The impact of borrowers attributes on the possibility of SMEs loan approval in HCMC, viet nam luận văn thạc sĩ

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAN THI TRAN NGA THE IMPACT OF BORROWERS’ ATTRIBUTES ON THE POSSIBILITY OF SMEs LOAN APPROVAL IN HCMC, VN MASTER’S THESIS SUPERVISOR: Dr CAO HAO THI Ho Chi Minh City, 2013 i ACKNOWLEDGEMENTS Firstly, I would like to express my gratitude to Dr Cao Hao Thi, my supervisor who has given a zealous support and advices during doing research period Especially, I am grateful for his enthusiasm in answering, reminding as well as his feedback, guidance and correction for me able to accomplish this thesis Secondly, I would like to thank Dr Dinh Thai Hoang who taught data analysis, helped me analysis methodology and data process of this thesis as well Thirdly, I would also like to thank all of my lecturers at International School of Business (ISB) – University of Economics Ho Chi Minh City (UEH) – for exchanging & sharing their knowledge and experience during my master course Enthusiastic assistance provided by the ISB’s executive board and staffs was also greatly appreciated Next, I would like to say thank you for creditors, who helped me to conduct survey, gave suggestions and shared their experience in profession to this research better Last, I would also want to thank my friends and classmates who share their knowledge support, and work with me during time I this study ii ABSTRACT Small and medium sized Enterprises (SMEs) play an important role in transitional economies and have high relevance for their economic policy of many countries In Vietnam, SMEs account for 77 percent and 87 percent by regular workforce and registered capital criteria in 2011 (Cuong, Sang & Anh, 2008) and produce over 40% of GDP Yet, the SMEs have some difficulties in lacking of finance supply from financial institutes or banks So this research will identify the factors effecting to the loan decision-making From those factors, researcher will find down the key one that impacts strongest on the possibility of loan approval Before a bank decides to invest into companies in a form of loan, they will put into consideration a lot of aspects In this decision making process, bank officers will take into account a lot of different kind of borrower’s attributes related to background and experience, the business and conditions surrounding it This research is done by thorough literature review on concepts relating to six borrower’s attributes The analyzing result found there are only three among six borrower’s attributes which have positively related to possibility of SMEs loan approval The research model explained 47.3% the variance of the borrower’s attributes on the possibility of SMEs loan approval Key words: SMEs, loan approval, relationships with the bank, value of collateral, firm size, related business experience, share of investment, business plan iii TABLE CONTENT ACKNOWLEDGEMENTS i ABSTRACT ii ABBREVIATION v LIST OF TABLES vi LIST OF FIGURES vii CHAPTER INTRODUCTION 1.1 Research background 1.2 Research Problem 1.3 Research objectives 1.4 Research scope 1.5 Research contribution 1.6 Research structure CHAPTER LITERATURE REVIEW 2.1 Approval loan 2.2 Borrower's Attributes 2.2.1 Relationship with the bank 2.2.2 Firm size 11 2.2.3 Value of collateral 12 2.2.4 Related business experience 13 2.2.5 Share of investment 14 2.2.6 Business plan 15 2.3 Lender’s human capital 17 2.3.1 Education 18 2.3.2 Lending experience 19 2.4 Research model 19 2.5 Hypotheses of this study 20 CHAPTER 3.1 RESEARCH METHODOLOGY 22 Research process 22 iv 3.2 Measurement scale 24 3.3 Sample size 26 3.4 Methods of data collection 27 3.5 