuong Tin Commercial Joint Stock Bank - Hai Duong Branch" by Nguyen Thi Thu Nga - K17-QTKD.HĐ at University of Economics and Business - Vietnam National University, Hanoi The author gives general theories on business strategies and suggests some solutions for Sacombank Hai Duong to implement their business strategy effectively However, the

6 author still has not noted the difference in implementing business strategies in her branch

Master thesis: "Business strategy planning at the Bank of Agriculture and Rural Development of Vietnam - Tan Thanh Industrial Area Branch, Ba Ria, Vung Tau in the period 2013 - 2018" by Tran Thanh Le (2013) at Hanoi University of Technology In this thesis, the author analyses in depth the business performance at Agribank Tan Thanh Industrial Area Branch, identify the strengths and weaknesses of the branch, and analyzes external factors, identifies advantages and disadvantages to give out the solutions to help business operations in the unit efficiently, stably, grow and develop sustainably Making a difference in positioning target customers who are businesses inside and outside industrial zones in Tan Thanh district

Master thesis "Credit quality at Vietnam Bank for Agriculture and Rural Development - Cau Giay Branch" by Nguyen Phuong Linh (2015) at the Academy of Finance In this thesis, the author systematizes the factors affecting credit quality at banks Hence, she assesses and analyzes the causes of credit quality and proposes several solutions to improve credit quality at Vietnam Bank for Agriculture and Rural Development - Cau Giay Branch

Master thesis "Solutions to improve the quality of medium and long-term credit at Joint Stock Commercial Bank for Investment and Development Ha Nam Branch'' by Pham Anh Tuan (2012) at the National Economics University The author has studied the theoritical fundamental of the credit quality of the commercial banking system and the role of bank credit in bank’s operations Then, the author has evaluated the medium and long-term credit quality at the Joint Stock Commercial Bank for Investment and Development Ha Nam Branch from 2009 to 2011 The research also assessed factors that positively and negatively affect bank credit quality and has proposed a few solutions to improve the quality of medium and long-term credit in the branch

Master thesis "Loan management for small and medium enterprises at Military Commercial Joint Stock Bank - Nghe An Branch" by Ho Sy Dat (2018) conducted at National Economics University From the theoretical basis, the thesis has assessed the loan quality for small and medium enterprises at Military Commercial Joint Stock

Bank - Nghe An branch The author found the resources that directly and indirectly affected the quality of loans for small and medium enterprises and offered some solutions

The research works on strategic management in general and business strategy, are prosperous and diverse Each study has a different approach and implementation of the problem, but it still follows the strategic management processes The formulation of a strategy is, after all, also to increase the revenue and profit of the organization, so the subjective analysis and evaluation affect the research entity Most of the recommendations are focused on solving the existing problems of the business to ensure long-term operation Through research, the author found that there have been many research papers on business strategy planning, management, and credit quality improvement at commercial banks, but have not seen the research topic "Planning a credit strategy for Agribank – Dong Da Branch in the period 2021 - 2026” It is a research gap for the author to choose this topic without being duplicated From the research overview and the banking practice, the author proposes a research framework as follows:

Business environmental analysis of the enterprise

Evaluate and propose solutions to implement the strategy

The factors belonging to the external environment

The factors belonging to the internal environment

Affirming the mission, vision and development orientation of bank credit

Defining strategic goals for credit sector business in the banking industry

Theoretical basis of business strategy planning of commercial banks

2.2.1 An overview of commercial banks

The concept of a commercial bank

The development history of the banking system is associated with the development of the commodity economy, and the rapid growth of the market economy has drastically changed the commercial banking system From the simple and primitive banking systems, they have become modern banks, giant financial corporations, and multinationals Along with the development of the commodity economy, economic ideas, the diversification of products and services and the specifics of the actual circumstances of each country, and each law, the concept of commercial bank can be viewed from one angle or another, but in general, they are consistent with each other: A commercial bank is an intermediary financial organization that acts as a bridge between the savings sector and the investment sector in the economy, or more specifically, a commercial bank is an organization that deals with money, receives deposits from economic actors, performs lending operations and invests in assets and other profitable capabilities, simultaneously provide diversified portfolios of financial, credit and payment services to actors in the economy

Thus, it is clear that commercial banks are one of the financial institutions that play an essential role in the economy First, as a financial intermediary, commercial banks convert savings (mainly from households) into credits for business organizations and other actors to carry out their financial transactions and investment activities At the same time, commercial banks are the largest providers of credit to consumers and are one of the most important members of the market for bills and bonds run by central and local governments and issued to fund public programs Commercial banks are also important providers of working capital, medium-term and long-term capital for businesses

- With the role of payment, commercial banks make payments on behalf of customers for the purchase of goods and services such as by issuing and clearing checks and providing electronic payment networks

- As a guarantor, the commercial bank commits to pay the debt of the customer when the customer is insolvent

- As agents, commercial banks manage and underwrite securities on behalf of customers

- Finally, with the role of policy implementation, commercial banks are also an important channel to implement the government's macro policies, contributing to regulating economic growth in pursuit of social goals

Commercial banks are professional organisations that create and provide financial and monetary services to the public and perform many other economic roles The success of the bank's business activities entirely depends on its capacity and ability to provide services to the public at competitive prices in the market Based on the function of commercial banks, we can divide the primary business activities of commercial banks as briefly described in the diagram below:

Basic business activities of commercial banks

-Trust agent -Securities trading… Service providing function

10 a, Asset transfer function: According to this function, commercial banks simultaneously perform the following two activities:

* Fundraising activities: It is a prerequisite activity to create the working capital for the bank Therefore, to ensure prosperity in their business activities, commercial banks can carry out capital mobilization activities from:

- Equity: this is the starting capital and is added during the operation Although this capital accounts for a small proportion, usually about 10% of the total capital, it plays a vital role in the bank's operations Specifically, it is a condition that allows banks to expand their network business network, mobilize scale, purchase fixed assets, contribute capital to joint ventures, finance subsidiaries and other business activities, and it is also a measure of the financial strength of each bank and the ability to hedge risks in the course of business operations of the bank Equity sources include charter capital, the bank's funds formed in the course of business and other assets according to the State's regulations

- Asset transfer function: In this activity, savings deposits of the population account for a relatively large proportion of the total mobilized capital of commercial banks There are also time deposits from businesses and social organizations, which can be payables with a fixed term or accumulated by the company In addition to term deposits, commercial banks also mobilize demand deposits, which are funds that depositors can withdraw at any time These demand deposits may include payment deposits and deposits to secure client assets The highlight of this type of deposit is that it has low mobilization cost but high volatility, complex movement and high risk

- Securities Issuance: Through the financial market, commercial banks can now raise capital by issuing certificates of deposit, bonds, promissory notes, and other valuable papers with various maturities, interest rates registered or unregistered in order to diversify forms of capital mobilization and meet the needs of customers to hold different assets, and through these activities, the bank can enhance its competitiveness in the market

- Borrowing from other commercial banks: in the course of their business operations, if commercial banks realize that the demand for loans from customers increases sharply or the budget is short due to many cash flows, commercial banks can borrow from other banks such as the State Bank through the form of discounting and rediscounting valuable papers and credit contracts granted to customers; or borrow from other financial institutions in the money market to fill a temporary shortfall in capital

