EVALUATION OF CONSUMER LENDING ACTIVITIES AT VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

Nowadays, banking is one of the most important financial channels for the economy. Improving and expanding banking activities are the orientation and guideline for banks to survive and grow in the increasingly fierce competition. Among that, credit activity is a vital field in the bank and decides most of other activities in the national economy. It is also a main source of creating profitability and decides the existence and development of the bank. For a long time, most banks only focused on lending the production business but not much paid attention to the final stage of producing – consuming. Actually, when society increasingly grows, not only the enterprises need capital to make business and expand the current market but the individual need more capital than ever before as well. People’s living standards are more and more improving, not only in need of basic necessities like food, clothes but also tons of needs both in mental and physical life.

I dedicate all my efforts and struggles of the educational life of my dear parents whohelp support and guide the course of my educational life, without them I’m meaningless.Also I devote the work of this internship report on Agribank report, as respectable andhonorable teachers who teach and support me develop my personality as a competentprofessional My all internship work is dedicated to following employees ofAgribank They are too much supportive and teach me how to learn a practical life Theyalways give me different tasks which bring more knowledge to me and guide me how toaccomplish these tasks

on this report Without her help, this report could not have been completed

Besides, my sincere thanks are also given to the Faculty of English for Banking andFinance, Banking Academy for the devoted teaching of all the lecturers and for giving methe knowledge and studying methods Their teaching not only helps me gain valuableknowledge and skills during 4 years but also lays the foundation for my future work.Next, I would like to express my special thanks to the staff at the Agribank fifthtransaction department of Cau Giay Branch for their big support so that I could finish myinternship there and finish the paper successfully

Last but not least, I wish to extend my thanks to my family and frinds for theirsupport, contribution and encouragement in the making of this report

However, owing to my lack of experience and knowledge as well as the limited scope ofthe research, some shortcomings and mistakes are unavoidable Please kindly take intoaccount

Executive Summary

Nowadays, banking is one of the most important financial channels for theeconomy Improving and expanding banking activities are the orientation and guidelinefor banks to survive and grow in the increasingly fierce competition Among that, creditactivity is a vital field in the bank and decides most of other activities in the nationaleconomy It is also a main source of creating profitability and decides the existence anddevelopment of the bank

For a long time, most banks only focused on lending the production business but notmuch paid attention to the final stage of producing – consuming Actually, when societyincreasingly grows, not only the enterprises need capital to make business and expand thecurrent market but the individual need more capital than ever before as well People’sliving standards are more and more improving, not only in need of basic necessities likefood, clothes but also tons of needs both in mental and physical life

People’s psychology has changed now, which considered borrowing as the need touse the goods before liquidity To meet that need, banks have developed a new creditmode: consumer loans It contributes to raise bank’s revenue It means consumer loanshelp individual obtain capital to improve their lives

After studying the activities of AFTD for a period of time, I found out that the bankwas concerned about the consumer loans However, it has not been actually the majoractivity of the bank Therefore, continuing research and offering solutions would bringenormous significance for both theoretical and practical aspects for the diversification of

the bank’s activities For this reason, the issue “EVALUATION OF CONSUMER LENDING ACTIVITIES ATVIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT” has been chosen for my internship report

This report mainly aims at:

• Referring factors affecting the development of consumer loans

• Analyzing figures and data relating to the operations of consumer loans at AFTD

• Describing the AFTD’s current situation of consumer loans

• Evaluating the effectiveness of those activities

• Suggesting some solutions to improve the branch’s competitiveness

Methodology

1 Desk research: the study is based on figures and information from AFTD of Cau Giaybranch’s internal data and theory mainly from David Cox (1997), Modern BankingOperations

2 Other secondary data: information of Agribank, AFTD, Vietnam’s economy andpolicies, etc were collected from the TV, internet, newspaper, magazines …