Methods of data analysis 28 3.5.1 Descriptive statistic 28 3.5.2 Testing the reliability 28 3.5.3 Exploratory Factor Analysis (EFA) 29 3.5.4 Multiple regression analyses 29 CHAPTER 4.1 DATA ANALYSIS 31 Result of Pilot survey 31 4.1.1 Testing the reliability of Relationship with bank and business plan 31 4.1.2 Exploratory factor analysis (EFA) 33 4.2 Result of official survey 34 4.2.1 Descriptive statistics analysis 34 4.2.2 Refinement of measurement scale 37 4.2.3 Hypotheses testing 41 CHAPTER CONCLUSION 50 5.1 Findings 50 5.2 Managerial implications and recommendation 52 5.3 Research Limitations 54 5.4 Suggestions for further research 54 REFERENCES XI APPENDIX A INTERVIEW QUESTIONS XVII APPENDIX B QUESTIONNAIRE XIX APPENDIX C DISCUSSION FOR EXPLAINATION XXVIII APPENDIX D REGRESSION RESULT XXIX v ABBREVIATION SMEs: Small and medium enterprises SPSS: Statistical Package Software for Social Science EFA: Exploratory factor analysis vi LIST OF TABLES Table 3.1a Measurement scale for independent and dependent factors 25 Table 3.1b Measurement scale for control variables 26 Table 4.1 Reliability of Relationship with the bank (REL) 32 Table 4.2 Reliability of Business Plan (PLA) 32 Table 4.3 KMO and Bartlett's Test 33 Table 4.4 Total Variance Explained 33 Table 4.5 Rotated Component Matrixa 34 Table 4.6 Descriptive statistics 35 Table 4.7 Reliability of relationship with the bank (REL) 37 Table 4.8 Reliability of business plan (PLA) 38 Table 4.9 KMO and Barlett’s Test 38 Table 4.10 Total Variance Explained 39 Table 4.11 Rotated Component Matrixa 40 Table 4.12 Matrix Correlations between variables in equation regression 42 Table 4.13 Model Summaryb 44 Table 4.14 Regression analysis result 44 Table 4.15 Hypotheses summary 47 vii LIST OF FIGURES Figure 1.1 SMEs’ contribution for economy by country Figure 2.1 The Research model 20 Figure 3.1 Research process 23 Figure 4.1 The revised research model 48 CHAPTER 1.1 INTRODUCTION Research background Small and medium sized Enterprises (SMEs) play an important role in transitional economies and have high relevance for their economic policy of many countries Thus, governments throughout the world focus on the development of the SME sector to promote economic growth (Olawale & Garwe, 2010) In Vietnam, according to a Spring 2011 report the number of SMEs is nearing 400,000 SMEs represent 99 percent of the number of businesses of the country and occupy an overwhelming proportion in total number of country’s enterprises accounting for 77 percent and 87 percent by regular workforce and registered capital criteria in 2011 (Cuong, Sang & Anh, 2008) According to the government over 40% of GDP is produced by SMEs From that, SMEs have vital and undeniable roles in promoting economic and social development in Vietnam They have made a significant contribution to the country’s advancement and enhancing the efficiency and the flexibility of the economy (Cuong, 2007) Apart from being a relatively dynamic sector in the economy, SMEs have role in creating jobs, maintaining high mobility of the labor market, and narrowing development gaps among localities of the country (Cuong, Sang & Anh, 2008) Despite the positive contribution for economy, SMEs still face the difficulty in accessing loan So the financing for small and medium enterprises (SMEs) recently years has been a subject of great interest both to policymakers and researchers (Beck, Demirgüç-Kunt, & Pería, 2009) Because financing loan is necessary for enterprises in the economic crisis period Especially for SMEs, accessing finance becomes more important because that helps them have capital to continue operating and developing However, with limited supply fund from