* Capital use activities: This is the second function in the asset turnover activities of commercial banks, which is to carry out credit and investment activities, which are activities that bring in revenue for the bank and offset expenses in operations motion

- Credit operations: at present, it is still one of the primary and traditional activities and plays the most crucial role in income-generating activities of commercial banks (this activity usually accounts for 60%-80 % of bank assets) Although credit activities are the main profit-making activities for commercial banks, determining the existence and development of the bank, it also contains many risks (liquidity risk, interest rate risk, political risk and moral hazard) These risks will significantly impact the bank because most of its capital is mobilized from the economy

- Investment activities: in order to diversify the use of capital sources, reduce risks in operations, increase income and support liquidity when necessary, in addition to credit activities, commercial banks also carry out other activities investment activities such as indirect investment activities (investment activities on the stock market through the purchase and sale of securities issued by the government, companies), or direct investment activities (capital contribution) into businesses, financial companies ) b) Service providing function

Along with the economic development, service providing activities play an increasingly important role in diversifying the bank's activities and, at the same time, also bring significant income for banks These services include payment and treasury services, guarantee, foreign currency trading, entrustment, agency, securities trading,

12 etc In addition, before the explosive development of information technology, banks are now developing and providing new services such as card services, Internet Banking, Phone banking as well as strongly developing international banking services

The concept of business strategy

RESEARCH METHODOLOGY

Research process

The author conducted this study as following:

Step 1: Collect documents on the enterprise's business strategic planning theory and determining the theoretical basis for business strategy planning

Step 2: Design a survey questionnaire to collect and analyze primary data, and synthesize secondary data to find opportunities, threats, strengths, and weaknesses in the credit sector of the Agribank Dong Da branch

Step 3: Propose a credit strategy at Agribank Dong Da branch from 2021 to

Data collection and processing methods

Sources of information: The research applied information from textbooks, previous research, thesis of several domestic and foreign authors as reference materials for thesis writing In addition, several technical books and reports of Vietnam Bank for Agriculture and Rural Development - Dong Da Branch, Vietnam Bank for Agriculture and Rural Development, etc were also utilized

Primary data sources were obtained through surveys and interview methods

- Managers, experts, and employees of Agribank - Dong Da branch

- Customers of Agribank - Dong Da branch

- The questions were designed to collect information about: (1) The impact of external environmental factors, opportunities, and threats on the Bank credit sector; (2) The impact of internal environmental factors, strengths, and weaknesses of the bank credit sector

- The questionnaire were built by two stages:

+ The first stage: I drafted the question based on my own experience in

30 banking as well as other research such as Baitshepi Tebogo (2012), Mwangi Joan Njeri (2015) Then, I ask my supervisor and other lecturers in HSB for their advice and assessments

+ The second stage: I finished the questionnaire with respondents’ advice and assessments

- Total number of votes issued: 100 votes, of which 20 are for managers and employees working at the bank; 80 votes for bank customers

The author sent online survey forms and distributed them directly to the subjects Besides, some in-depth interviews were conducted with managers and experts of the bank to consult them about strategic options and solutions to implement the credit strategy of the Agribank - Dong Da branch

The questionare is on expert opinions on the evaluation criteria of the 5 perspectives as well as the proportion of SBSC scenarios The evaluation criteria are inherited from previous studies, after synthesizing the opinions of departments and experts, the author will agree on the use or modification of the evaluation criteria to best suit the characteristics of Nam A Bank

- Method of processing data: using Excel software

The questionnaire included nominal scales (gender, age ) and interval scales Mean value was used

The meaning of the levels is as follows:

1.00 1.80: strongly disagree/ Very dissatisfied/ Very unimportant

4.21 5.00: Strongly agree/ Very satisfied/ Very important

Statistical method is a method of gathering and describing the collected information about the research phenomenon in order to serve as a basis for

31 synthesizing and analyzing the phenomena to be studied The object of study of statistics are large number phenomena and these phenomena are very complex, including many different units and elements, on the other hand, there are constant fluctuations in space and time, because Therefore, a requirement is that there should be statistical methods of investigation to suit each situation, in order to obtain information in the most accurate and timely manner

Analysis is, first of all, dividing the whole of the research object into simpler parts, aspects, and constituent elements in order to study and discover each attribute and nature of each element and thereby help us understand the object of study more coherently, understand the complex general from those partial factors The task of analysis is to find the common through the particular, through the phenomenon to find out the essence, through the particular to find the universal

Synthesis is the reverse process of analysis, but supports the analysis process to find the generality From the research results on each side, it must be summed up to have a full and correct perception of the common, to find out the nature and movement laws of the research object

RESEARCH FINDINGS

Overview of Agribank – Dong Da Branch

4.1.1 The process of formation and development of Agribank – Dong Da branch

In 1988, the banking system changed from one level to two levels, according to which there was a new management mechanism Market demand has changed, such as savings and investment has been increasing As a result, the commercial banking system has expanded and developed

Agribank was founded under Decree No 53/ND-HDBT in 1988 of the Council of Ministers (now known as the Government), and officially came into operation on 1st July 1988 on a national scale Through each period of development with different names associated with distinctive missions, after 33 years of construction and development, Agribank has always affirmed the position and role as one of the leading commercial banks in Vietnam, leading the implementation of monetary policy, contributing to macroeconomic stability, controlling inflation, supporting growth, accompanying of agricultural development, farmers and rural areas, making various positive contributions to promoting the process of restructuring the economy, building new rural areas and ensuring social security

Agribank Dong Da Hanoi Branch (referred to as Agribank Dong Da) was established in 2000 to meet the better needs of economic development, serving the citizens in Dong Da district in particular and Hanoi in general, contributing to expanding the operation scale of Agribank city Agribank Dong Da’s head office is at 154 Ton Duc Thang, Hanoi Since 1 st April 2008, Agribank Dong Da has changed to be the model of the first-class bank of Agribank, and the head office is located at 3/37 De La Thanh, Hanoi

In parallel with the development of Agribank, Agribank Dong Da Branch has experienced more than 20 years of development and obtained many achievements, affirming it to be one of the leading Agribank branches in Hanoi In particular, the branch came into operation right before the Implementation of the first restructuring of Agribank (2001-2010) In this restructuring, Agribank has made efforts to

33 strengthen and improve financial capacity, independent of policy credit activities (lending to the poor, lending to designated programs since 2007) and gradually improving business activities in the direction of multi-purpose The bank also made breakthroughs in the field of information technology by successfully connecting IPCAS throughout the system in 2008 This event has turned a new page in the Bank's operations by providing more convenient products to customers (Agribank,

2018) Accordingly, Agribank Dong Da was formed and operated in the context of establishing a new operating mechanism of Agribank with dynamism, flexibility, initiative and high autonomy in operation and organization

Restructuring activities have changed Agribank’s operations in general and established the "shape" of Agribank Dong Da Branch The four main pillars of this development consist of: financial capacity, technological level, organization, staff, and management of the executive board have been oriented to modern international standards