3 Primary data: Interviews to executive managers at the department of Credit Activities

in AFTD, as well as staff who directly involves in consumer loans operations

Hanoi, April 29 th , 2014

TABLE OF CONTENTS

TABLE OF CONTENTS 6

List of tables 7

List of figures 8

Part 1: Introduction about Agribank 9

1.1 Overview of Agribank 9

1.1.1 Brief history 9

1.1.2 Nature of the organization 10

1.1.3 Business volume 12

1.1.4 Main products and services 12

1.1.5 Competitors 13

1.2 Organizational structure 14

1.2.1 Organizational chart 14

1.2.2 Number of employees 15

1.2.3 Main offices 16

1.2.4 Introduction of all departments 16

Part 2: Description of the internship 18

2.1 The establishment of Cau Giay Branch of Agribank and the fifth transaction department 18

2.1.1 The establishment of Cau Giay Yen Branch of Agribank 18

2.2 Internship activities 20

2.2.1 Training phase 20

2.2.2 Internship contents 20

2.2.3 Internship process 20

2.3 Critical analysis 20

Part 3: Recommendations & Conclusion 22

3.1 Some recommendations for the development of consumer lending at AFTD 22

3.2 Conclusions 27

Reference 28

List of tables

List of figures

Part 1: Introduction about Agribank

Understanding the importance of the internship to the later professional career, I

chose the fifth transaction department – Cau Giay Branch, directly under the control of

Vietnam Bank for Agriculture and Rural Development as my internship location fromFebruary 25th to May 18th, 2014 It is really an ideal working environment for me when

my major is English – Finance and banking Following is the general introduction of myinternship milieu

1.1.1 Brief history

AGRIBANK (Vietnam Bank for Agriculture and Rural Development) has becomeone of the leading commercial banks playing a major role in making investment inagricultural economic development in rural areas, together with other sectors of Vietnameconomy

 Full Name: Bank of Agriculture and Rural Development Vietnam

 International transaction name: Vietnam Bank for Agriculture and RuralDevelopment

 Abbreviated name : AGRIBANK

 Headquartered at: 18, Tran Huu Duc, My Dinh, Tu Liem, Hanoi

 Website: www.agribank.com.vn

 Email: webmaster@agribank.com.vn

Agribank's milestones in development:

1988: Established under the name of Agricultural development Bank of Viet Nam bydecree No 53/HDBT dated 26 March, 1988 of the Council of Ministers (now theGovernment)

1990: Changed name to Vietnam Bank for Agriculture (VBA)

1991: Established the representative office of Vietnam bank for Agricultural in Ho ChiMinh City.

1992: established VBA provincial branches

1994: Approved new innovative management system model of the Agribank and began to

be organized into a State-owned Corporation

1996: Changed name to Vietnam Bank for Agriculture and Rural Development(AGRIBANK)

2001-2010: Implemented the plan of bank restructuring

2001: Became the leading commercial bank in Vietnam, with the most extensive network

of branches in rural areas

2002: Became a member of APRACA and the Confederation International du CreditAgricole (CICA)

2009: Utilized modern information technology to develop and introduce modern bankingproducts and services, payment connectivity with the State Treasury, in coordination withTaxation and Customs Offices for the collection of state budget;

2010: Be in Top 10 of 500 largest enterprises in Vietnam and continuously to be thelargest Financial Institution in Vietnam

2011: Completely changed into Ltd company with 100% capital of state and became theleading credit institution for pilot lending for the new rural construction

2012: Won the title such as: Top 10 biggest enterprises in Vietnam – VNR500; TopASEAN Enterprise, Top brand name of ASEAN; Top Bank for Payment; Top Banks ofVietnam

2013: Held the 25 year universal (March 26, 1988 – March 26, 2013)

1.1.2 Nature of the organization

Agribank was established by Decree No 53/HDBT dated 26 March, 1988 of theCouncil of Ministers (now the Government) with the reform of the financial system andthe introduction of commercial banks in Vietnam

The Agricultural Development Bank of Vietnam was created out of the State Bank ofVietnam (SBV) After being established in November 1990, the Vietnam Bank forAgriculture was by law a legal entity having universal banking functions with majorfocus on agricultural sectors and rural areas, and responsible for its own finance,operations.