financial institutions, but increasing financial demand of enterprises, how SMEs to access loan that depends on many factors, including the borrower’s attributes and banks’ side ones And how the borrower’s attributes affect to the possibility of SMEs loan decision-making which is the issue needs to research in this paper The figure 1.1 illustrates a more in-depth look of the breakdown the small business impact on the economy by country Figure 1.1 SMEs’ contribution for economy by country Source: SMEs in Asian Report 2011–12; McKinsey Global Institute analysis XVII APPENDIX A INTERVIEW QUESTIONS Good evening Sir/ Madam, I am Phan Thi Tran Nga, a Master student of ISB, University of Economics Ho Chi Minh City I am doing thesis research “The impact of borrower’s attributes on the possibility of SMEs loan decision-making” I wish all of you to spend time helping me to conduct this interview so that I can complete the questionnaire Sincerely thanks you so much for your help What factors affect to the possibility of SMEs loan approval? What is the key factor impacting strongly on this decision? Does your bank apply the 5Cs principle in credit to access borrower as well as lending decision-making? Do the borrower’s factors affect to the possibility of loan approval? Such as: Relationship with the banks, firm size, value of collateral, related business experience, and share of investment What are the recommendations to borrower when they apply loan application to get loan? XVIII CÂU HỎI PHỎNG VẤN Chào Anh/ chị, Tôi Phan Thị Trân Nga - học viên cao học Viện Đào Tạo Quốc Tế (ISB) – Trường Đại Học Kinh Tế Tp.HCM Tôi thực đề tài nghiên cứu “Sự ảnh hưởng yếu tố người vay đến khả định cho Doanh nghiệp vừa nhỏ vay” ngành ngân hàng, khảo sát TP HCM Rất mong anh/chị dành thời gian giúp thực vấn để hoàn thành bảng câu hỏi Rất cảm ơn giúp đỡ anh/chị Những yếu tố ảnh hường đến khả cho Doanh nghiệp vừa nhỏ vay? Yếu tố yếu tố tác động mạnh đến định cho vay? Ngân hàng anh/ chị có áp dụng quy tắc 5C tín dụng đế thẩm định người vay định cho vay không? Các yếu tố ngừơi vay có ảnh hưởng đến khả cho vay không ? mối quan hệ với ngân hàng, quy mô doanh nghiệp, giá trị tài sản đảm bảo, kinh nghiệp ngành nghề kinh doanh liên quan, tỷ lệ vốn chủ sở hữu Những lời khuyên cho người vay nộp hồ sơ vay để nhận chấp nhận cho vay? XIX APPENDIX B QUESTIONNAIRE Dear all, I am Phan Thi Tran Nga, a Master student of ISB, University of Economics Ho Chi Minh City I am doing thesis research “The impact of borrower’s attributes on the possibility of SMEs loan decision-making” I wish all of you to spend time to this survey If you are interested in this subject, I will send to you a copied report after completed for your reference If you have any comment or suggestion, please contact to the email address: ngaphan072008@gmail.com Sincerely thanks you so much for your help Instruction To make assessment to probability of loan approval, all of you, creditors will use the information from a recent loan application which you are processing procedure or closed profile Then would you please answer the question below as following each request A Assessment of borrower’s attributes Relationship with the bank The borrower started using our bank’s service long time ago (> years) Completely disagree Completely agree XX We made positive experience in the past Completely disagree Completely agree We are obliged to the borrower Completely disagree Completely agree The borrower informs us immediately about problem Completely disagree Completely agree Our relationship is stable under pressure Completely disagree Completely agree Value of collateral How much is value of collateral relative to an amount