Between 2013 and 2018, Agribank Dong Da carried out the Second restructuring This was the stage of operation of the Bank and the Branch with many threats Agribank faced the risk of losing its market share, increasing bad debt burden and "panic" weighing on the whole system when some senior leaders of Agribank were involved in economic cases The beginning of implementation of the restructuring project (as of the first half of 2014) partly went unpromisingly

However, with the determination of the entire bank's staff and decisions the Bank's board of directors and direction had made, Agribank Dong Da accomplished the restructuring tasks associated with bad debt settlement in the period of 2016-

2020, especially in the context of the outbreak of Covid-19 and bringing many impacts on economic activities - society Agribank Dong Da has attained significant achievements in (i) effective business development and (ii) handling the burden of bad debts

4.1.2 Products and services of Agribank – Dong Da Branch

Agribank Dong Da is a branch of Agribank, carrying out banking and other related business activities for profit purposes, contributing to implementing the

State's economic goals At the same time, the Bank still strives to implement its vital mission as a key bank in serving and investing in agricultural and rural development, investing in the development of clean agriculture and high-tech agriculture

The main operating products and services of Agribank Dong Da Branch are comprised of the followings:

- Receiving deposits and savings from organizations, individuals, and other credit institutions in the form of demand deposits, term deposits and other types of deposits

- Issuance of certificates of deposit, bonds and other valuable papers to mobilize capital of domestic and foreign organizations and individuals when approved by the Governor of State Bank (SBV)

- Loans from other credit institutions operating in Vietnam and foreign credit institutions

- Short-term loans of the SBV in the form of refinancing

- Other forms of capital mobilization according to the SBV's regulations

- Loans: short-term loans for production, business, and services (each time); loans under the line of credit; loans for fixed capital investment in production and business projects; export incentive loans; lending in the form of account overdrafts; co-financing loans; loans under projects and programs funded by foreign funding; credit card issuance loans; lending to projects as designated by the Government;

- Guarantee: loan guarantee, bid guarantee, contract performance guarantee, payment guarantee, advance refund guarantee, reciprocal guarantee, product quality guarantee, co-guarantee, other type of guarantee, grant guarantee

- Discounting and rediscounting: discounting and rediscounting SBV bills; bonds issued by the State's regulations; valuable papers published by other organizations; debt collection drafts; drafts for debt receipts; cheques

4.1.3 Organizational and personnel chart of Agribank – Dong Da branch

The organizational structure of Agribank Dong Da is as follows:

Figure 4.1 The organizational structure of Agribank Dong Da

Source: Agribank Dong Da The functions and duties of specific departments are as follows:

- Board of Directors: (i) Develop programs AND plans, TAKE OVER business activities of the Branch under the direction of the industry, of the city Agribank - grassroots authorization; + Promptly disseminate and inspect the implementation of policies, public-private, directives and decrees of the sector to officials and employees; + Take care of fostering to improve professional qualifications and life of employees in the Branch

- General Department: + Consults for the Director on legal issues related to the entire operation of the Branch + Performs personnel management, training and administrative work, reward emulation, marketing information, and administration of the Branch

- Department of Corporate and Household Customers and Individuals: + consults the Director in developing Agribank's oriented business plan and organizing its implementation within the Branch Plan a long-term business development strategy, 6-month and annual plan for the whole branch + Synthesizing socio-economic information, and interest rate movements in the market, to promptly advise the Board of Directors on loan interest rates, capital mobilization rates, service costs as well as the implementation of capital mobilization measures, forms and tools + Appraisal of investment projects, production and business plans, completion of loan dossiers, guarantee and grant of credit to customers at the head office + Regularly inspect and analyze production activities of borrowing enterprises, classify debts to find out how to collect debts on time + Prepare reports periodically and at the request of branch leaders + Perform other tasks assigned by the branch leader

- Financial Accounting Department: Assist the director in implementing the accounting, financial management, and service business regime per Agribank's regulations and current laws + Develop financial plan targets, finalize financial collection and expenditure plans, and salary funds for branches + Direct the inspection of affiliated transaction offices to perform accounting, statistical accounting and fINANCIAL work Make

Analysis of the external environment of Agribank – Dong Da branch

Agribank Dong Da's operation is influenced by many factors inside and outside the organization

Economic growth is a driving factor in credit growth (Nguyen Thanh Nhan et al., 2014; Phan Thi Hoang Yen and Tran Hai Yen, 2020) Vietnam's economy in the period 2016-2020 grew steadily and improved, the economic scale was expanding,

43 and the major balances of the economy were ensured, contributing positively to promoting credit growth The growth rate of gross domestic product (GDP) in 2016-2019 was relatively high, at an average of 6.8% per year Although the economy in 2020 was heavily affected by the Covid-19 pandemic, natural disasters, severe storms and floods in the Central region, the average growth rate in 5 years

2016 - 2020 reached about 6% annually and stood among the group of the highest growth countries in the region and the world In particular, the industry, construction and service sectors continue to play a leading role, contributing mainly to the overall growth The average growth rate in the industry and construction sector was estimated at 7.45% and that of the service sector reached 6.2%; the proportion of the industry and service sector (including construction) at producer prices in GDP increased from 82.6% in 2015 to 84.8% in 2020 The size of GDP continued to expand By 2020 it was estimated at 271.2 billion USD, an increase of about 1.4 times compared to 2015; GDP per capita in 2020 would reach 2,779 USD per person, about 1.3 times higher than in 2015 The major balances of the economy in terms of accumulation - consumption, savings - investment, energy, food, labor - employment… continued to be secured, firmly strengthening the macroeconomic foundation The ratio of asset accumulation to GDP at current prices by 2020 was about 26.7% (Communist Party of Vietnam, 2021) When the economy developed and stabilized, people's incomes would improve, causing higher accumulation demand, leading to an increase in demand for deposits, thereby creating conditions for banks to have money for businesses to rent On the other hand, economic development creates conditions for capital demand for projects that also increase due to improved profitability opportunities With good economic growth, businesses also perform business, thereby improving debt repayment capacity (Phan Thi Hoang Yen and Tran Hai Yen, 2020)

Figure 4.2 Vietnam's economic growth (%) and GDP per capita (USD)

Source: General Statistics Office, Pham Hong Chuong et al (2021)

Due to the negative impact of the Covid-19 pandemic, Vietnam's economy in

2020 only reached 2.91% (the lowest in the last 2 decades), a very deep decrease compared to the growth rate of 7.02% in 2019 However, Vietnam was still a bright spot in the context of the world economy and the region slipping in negative growth Specifically, global GDP decreased by about 4% Thailand, Malaysia and the Philippines decreased by 7.8%; 6% and 8.5% respectively (Pham Hong Chuong et al., 2021)

As the Capital of Vietnam, Hanoi reported its normal growth rate was higher than the production growth rate of the whole country In the period 2015-2019, the growth rate reached over 7.2% Under the impact of the Covid-19 epidemic, in

2020, the scale of GRDP at current prices was estimated at VND 1,016 trillion, a rise of nearly 2.34% compared to 2019 (Hanoi Statistics Office, 2020a)