On 30 July, 1994, by Decision No.160/QD-NHN9, The Governor of the StateBank of Vietnam approved new innovative management system model of the Agribank,

on that basis, the General Director of VBA specified in writing in document No.927/TCCB/VBA dated 16 August, 1994 which detailed as: the Vietnam Bank forAgriculture had two levels: Advisory level and Operational level This was truly a turningpoint in the organizational structure of VBA and set the foundation for businessoperations of the existing Vietnam Bank for Agriculture and Rural Development

On March 7th, 1994 pursuant to the Decree No 90/TTg of the Prime Minister, VBAbegan to be organized into a State-owned Corporation with the organizational structureconsisting the Board of Directors, General Director, assisting apparatus includingapparatus for internal control, subsidiaries including dependent accounting business units,independent accounting business units, and executive and non-executive functions wereclearly separated, in which Chairman of Board of Directors and General Director weretwo separate roles

On 15 November, 1996, under the new name, Agribank is allowed to carry outcommercial banking activities but with a focus on investment for agricultural sector andrural areas by providing medium and long-term loans for infrastructure development,particularly agriculture, fishery, forestry, contributing to the cause of industrialization andmodernization of agriculture and rural development In 2002, Agribank expandedoperation at home market as well as strengthened international relations

In the context of the world economy and Vietnam in particular facing many difficulties inthe economic crisis, Agribank remains sustainable development and growth Agribankhad the total assets of VND 617,859 billion (approximately 20% GDP), rose by 10%

compared with 2011 As the biggest commercial bank in Vietnam in terms of fundresources, assets, and the bad debts are controlled.

Total outstanding loans 469,000

Table 1: Business volume

Operating network: 2,400 branches and transaction offices nationwide; 1,033correspondent banks in 92 countries and territories and a customer base of over millionscustomers • Personnel: 42,000 staffs

1.1.4 Main products and services

- Accounts and deposits: accepting deposits and mobilizing savings with the diver,attractive interest rates such as promissory notes, bonds, certificates of deposit

- Loans: lending in short, medium or long term, daily life consumption, investmenttrusts; mortgage lending by valuable papers, co-sponsored loans, lending by issuingcredit cards

- Guarantee: implementing businesses; payment guarantees; bid guarantee;contract performance guarantee, contract of guarantee, guarantee confirmation

- Domestic payment services: domestic money transfer services, service ofcollection and payments; state budget collection services, bill payment services,automatic collection services

- Securities: the point of providing Agriseco’s services, implementing transactions

of opening accounts,securities registration, securities trading

- Foreign Exchange Services: import and export payments under the creditmethods such as L/C; cash transfer; foreign currency trading; remittance payment ;currency exchange

- Border payment with Laos: including bank drafts, cross-border money transfersdocuments, trading transaction payment, deed of trust and e-transfers, letters of credit andletters of trade border payment guarantee letter

- Card Services: issuing domestic debit card (success); international debit card(master/visa debit); International credit cards (Master/Visa credit); business card set

- Electronic banking (e-banking): mobile banking services (VnTopup - phonerecharging services via SMS, SMS banking; Atransfer – SMS money transfer service);VnMart services, internet banking; Apaybill

- Insurance: Security credit insurance; Insurance for international cardholders,cargo insurance, fire insurance; insurance of automobiles, motorcycle, human; otherkinds of insurance

- Other services: provide account information; automatic salaries paying andreceiving service; safe leasing services; consulting services and other services

at Figure 1 :

Figure 2 : The organization structure of BIDV 1.2.2 Number of employees

Agribank is the commercial bank having the largest number of employees inVietnam’s banking system with the total number of 42,000 employees as of 31 December

2013 Agribank has always placed a high priority on human resources training anddevelopment Human resources training and development are considered the decisivefactor in the success of all activities

1.2.3 Main offices

1.2.4 Introduction of all departments

Director is responsible for selecting, monitoring, and evaluating competent

management; establishing business strategies and policies; monitoring and assessing theprogress of business operations; establishing and monitoring adherence to policies andprocedures required by statute, regulation, and principles of safety and soundness

Deputy General Director helps the Director to guide some banking operations,

and takes responsibility for his actions to Director and Law; represent Director to manageauthorized duty; take part in complementing obligations in concord with principle ofdemocratic centralism

Accounting-budgeting Department- entering into account directly; making

financial plan, drawing the balance sheet; conducting payment to budget and settlement

in concord with regulation; managing, using technology devices, informatics to supportfor business operation

Computing Department – recapitulating, count and store data, information

relating to bank’s activities; handling arising operations that are in relation to posting,statistic accounting; complementing reporting regime, statistics and information inconcord with regulation; manage, maintain and repair informatics devices

Personnel -Administration Department- creating monthly and quarterly business

plans; advising legislation about contract commitment, contentious business, civilian,criminal, financial dispute, etc; manage stamp directly; complementing administrativework, stationary, transport, security, medical; conducting payment and insurance regime,managing and completing employee profiles