of credit? (% collateral value/ amount of credit) Firm size How much is annual sale level? (Billions VND) XXI Related business experience How many years does the firm relate business experience? (years) Share of investment How much capital is invested by the owner towards the operation of the firm? _ (% owner’s capital/ required capital) Business plan The borrower has developed financial projection for the venture Completely disagree Completely agree The venture has gathered information about the market and competition Completely disagree Completely agree The borrower has completed a business plan Completely disagree Completely agree B Possibility of loan approval From the assessment of borrower’s attributes above, please answer the question: “How would you rate the probability that you would support this credit application?” Highly unlike Very likely XXII C Personal information of creditor I wish you provide your personal information by selecting appropriate answers I declare the following content will be kept confidential and used only for research purposes Sex Male Female Age group 20 - 30 years 31 - 40 years 41 - 50 years > 50 years Education background University Postgraduate Respondent works for financial institute Foreign bank State commercial bank Corporate commercial bank Banking experience < years -10 years 10 - 15 years > 15 years Lending experience < years - 10 years 10 - 15 years > 15 years XXIII BẢNG KHẢO SÁT Kính chào anh/chị, Tôi Phan Thị Trân Nga - học viên cao học Viện Đào Tạo Quốc Tế (ISB) – Trường Đại Học Kinh Tế Tp.HCM Tôi thực đề tài nghiên cứu “Sự ảnh hưởng yếu tố người vay đến khả định cho Doanh nghiệp vừa nhỏ vay” ngành ngân hàng, khảo sát TP HCM Rất mong anh/chị dành thời gian thực bảng khảo sát bên Nếu anh/chị quan tâm đến đề tài, báo cáo sau hoàn thành gởi đến anh/chị để anh/chị tham khảo Mọi ý kiến đóng góp xin vui lòng gửi địa chỉ: ngaphan072008@gmail.com Chân thành cám ơn hỗ trợ anh/chị! HƯỚNG DẪN THỰC HIỆN Để đánh giá khả định cho vay, anh/ chị cán tín dụng ngân hàng sử dụng thông tin hồ sơ vay, đơn xin vay gần doanh nghiệp với quy mô vừa nhỏ, mà anh/ chị tiếp nhận xử lý, hoàn tất, đóng hồ sơ Và trả lời câu hỏi bên theo yêu cầu câu sau: XXIV A Đánh giá đặc điểm người vay (Doanh nghiệp vay) Mối quan hệ với ngân hàng Doanh nghiệp bắt đầu sử dụng dịch vụ ngân hàng chúng lâu (> năm) Hoàn toàn không đồng ý Hoàn toàn đồng ý Trước hợp tác tốt với Hoàn toàn không đồng ý Hoàn toàn đồng ý Ngân hàng hỗ trợ, giúp đỡ doanh nghiệp Hoàn toàn không đồng ý Hoàn toàn đồng ý Doanh nghiệp thông báo kịp thời cho khó khăn họ Hoàn toàn không đồng ý Hoàn toàn đồng ý XXV Mối quan hệ ngân hàng doanh nghiệp bên chặt hoàn cảnh Hoàn toàn không đồng ý Hoàn toàn đồng ý Giá trị tài sản chấp Tổng giá trị tài sản chấp cho ngân hàng so với hạn mức tín dụng xin cấp doanh nghiệp bao nhiêu? (% giá trị tài sản chấp/ hạn mức tín dụng) Quy mô doanh nghiệp Doanh thu trung bình hàng năm doanh nghiệp bao nhiêu? (Tỷ đồng) Kinh nghiệm liên quan đến ngành nghề kinh doanh doanh nghiệp Doanh nghiệp có năm kinh nghiệm lĩnh vực mà họ kinh doanh? (năm) Tỷ lệ góp vốn chủ doanh nghiệp Vốn góp chủ doanh nghiệp chiếm tổng nhu cầu vốn _ (% vốn chủ sở hữu/ tổng nhu cầu vốn) XXVI Phương án sản xuất kinh doanh Doanh nghiệp lập kế hoạch tài cho dự án Hoàn toàn không đồng ý Hoàn toàn đồng ý Dự án thu thập đầy đủ thông tin thị trường đối thủ cạnh tranh Hoàn toàn không đồng ý Hoàn toàn đồng ý Doanh nghiệp hoàn thiện phương án kinh doanh Hoàn toàn không đồng ý Hoàn toàn đồng ý B Đánh giá khả cho vay Từ kết đánh giá đặc điểm người vay phần A, anh chị trả lời câu hỏi: “Anh chị đánh khả anh, chị tài trợ/ cấp tín dụng hồ sơ vay này?” Hoàn toàn Rất XXVII THÔNG TIN