Figure 4.3 Gross product value in Hanoi at comparative prices in 2010 and

(Source: Hanoi Statistics Office, 2020a) Population and number of businesses

The economic scale and population of Hanoi rank the second following Ho Chi Minh City According to the Hanoi City Statistics Yearbook 2019, Hanoi's population was more than 8 million people, and the gross domestic product at current prices in 2019 reached VND 968,436 billion, while the corresponding figures of Ho Chi Minh City were 9 million people and VND 1,338,179 billion Hanoi's population density tended to increase, reaching 2.3% in 2019 The population density was also high, 2,410 people/ km2

Table 4.4 Population and gross domestic product (current prices) of some big cities in Vietnam in 2019

Ho Chi Minh City Haiphong Da

Ho Chi Minh City Haiphong Da

Dong Da district has the highest population density in Hanoi with more than 38,000 people per /km, much higher than the overall density of Hanoi and other districts

Table 4.5 Area, population and population density in some administrative units of Hanoi in 2019

Population density (People/ km2 ) Hanoi 3358,5 8093,9 2410

The number of enterprises and cooperatives operating (as of 31/12) in Dong

Da district was also the largest compared to other districts in the city and generally

47 prone to soar in popularity over the years In 2018, the total number of enterprises and cooperatives in the Dong Da district was 12,279, accounting for roughly 9.4% of those in Hanoi

Table 4.6 Number of enterprises and cooperatives operating on December 31st in some administrative units of Hanoi

Numerous enterprises, densely populated inhabitants, high income, and social investment capital also tended to rise 34 million VND per person in 2015 to 47.6 million in 2019 (Hanoi Statistics Office, 2020b), which led to an increase in potential growth in demand for credit in the area

The economy’s inflation also impacts the credit activities of banks In general, inflation has a negative impact on credit growth (Luong Thi Nga and Dao Thi Thu Hien; Sharma and Gounder, 2012) In the period 2011-2020, inflation was controlled below the set target Prices of commodities were relatively stable The average consumer price index (CPI) in the period of 2016-2020 dropped sharply to 3.15%, compared with the period 2011-2015 (7.7%), within the set target range (less than 4%) The average core inflation has been well controlled over the years, remaining at a stable level The average in the period of 2016 - 2020 reached 1.81%, which was a noticeable decrease compared to the period 2011 - 2015 of

5.15% (Communist Party of Vietnam, 2021) In the context that the Covid-19 epidemic strongly affected all aspects of the economy, Vietnam's CPI in 2020 rose, compared to 2019 However, this figure remained at a stable level below 5% (Pham Hong Chuong et al., 2021)

Figure 4.4 Vietnam Consumer Price Index (CPI) 2003-2020

Source: General Statistics Office, Pham Hong Chuong et al (2021) Covid-19 outbreak

The Covid-19 pandemic originated in China, the neighbouring country to the north of Vietnam Due to the close geographical distance and high frequency of tourism and trade between the two nations, the impact of the disease that Vietnam has to face is inevitable The first case recorded in Vietnam was recorded on 23 rd January 2020 Since then, the Government has adopted many policies and timely actions to prevent the epidemic, yet the Covid-19 epidemic still exerted a range of impacts on the economy in terms of producing goods and services

According to PwC (2020), second-order effects would be the hardest hit by the financial services and banking industry In particular, the deteriorating credit quality of customers and the low-interest rate environment continue to be maintained – as the consequences of the pandemic gradually reveal themselves

49 throughout the economy over the next few years The Covid-19 pandemic has markedly affected the financial viability of both individual and business customers Over the past time, with the timely and effective support of the Government, the banking industry has not encountered significant disadvantages compared to the rest of the economy However, there are still potential concerns as these delayed capital influences play out in the future (NEU and JICA, 2020)

Dinh Hong Hanh (2021) stated that the Covid-19 epidemic had changed the way society works in many ways Some notable trends for Vietnam's financial and banking system in the coming period include:

- Asset decline problem: The recession from Covid-19 and the decline in asset values will reduce risk tolerance due to increased risk-weighted asset pressure, leading to a decline in the lending capacity of the banking and finance industry to support the real economy in the upcoming economic recovery period Regardless of ANY circumstances, businesses will need to be ready to seek other sources of financing such as increased issuance of shares in the capital market, and access to loans from non-bank financial institutions, such as private equity funds and sovereign wealth funds The problem of declining asset values at banks and affecting lending capacity has been effectively managed thanks to Circular No 01/2020/TT-SBV (to be analyzed later)

- Pressure to digitize: Covid-19 has changed how society works so dramatically, that even individuals who were previously least receptive to technology have become e-commerce adopters These shifts are unlikely to return to the days before the outbreak, and digital solutions will become a differentiator This, along with the digitalization trend in Vietnam's banking industry to meet customers’ new expectations, has constantly created pressure for digital transformation In recent years, credit institutions in Vietnam have focused on the digitalization trend as part of their long-term strategy According to the SBV, Vietnam currently has 70 credit institutions and electronic supply organizations) that have provided

Analysis of internal environment in credit activities of Agribank – Dong Da

Da branch according to the value chain model

4.3.1 Direct activities in credit activities of Agribank - Dong Da Branch

Credit growth targets must ensure compliance with operational safety ratios; growth control by the management ability associated with credit restructuring and customer choices, credit and inv; credit work at Agribank Dong Da was implemented and achieved good results

Adhering to Agribank’s orientation, socio-economic development goals of Hanoi capital, regulations on lending and interest rate support, basic interest rates, regularly conducting timely assessment and remediation of those existing in the implementation process, eliminate difficulties in business activities Credit capital has basically met the capital needs necessary for the production and business development of enterprises and production and business households Focus on investment for retail customers who are small and medium enterprises, production and business households and consumers

In the period 2015-2020, thanks to the exemplary implementation of the appraisal before, during and after lending time, the bad debt ratio of the branch always remained low, below 3%; interest collection reached more than 90% By May 31, 2020, outstanding debt reached VND 4,086 billion, from VND 3,087 billion in 2015, the average growth rate reached 35% every year, whereas bad debt accounted for 1.3%

The branch also implements a wide range of preferential credit programs to attract good, traditional, and potential customers 3

Handling and recovering bad debts – debts that have handled risks and accrued interest

Agribank Dong Da conducts a specific review and assessment of each bad debt identified under Resolution No 42/2017/NQ-QH14 in order to fully determine the bad debt status, especially large bad debts, collateral for these loans, recoverability, causes, difficulties and problems in the process of collecting bad debts, based on which there are synchronous and effective solutions to handle and recover bad debts

From 2015 to 2020, the Branch has focused on addressing problems related to credit work and initially achieving certain results Non-performing loans of the Branch gradually decreased from 13% on June 30th, 2015, to 1.18% on December 31st 2015 By December 31st 2019, it was 1.53%; on May 31st 2020, it was recorded to reach 1.3%

Annual risk processing debt collection also achieves certain results By 31 st May 2020, the total amount of debts that have handled risks is VND 87 billion out of VND 216 billion The ability to recover debts that have handled threats is still low and has not met the plan assigned by Agribank The key reason is the insolvency of customers; the sale of collateral is entangled in legal procedures; real

3 Preferential loan program for small and medium enterprises with a scale of VND 30,000 billion (VB 7475/NHNo-TD); preferential loan program for large customers with a scale of VND 35,000 billion (VB 8288/NHNo-KHL); Preferential loan program for FDI customers with a scale of VND 5,000 billion and USD 150 million (VB 5817/NHNo-KHL, VB 9048/NHNo-KHL)

67 estate assets are subject to court proceedings, with immovable properties that have conducted an auction of the property but have not yet been sold

The recovery of accrued interest is focused on prioritizing Numerous measures have been implemented effectively, such as controlling cash flow, supporting capital for production and business to create debt repayment sources, and implementing interest exemption and reduction mechanisms according to Agribank’s regulations

4.3.2 Supporting activities for credit activities of Agribank Dong Da Branch Capital mobilization

Thoroughly controlling Agribank’ s guiding thoughts on capital mobilization, diversifying forms of capital mobilization, actively developing business plans from time to time, and proposing organizational measures in accordance with the actual situation of the branch

Direct and implement measures such as: assigning capital mobilization targets directly to each officer and having a material incentive policy

Launching emulation movements mobilized on major national holidays such as Happy Spring, 30/4 and 1/5; National Day, 2/9 to complete the set plan

By May 31, 2020, the mobilized capital reached VND 4,757 billion from the beginning of VND 2,458 billion in 2015; the average annual growth rate reached 20%

Deploying many forms of traditional products and services and new products and services to provide utilities to customers, improves the position of branch operations in the increasingly fierce competitive trend Agribank offers over 220 products and services on the market The Agribank system is generally innovating its growth model from relying on credit as the main to strongly improving service quality based on modern and multi-service banking platforms

Pay more attention to promoting banking products and services, traditional customer care, and developing new and potential customers through customer policy work

Focus on developing products and services such as international payment, trade margin or foreign exchange market, especially e-banking such as POS, E- Mobile Banking, Internet Banking

As a result, the average revenue growth over the years reached nearly 100% and consistently exceeded the plan assigned by Agribank Total service revenue in

2015 was VND 7.6 billion, by 2019 it reached VND 79.5 billion In particular, in

2016, the branch was awarded the Certificate of Merit by the General Director of Agribank with the first prize "Thematic Financial Institutions in 2016"

Finance, accounting and treasury work

Accounting and treasury work have been well focused on by the Branch, reflected in areas such as money transfer payment, interbank payment, bilateral payment, cash collection and expenditure services

Total money transfer sales have increased over the years; in 2015 it was VND 14,528 billion By 2019 it rose to VND 56,028 billion; the average growth rate is 18%/year

Revenue and expenditure in 2015 were VND 12,096 billion; by 2019, this figure is VND 12,451 billion Treasury work is guaranteed to be safe; the excess money is returned to customers

When it comes to financing, the difference in revenue and expenditure has improved year by year In 2015, the gap between revenue and spending was VND 29.9 billion and increased to VND 91.3 billion in 2019 V1 + V2 salary guarantee income fund has a productivity salary and repayment of VND 13 billion/VND 17 billion, equivalent to 73% of salary loans

Every year, the branch develops a specific and comprehensive inspection plan for all aspects of the branch's business activities and fully meets inspection requirements from the superiors Internal inspection and control concentrate on the following areas: implementing regulations and mechanisms in credit operations, accounting operations and settlement of complaints and denunciation letters

In the period of 2015-2020, the number of inspections was 123, of which branches self-inspected (including inspection), 15 delegations of Agribank inspected and 6 delegations of foreign industries inspected During the inspection, no major errors have been detected, and those that exist after the inspection have instructions to fix them immediately

Restructuring, innovating and improving the operational efficiency of the business

Agribank Dong Da has restructured, renovated and improved the operational efficiency of enterprises under the Project on structuring branches in Hanoi and Ho Chi Minh City until 2015 and the Agribank Restructuring Project was approved by the SBV After separating Thanh Xuan Branch in October 2015, Agribank Dong Da's organizational model temporarily ranked 2nd including 6 departments under the Head Office and 5 Transaction Offices with 88 employees By June 1st, 2018, the branch ranked 2nd By August 2019, the branch was upgraded to the top 1 branch by Agribank The 2nd class branch has consolidated its organizational model, from 6 departments under the head office and 5 transaction offices to 8 with

The Agribank system is carrying out equitization implementation works under the direction of the SBV Accordingly, Agribank Dong Da also plans to implement immediately after the SBV issues a decision to equitize Agribank

Investment in the construction of facilities and equipment

CONCLUSION AND RECOMMENDATION

Vision and mission affirmation for Agribank - Dong Da Branch

With the driving force of the development being the 4.0 technology system in the context of globalisation and the impact of the Covid-19 pandemic, Agribank needs to reaffirm its orientation, mission and vision Agribank maintains its position as the leading commercial bank in Vietnam, operating under the model of a commercial bank dominated by the State; it has a technological foundation, modern and advanced management model and high financial capacity; multi-function, safety, efficient business activities, stable and sustainable development ensure the excellent performance of the task, of playing a pivotal and leading role in credit supply, providing banking services and banking facilities in the field of agriculture and rural areas with four strategic breakthroughs:

- Firstly, thoroughly overcome the shortcomings, improve operational efficiency, and convert the operating model to a joint stock commercial bank

- Second, diversify and improve the quality of products and services based on modern and advanced technology; develop and expand distribution channels of products and services to customers, increase competitiveness in the market; actively seek feasible solutions to improve financial capacity, ensure conditions for operational safety by state regulations and international practices

- Third, complete and standardise the operating management model, risk management, and business processes towards the standards of the Basel Committee and the roadmap for Basel II application in Vietnam, in line with Agribank's practical operation

- Fourth, improve productivity and quality of human resources; develop a team of highly qualified banking managers and businessmen, have a sense of legal compliance, good ethics and professional responsibility, and adapt to the requirements of competition and integration

Agribank's mission and vision were given in Agribank (2018) as follows:

Mission: Agribank is the leading state-owned commercial bank in Vietnam, playing a key and leading role in investment in agricultural, farmers and rural development to contribute to socio-economic development in Vietnam

Vision: Agribank develops in the direction of modern banking "growth - safety - efficiency - sustainability", affirming its vital role in credit investment for agricultural, farmers and rural development, competitiveness and international economic integration

Business philosophy: "Bring Prosperity to Customers" Agribank's business objectives are customer oriented All officers and employees of the Bank constantly innovate service methods, aiming to improve the quality of convenient and modern banking products and services to bring the best benefits and highest satisfaction to customers and maximise profits for customers of the Bank Agribank commits to accompanying customers towards the goal of success in production and business The bank determines that dedication to serving and bringing prosperity to customers is also the basis for sustainable development.