CÁ NHÂN CỦA CÁN BỘ TÍN DỤNG Anh/chị vui lòng cung cấp số thông tin cá nhân cách chọn câu trả lời thích hợp Tôi cam đoan nội dung bảo mật sử dụng cho mục đích nghiên cứu Giới tính anh/chị Nam Nữ Anh/chị thuộc nhóm tuổi nhóm đây? 20 - 30 tuổi Từ 31 - 40 tuổi Từ 41 - 50 tuổi Trên 50 tuổi Trình độ học vấn Đại học Trên đại học Ngân hàng anh/ chị làm ngân hàng Nước Thương mại nhà nước Thương mại cổ phần Thời gian anh chị làm việc ngành ngân hàng < năm -10 năm 10 - 15 năm > 15 years Thời gian anh chị làm việc lĩnh vực cho vay < năm - 10 năm 10 - 15 năm > 15 năm XXVIII APPENDIX C DISCUSSION FOR EXPLAINATION According to previous studies and direct interview, there are six borrower’s attributes are related to the possibility of loan approval, but after survey, analyzing result showed there were only three factors were positively related to the possibility of loan approval Three factors did not relate to the possibility of loan approval were value of collateral, firm size and share of investment So what were the reasons? According to previous studies, lender’s human capital impacts on the relationship between borrower’s attributes and the possibility of loan approval Yet, the analyzing result was not What were the reasons? THẢO LUẬN ĐỂ GIẢI THICH CÁC YẾU CÓ KHÔNG ẢNH HUỞNG Theo nghiên cứu trứơc vấn lần trước có sáu yếu tố người vay tác động đến định cho vay, kết phân tích sau khảo sát có ba yếu tố tác động Ba yếu tố không tác động đến định cho vay Giá trị tài sản chấp, quy mô doanh nghiệp tỷ lệ vốn chủ sở hữu/tổng nguồn vốn Vậy lý gì? Cũng theo nghiên cứu trước đây, yếu tố ngừơi cho vay có tác động đến mối quan hệ yếu tố ngừơi vay định cho vay? Nhưng kết phân tích lại không tác động? lý gì? XXIX APPENDIX D REGRESSION RESULT Descriptive Statistics Mean APPRO Std Deviation N 5.39 1.125 120 23.28 6.780 120 REVE 149.692 280.6253 120 COL 85.608 36.0309 120 RE.EXP 8.38 4.038 120 SHARE 47.85 18.642 120 PLA 15.30 3.045 120 EDU 87 341 120 LE.EXP1 3750 48615 120 LE.EXP2 4000 49195 120 LE.EXP3 1917 39526 120 REL b Model Summary Change Statistics Adjusted R Std Error of Model R R Square a 719 Square 517 473 the Estimate 817 R Square Change 517 Sig F F Change 11.671 df1 df2 10 a Predictors: (Constant), LE.EXP3, COL., REVE., SHARE, REL, EDU, LE.EXP1, PLA, RE.EXP, LE.EXP2 b Dependent Variable: APPRO 109 Change 000 XXX a Coefficients Unstandardized Standardized Coefficients Collinearity Coefficients Correlations Statistics Zerodoi B (Constant Std Error 2.510 762 REL 053 013 COL .000 REVE Beta t Sig order Toleranc Partial 3.292 001 319 3.933 000 580 002 -.019 -.269 788 -.133 000 000 094 1.246 215 294 119 RE.EXP 066 024 236 2.691 008 522 250 SHARE 000 004 -.009 -.120 905 010 PLA 080 030 217 2.688 008 498 EDU -.150 239 -.046 -.629 530 -.191 LE.EXP1 029 478 013 061 951 -.163 LE.EXP2 -.171 468 -.075 -.366 715 -.164 LE.EXP3 435 459 153 947 345 340 ) a Dependent Variable: APPRO 353 Part e VIF 262 674 1.483 -.026 -.018 860 1.163 083 785 1.274 179 576 1.737 -.011 -.008 848 1.179 179 683 1.465 -.060 -.042 842 1.187 004 104 9.631 -.035 -.024 106 9.457 170 5.872 249 006 090 063 XXXI ... possibility of SMEs loan approval The research model explained 47.3% the variance of the borrower’s attributes on the possibility of SMEs loan approval Key words: SMEs, loan approval, relationships... down the key one that impacts strongest on the possibility of loan approval Before a bank decides to invest into companies in a form of loan, they will put into consideration a lot of aspects In. .. SMEs, since they are unable to finance themselves through retained earnings or equity financing Most SMEs rely on informal sector financing to meet their needs The main source of formal financing