Strategic objectives proposal for credit activities at Agribank Dong Da Branch

Focus on solutions to improve credit quality, control and handle bad debts; attach credit growth by management capabilities; continue to advocate increasing the proportion of corporate loans, being proactive in finding, approaching and screening customers effectively, and focusing on expanding retail customers in big cities associated with product and service development On that basis, prioritise credit growth in areas and branches with low credit quality, increase the proportion of loans to assets with low-risk coefficient, reduce the balance of outstanding loans for investments with high-risk coefficient; ensure compliance with the minimum capital adequacy ratio, credit risk limit, centralised risk limit as prescribed

- Credit grows from 12-15% / year; medium and outstanding long-term loans account for 40% of total outstanding loans

- Maintaining the proportion of outstanding loans for rural agriculture from 65%-70%;

- The ratio of non-performing loans on the balance sheet is less than 3%; according to Circular 02/2013/TT-NHNN, less than 2%

- Collecting and handling completed risks according to Agribank's plan

Business strategies proposal for credit activities at Agribank Dong Da Branch

Using the SWOT matrix, the author carefully analyses the strengths and weaknesses, opportunities and Threats, thereby combining them to come up with business strategy methods, including competitive and cooperative strategies as follows:

Table 5.1 SWOT matrix of Agribank Dong Da

O1- Good expectations for economic growth and inflation O2 – The potential credit market in Hanoi O3 – State policy on credit is quick and promt O4 – Technology in the banking industry has developed to facilitate the improvement of management and expansion of credit activities O5 – The Covid-19 pandemic is an opportunity to carry out restructuring

T1 – The monetary policy system to support credit due to the impact of the Covid-19 epidemic has not yet brought about a long-term credit growth T2 – The policy on agricultural credit has many shortcomings in the implementation T3 – Fiercely competitive credit market T4 – Difficulties due to the Covid-19 pandemic continue, directly affecting business plans and production activities of people and businesses

80 in Hanoi T5 – Pressure from technological improvement and innovation

S1 – Business results are at a reasonable level

S2 – Agribank is a "young" branch, easy to adapt to technology changes and proactive in organisational structure and working environment

W1 – Credit growth tends to be lower than the same period in previous years

W2 – Bank's internal policies are still behind schedule and the assigned plan

W3 – Bad debt control is still limited; credit quality has not been positively improved

W5 – The implementation of cooperation agreements with corporations has not been effective

Initially, shaping the SO, ST, WO, and WT strategies, then combining the four elements to create the most comprehensive plan Both exploit strengths to take advantage of opportunities while limiting weaknesses to reduce external threats and challenges

Combine four elements to make strategic choices

=> Strategy 2: Competition by focusing on key markets

=>Cooperation strategy: joint venture, vertical association Source: Self-synthesized by author 5.3.1 Competitive strategies for credit activities at Agribank Dong Da in the period 2020-2026

Agribank Dong Da can choose the following competitive strategies:

Agribank Dong Da has been formed and developed for more than 20 years The development process of Agribank Dong Da is associated with many development processes of Hanoi and the banking system Belonging to the Agribank system, Agribank Dong Da has a solid resource base Agribank is one of the first banking systems in Vietnam, in the top 4 largest commercial banks in Vietnam, and at the same time, has a branch system spread throughout the country, including in remote areas Agribank has a lot of experience and is assigned by the State to focus on supporting agricultural and rural development in Vietnam In the context that the agricultural credit policy faces many shortcomings in implementation, complicated effects of the Covid-19 pandemic (including in Hanoi), and the fiercely competitive Hanoi credit market, Agribank, with a long

82 history and scale, will be the best basis for Agribank Dong Da to stand firmly in the credit market Agribank brand is always associated with long-term and solid, close people

Box 5.1 Interview on the prestige and attachment of the Agribank brand

Agribank is a long-standing and reputable brand in Vietnam's state-owned banking system Agribank Dong Da branch has a long operation history and is one of the major branches in Hanoi Credit activities in particular and other banking activities of Agribank Dong Da bring positive experiences to customers Customers coming to Agribank have a firm trust in the brand because compared to other banks, the Agribank brand represents trust, low-risk level, a comprehensive linking system, and easy access to preferential credit sources of the State

Source: In-depth interview with managers Competition by differentiating products

Promote the strengths of Agribank Dong Da, such as dynamism, active but still orderliness, process and discipline; Experienced staff and great resources from the Agribank system, Agribank Dong Da continues to pioneer in implementing credit policies, especially credit support packages of the State, quickly changing and adapting to new interest rate regulations or the response of the economy from the impact of the Covid-19 epidemic Reasonable expectations of economic growth and inflation of Vietnam in general, Hanoi in particular and the potential of Hanoi credit market size are the basis for differentiating products accepted in reality

Differentiation is reflected in the pioneering role and the efforts to diversify credit objects, approaches, controls, checks and supervision of credit quality and bad debts, thanks to the State's policy orientation and application of technological achievements Providing credit and/or procedures can be simplified/digitised, increasing customer convenience

Experienced service personnel but still flexible, proactive, and adapting to the technology application of Agribank Dong Da are also necessary conditions to implement this strategy

Competition by focusing on key markets

Agribank Dong Da has a system of experienced staff and great resources from the Agribank system; Agribank Dong Da can focus on key groups such as credit support for the agricultural sector and small and medium enterprises in the district and city These are the "slots" that Agribank has advantages, and a long history helps it have a good relationship with customers and other companies that are more difficult to get into This strategy is quite suitable in the context of the fierce competition in the credit market in Hanoi The State policies on the credit of the Government and the SBV in recent times have also focused on those who are highly affected by the Covid-19 epidemic, including small and medium-sized enterprises The concentration of objects also helps to improve the scope of lousy debt control or facilitate the inspection and supervision of bank branches

5.3.2 Cooperation strategies: joint ventures, vertical links

Hanoi credit market has a lot of potential, and Agribank is restructuring; Agribank Dong Da continues its cooperation strategy and links with branches in the same system and outside the system to sign collaboration, joint ventures and associations with Agribank The association and partnership not only create a driving force in the long term, reduce competition and unpredictable impacts of the Covid-19 epidemic but also make good use of the advantages of business operations and staff of the branch Joint ventures and associations also create higher credit growth opportunities; cooperation with other organisations, including the State Group/Corporation, is more convenient and effective (based on Agribank Dong Da gaining more experience and/or relationships, better connection when performing cooperation with other organisations).

Selection of business strategy in the credite sector for Agribank Dong Da using

After having the options, the author uses the QSPM matrix to support the decision-making of the business strategy

Table 5.2 QSPM matrix to choose Agribank Dong Da business strategy

No Environmental factors Weight Strategy 1 Strategy 2 Strategy 3

AS Tas AS Tas AS Dozen

Good expectations for economic growth and inflation

2 The potential credit market in Hanoi 0.15 2 0.3 3 0.45 3 0.45

State policy on credit quick and prompt

Technological development of the banking industry

The Covid-19 epidemic creates favourable conditions for restructuring

The monetary policy system to support credit during the

Covid-19 pandemic has not yet created a driving force for long-term credit growth

Credit policy for agriculture is challenging to implement

The credit market is fiercely competitive in Hanoi

The Covid-19 pandemic has hurt the economy and society

No Environmental factors Weight Strategy 1 Strategy 2 Strategy 3

AS Tas AS Tas AS Dozen

Pressure to improve technology and innovation

1 Business results are at a good level 0.1 4 0.4 2 0.2 2 0.2

Be a "young" branch, highly adaptive and proactive

1 Credit growth tends to be lower 0.05 2 0.1 1 0.05 2 0.1

Bank's internal policies are still slow and lacking

Bad debt control is still limited; credit quality has not been positively improved

The inspection and supervision work are still limited

Implementation of cooperation agreements with corporations has not been effective

Source: Author synthesis based on expert opinion

Through the QSPM strategy selection matrix, we see that the total score of strategy 1 - brand-based competitive strategy is 5.6 higher than the other two strategies So the selection strategy is a brand-based competitive strategy

Box 5.2 Interview on competitive strategy

Agribank Dong Da has the orientation to combine activities to achieve the best results The most significant competitive advantage compared to other banks in Hanoi is the long-standing brand name of the bank The brand is built based on the brand of the Agribank system and the operational and accumulated activities of many generations of officers and employees of the bank The branch was formed and operated in many stages of development and renovation of the country and the city, as well as the restructuring of Vietnam's credit institutions…

Source: In-depth interview with managers

The brand-based competitive strategy is suitable for Agribank Dong Da when the branch is a long-standing bank branch, belonging to the extensive branded banking system and closing to the community for a long time, with high trust and recognition The staff is not only experienced but also adaptable In addition, the context of Hanoi's potential credit market with unpredictable fluctuations, especially credit policies, changed a lot because of the Covid-19 pandemic and banks are strongly affected by Industry 4.0; the brand-focused strategy also helped Agribank Dong Da branch reduce unnecessary costs and focus on inherent strengths to maintain development investment resources for a long time Concretise a competitive process by brand focusing on the following issues:

- Continue to improve the capacity of staff in terms of attitude, professional qualifications and technology;

- Improve the process of carrying out credit activities of the bank;

- Thoroughly observe the guidelines and policies of the Bank, respond to the policies of the Government and the SBV; at the same time, consider and propose issues arising in the implementation of the policy;

- Enhance the improvement of data systems, upgrade software and services capable of applying information technology;

- Strengthen the inspection and supervision of system activities

In addition to the advantages of the brand edge strategy, to overcome weaknesses and limit threats, as well as make better use of opportunities and promote strengths, Agribank Dong Da needs to implement a plan of cooperation and link with vertical units, especially units in the Agribank system

Specifically, from 2016 to 2020, Agribank Dong Da has performed the following tasks:

- Professionalization of credit departments and processes;

- Fulfilling the targets of Agribank assigning branches;

- Actively participating in responding to programs and training, improving the capacity of the bank's general staff to;

- Be proactive and positive- in learning and improving the experience in managing, checking and supervising credit activities;

- Technological improvement and use of technology in connection with affiliates or Agribank in general

Recognising the strengths, weaknesses and the ability to overcome weaknesses, combined with taking advantage of opportunities and limiting threats brought by the market, Agribank Dong Da uses a strategy of combining competition and cooperation based on stable strategy and development orientation of the branch in particular and Agribank in general.

Some solutions to implement a business strategy

On the promulgation of mechanisms and policies

- Continue to review, make additional contributions, develop mechanisms and policies as required in Circular 13/2018/TT-NHNN, improve the efficiency

88 and quality of Agribank's credit, and complete the credit policy mechanism by Basel II standards 4

- Participate in completing credit mechanisms to ensure synchronisation and compliance with the provisions of law and the SBV while improving the initiative in business activities of units while ensuring risk control

- Propose to consider adjusting the authority of credit judgments according to branches' management capacity and business environment, especially in Hanoi

- Coordinate in monitoring, supervising and proposing measures to handle cases of reaching/violating credit risk limits and credit concentration risk limits as prescribed

About customer support affected by covid-19

Continuing to remove difficulties for customers affected by Covid-19, natural disasters and climate change, Agribank Dong Da needs:

- Closely follow the direction of the Government and the SBV, regularly monitor the situation and developments of epidemics and natural disasters and take actions to help and create conditions for affected customers to face difficulties for production and business

- Review credit subjects with structural policies according to Circular 01 to inform the State Bank of interest rate support according to objective causes of force majeure

- Regularly supervise the implementation of compliance, conduct unscheduled inspections with units that are slow to deploy, implement wrong objects, and many complaints and reflections Resolutely handle the responsibility of the head and relevant individuals if a mistake occurs

4 Problematic debt management regulations; Regulations on credit security transactions (according to the government's newly promulgated Decree); Regulations on management of risky assets, associated with the assignment of credit plans with the requirement to ensure the growth of risky assets according to Agribank's objectives; Regulations on purchase and investment of corporate bonds; Factoring Regulations; Regulations on affiliate lending Lending for life needs, small-scale real estate business, overdraft loans for individual customers, legal entities, completing credit policies for VIP customers, traditional customers, corporations/ corporations

- Regularly review and analyse the impact of policies to support customers affected by the Covid-19 epidemic, have solutions to handle debt collection, reduce bad debts, reduce provision costs and reduce economic effects for Agribank

- Manage credit growth by the actual situation associated with restructuring the portfolio of risky assets in the direction of continuing to increase credits with low credit risk factors; ensure compliance with credit risk limits, centralised risk limits and capital adequacy ratios; priority growth for branches with good credit quality

- Continue to implement the policy of lending priority areas by the Government's regulations; expand group loans and loans under the mobile transaction point scheme by specialised cars to ensure efficiency, and management ability, reduce operating costs and reduce the workload for credit officers

- Continue actively increasing the proportion of loans to corporate customers and be proactive in finding, reaching, and screening customers effectively

- Priority is given to promoting credit growth for retail customers, small and medium-sized business customers, and customers capable of developing various services and cross-selling products in big cities

- Strictly control credit growth, credit structure and credit quality, strengthen credit risk management for potentially risky areas, large outstanding customers, and corporate bond investment activities; Strengthen risk management for the consumer sector, life loans, loans to related customers not affiliated customers, value chains; Strictly comply with the provisions of the law on credit granting, on the method of disbursement of loans using non-cash payments; Strictly control the purpose of using borrowed capital of customers, minimising the increase in bad debts of credit grants

- Proactively approach, expand relations and strengthen strategic cooperation for customers who are large enterprises and economic groups; effectively

90 implement signed cooperation agreements, ensure the overall benefits of Agribank, and link credit growth with capital mobilisation and service development

- Develop preferential credit programs with the following subjects: Corporations/ Corporations; Import and export; Loans under bananas; Green Credit

- Apply a flexible lending interest rate mechanism according to the loan’s safety and Agribank's ability to cross-sell products and services

- Organizing business connections through conferences, seminars, cooperation programs, and regular participation in activities of business associations and entrepreneurs of which Agribank is a member

- Develop technology infrastructure, support the development of the whole system, especially in the analysis and planning of borrowers and the use of banking products and services, forming a supply chain closely linked to customer needs, creating conditions for the development of retail banking models

About reviewing and handling bad debts

- Develop and drastically implement plans to handle bad debts and off-balance sheet debts; take measures to remove customers who face difficulties, have goodwill and are still able to repay debts;

- Resolutely apply all measures as prescribed by the law to accelerate the recovery of internal and external bad debts before determining the value of Agribank for equitisation

- Consider responsibilities and take strict measures against the head of the branch that violates credit regulations and high bad debt due to subjective reasons

- Actively seek and expand partners in addition to VAMC, DATC to consult, broker to buy/sell bad debts and collateral of debts

- Continue to build and perfect modules, monitor for financial statements, and post-processing debts gradually move towards centralised data

91 management, automate the exploitation of data and reporting information related to monitoring the bad debt situation

- Direct the overall inspection of credit activities according to the Party Committee of Agribank, checking based on key risk factors: related customer groups, structural debts, bad debts, and unsecured debts

- Develop an inspection plan at the beginning of the year, actively regularly review, select branches with enormous bad debts, many related customer groups, outstanding consumer loans related to large real estate, and propose unscheduled and periodic inspections to promptly correct, limit wrongdoing

- Frequently inspect and supervise loans that exceed their rights periodically, focus on monitoring and controlling the implementation of conditions according to the approval notice of the CEO, and manage the loan’s cash flow and the collateral of the loan

- Frequently review the actual situation of long-term debts that have not collected interest and have large interest reserves to ensure substance by the provisions of the law and the guiding documents of the SBV

- Strengthen supervision and management of customer groups from initial exploitation on IPCAS to monitoring disbursement limits and controlling loans to ensure safety and efficiency

About training and improving professional qualifications

Proposing some conditions for implementing the strategy

Located in Agribank's system, Agribank Dong Da carries out credit activities that have achieved specific achievements but still have many difficulties and problems To implement the strategies mentioned above, and at the same time help Agribank Dong Da branch develop and complete the business plan, effectively implement credit programs and policies, improve competitiveness and financial capacity, and successfully implement equitisation in the coming time, below are recommendations to regulators and Agribank

For the Government, the Ministry of Finance, and other ministries

The implementation of investment projects in the technology field currently faces many problems due to the need to comply with many procedures and procedures, leading to a long implementation time and difficulty meeting the requirements of Industry 4.0 The Government needs to have appropriate mechanisms on the order, strategies and time when implementing projects in this field to meet the requirements of bank modernisation, digital banking implementation

Agribank Dong Da is implementing the Government's preferential interest rate lending programs according to Resolution 30A/2008/NQ-CP dated December 27th, 2008, on the program to support rapid and sustainable poverty reduction for

61 poor districts, Decision 68/2013/QD-TTG dated November 14th, 2013, on support policies to reduce losses in agriculture, Decree 67/2014/ND-CP of the

Government on several fisheries development policies (now Decree 17/2018/ND- CP); the amount of support for customers is enormous Every year, Agribank Dong

Da has made and transferred Agribank so that Agribank can create a plan to compensate and support interest rates to send to ministries and agencies to submit to the Government but is informed that the state budget capital plan is very little, not enough for Agribank to settle according to the arising reality The Government shall consider directing to have a state budget capital plan on granting compensation and interest rate support to Agribank annually according to the actual number incurred so that the Ministry of Finance can settle and give interest rate compensation to Agribank, the branch has sufficient capital to ensure financial capacity, continue to implement lending programs according to the Government's guidelines

The implementation of debt settlement solutions under Resolution No 42/2017/QH14 currently faces many problems The application of the abridged procedure at the Court must meet many conditions and still face many difficulties The application of payment priority order when dealing with collateral, especially in cases where the processes are less than the payment obligation, in many cases, the bank must pay personal income tax on behalf of the person whose assets are auctioned; the lack of synchronisation, consistency and drastic of the parties when participating in bad debt settlement Ministries and sectors need to consider handling arising problems and continue to be more powerful At the same time, support credit institutions to synchronously implement solutions on bad debt settlement of the whole industry in general and of Agribank in particular, more effectively implement debt settlement solutions according to Resolution 42: the application of shortened proceedings when resolving disputes arising related to secured assets; the seizure of collateral, the transfer of the project; guide the fulfilment of tax payment obligations on the collateral of bad debts after being processed There is a policy of exemption from taxes and fees (including execution fees) when handling secured assets that are not enough to collect or spend enough to pay to credit institutions

Agribank has been granted VND 3,500 billion of charter capital after distributing profits of VND 8,900 billion in 2019 According to the plan approved by the SBV, the capital adequacy ratio does not meet the regulations of 9% This directly affects the fact that Agribank Dong Da also ensures the capital adequacy ratio Agribank, in general, and Agribank Dong Da in particular cannot grow credit but also must decrease in 2021 The Government should consider and approve the capital increase plan for the period 2021-2025 for the bank, granting at least VND 5,000 billion in the next year to meet the SBV's regulations and international standards, ensuring conditions for giving credit to agriculture and rural areas

Urgent, immediate solutions for Agribank to both meet credit growth, especially for agricultural and rural capital needs, and ensure safety ratios; the Government needs to allow Agribank to apply a risk factor of 50% for unsecured loans according to Decree No 55/2015/ND-CP dated 09/6/2015 on credit policies for development Agricultural and rural development and Decree No 116/018/ND-

The Government and the SBV task Agribank to play a vital role in lending for agricultural and rural development, but lending capital still has to compete with mobilisation like other commercial banks without appropriate support mechanisms

At the same time, the ratio of outstanding loans to total deposits decreases, reducing the ability to grant credit to customers The SBV should consider having an appropriate mechanism, allowing to adjust the time limit for implementing the ratio of outstanding loans to total deposits specified in Circular No 22 dated January 1 st ,

2021, and correspondingly backwards the roadmap for implementing measures and handling plans to ensure compliance with the ratio of outstanding loans to total deposits before January 1 st , 2024, to ensure compliance with the percentage of delinquent loans to total deposits before January 1 st , 2024, to ensure compliance with the ratio of outstanding loans to total deposits before January 1 st , 2024, to ensure compliance with the percentage of delinquent loans to total deposits before January 1 st , 2024, to ensure compliance with the percentage of outstanding loans to

95 total deposits before January 1 st , 2024, to ensure the ability to grant credits for rural agriculture

Soon consider amending Circular No 01/2020/TT-NHNN allowing the restructuring of debt repayment terms according to customers, removing the content of debt structure according to due balance and stipulating that a customer has only one group of debts because customers are tough, even after the end of the epidemic; guide the detailed set of criteria to evaluate customers affected by the Covid-19 epidemic and in lending new to this customer

5.6.2 For Vietnam Bank for Agriculture and Rural Development

Credit activities are still the main activity and the main operation that brings income to the Agribank system In the coming time, Agribank needs to:

- Unify awareness and consistent actions in credit policy implementation with a long-term vision

- Proactively develop a system of policies and indicators, limit with warning of pitfalls and high risks, build lending limits for specific industries and areas to disperse risks, and provide guidance for branches to implement

- Organize credit seminars (online and offline) for branch staff to exchange work experiences and improve their qualifications

- Timely and specific guidance on documents and decisions of the SBV, Agribank and related departments

- Strengthen internal inspection and control activities throughout the system to improve the activities of the Branch and human resources

- Coordinate with the SBV to review credit processes and, simultaneously, review, synthesise and transfer opinions from branches submitted in written form to complete the general State policy system on credit

- Consider and gradually improve the infrastructure of facilities and technology in the system of branches of the bank, especially units with exemplary achievements such as Agribank Dong Da

- Develop strategies for cooperation and competition with domestic credit institutions and orient the branch to implement with other components of credit institutions in the area

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3 Agribank - Dong Da Branch (2015, 2016, 2017, 2018, 2019, 2019) Report on Thematic Credit of Agribank - Dong Da Branch

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Master of business administration, School of business, University of Nairobi

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QUESTIONNAIRE FOR MANAGERS AND EMPLOYEES OF AGRIBANK DONG DA

Dear officers and employees of the Agribank Dong Da branch!