cải thiện hoạt động cho vay các doanh nghiệp vừa và nhỏ tại ngân hàng thương mại cổ phần quân đội

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS HOANG THI THU HUONG IMPROVING LENDING ACTIVITIES FOR SMALL AND MEDIUM ENTERPRISES IN MILITARY COMMERCIAL JOINT STOCK BANK Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS SUMMARY Supervisors: Dr Nguyen Viet Dung Hanoi – 2011 TABLE OF CONTENTS ACKNOWLEDGEMENTS i ABSTRACT ii TÓM TẮT iv TABLE OF CONTENTS vi LIST OF ABBREVIATIONS viii LIST OF TABLES ix INTRODUCTION 1 RATIONALE RESEARCH PROBLEM AND OBJECTIVES RESEARCH QUESTIONS RESEARCH METHODOLOGY 4.1 DATA COLLECTION 4.2 DATA PROCESSING RESEARCH SCOPE AND LIMITATIONS RESEARCH STRUCTURE CHAPTER 1: LENDING ACTIVITIES FOR SMES IN COMMERCIAL BANKS 1.1 OVERVIEW OF SMES 1.1.1 Definition of SMEs 1.1.2 Features of SMEs 1.1.3 SMEs’s role in the economy 1.2 LENDING ACTIVITIES FOR SMES IN COMMERCIAL BANKS 1.2.1 Overview of lending activities in commercial banks 1.2.2 Lending activities for SMEs in commercial banks 19 1.3 FACTORS AFFECTING LENDING ACTIVITIES FOR SMES OF COMMERCIAL BANKS 23 1.3.1 Internal factors 23 1.3.2 External factors 27 CHAPTER 2: LENDING ACTIVITIES FOR SMES IN MILITARY BANK 2.1 OVERVIEW OF MILITARY BANK 2.1.1 Establishment and development process 2.1.2 Organization model and business activities vi 2.1.3 Credit Risk Management of Military Bank 2.1.4 Current business performance 2.2 LENDING ACTIVITIES FOR SMES IN MILITARY BANK 2.3 ASSESSING LENDING ACTIVITIES FOR SMES IN MILITARY BANK 31 2.3.1 The results 31 2.3.2 The existing problems and causes 33 CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE THE SMES LENDING ACTIVITIES IN MILITARY BANK 41 3.1 THE DEVELOPMENT ORIENTATION OF LENDING ACTIVITIES IN MILITARY BANK 41 3.2 SOLUTIONS TO IMPROVE LENDING ACTIVITIES FOR SMES IN MILITARY BANK 43 3.2.1 Military Bank should keep SME loans growing at safer and more stable pace 43 3.2.2 Improving credit policy and process of lending activities 45 3.2.3 Improving quality of justification in making credit decision 47 3.2.4 Setting a reasonable interest rate 49 3.2.5 Improving quality of human resource 51 3.2.6 Improving quality of information 53 3.2.7 Improving control, internal supervision and debt collection 54 3.2.8 Improving organization and management operation 56 3.3 RECOMMENDATIONS 57 3.3.1 Recommendations for Vietnam State Bank 57 3.3.2 Recommendations for Small and Medium Entrepreneurs 58 CONCLUSION REFERENCES APPENDICES vii LIST OF ABBREVIATIONS SBV State Bank of Viet Nam SMEs Small and Medium Enterprises LMEs Large Manufacturing Enterprises LBL Loans Balances WTO World Trade Organization FED Federal Reserves viii LIST OF TABLES Table 2.1: Some financial indicators Table 2.2: Quantity of enterprises 12 Table 2.3: Volume of loans for SMEs over the years 13 Table 2.4: Outstanding loans for enterprises in Military Bank 14 Table 2.5: Collecting capital 16 Table 2.6: Interest income from SMEs lending activities 17 Table 2.7: Non-performance SMEs loans 18 Table 2.8: SMEs collateral loans ratio 20 Table 2.9: Structure of SMEs loans based on industry 22 Table 2.10: Structure of SMEs loans based on term 24 Table 2.11: Structure of SMEs loans based on sector 26 Table 2.12: Structure of SMEs loans based on currency 28 Table 2.13: Interest income on volume of SME loans 29 Table 2.14: Turnover ratio of SME loans 30 ix INTRODUCTION Rationale Coming with the common tendency of development in the world, Vietnamese banking and finance industry is playing a more and more important role in prosperity of Vietnam economy When Vietnam officially integrated into the world economy and became the member of World Trade Organization, activities of Vietnamese commercial banks were very eventful and competitive in few years ago Although the recent recession of the world economy was caused by multinational financial institutions like insurances, banks, securities It’s difficult to deny the contributions of commercial banks in the past as well as in the coming future Commercial bank is a financial intermediary in money - credit that supplies a series of important services helping the economy – subjects to join in payment quickly, save cost of buying and selling goods, grab the business opportunities, provide capital to ensure producing activity sustainable, create facilitations for enterprises and the economy In all of products and services or utilities which commercial bank supplies, lending activities always occupy the biggest percentage of total asset of commercial bank because of the importance and special characteristics of its By lending activities, capital will be transferred from people who temporarily have surplus money to those who need money to invest in the economy in order to make profit for them or contribute to develop the economy Moreover, this activity creates the biggest profit for Vietnamese commercial banks, ensures that Vietnamese commercial bank will exist, develop and become prosperous in the coming years Therefore, when I mention about Vietnamese commercial banks, I mention about lending activities, but when I focus on lending activities, I would make consideration about lending activities in SMEs Lending activities for SMEs in Vietnamese commercial banks have been developing very quickly in recent years as SMEs are playing a very important role in solving employment problem, contributing to the growth of national economy, creating a competitive environment to spur commodity market and so on Currently, many SMEs are in need of capital and the SMEs market is assessed to be very potential in the coming years Yet, if these lending activities are not handled effectively, they cannot bring the prosperity for commercial banks, not to say they can even make commercial banks collapse if borrowers cannot fulfil the repayment Therefore, improving lending activities for SMEs is very important to commercial banks In Military Bank, the lending activities for SMEs are good in fundamentals Yet, although the interest from loans and advances to small and medium customers has increased from year to year and occupied a bigger proportion of total loans (about 51%), it is still not big enough in comparison to the target of 60% set by the Board of Managers Besides, there are still non-performance loans of SMEs in the balance sheet of Military Bank, it is below 5% but still should be considered In addition, the pace of credit growth of Military Bank is too hot and not easy to manage whereas the ability of credit officers and credit-classified system still has limitations In short, it is necessary for Military Bank to find better ways to improve the lending activities for SMEs, which is the reason why my thesis would be “Improving Lending Activities for Small and Medium Enterprises in Military Bank” Research problem and objectives Research problem: My thesis studies the SMEs lending activities in commercial banks, especial in Military Bank The research problem is how to improve the lending activities for SMEs in Military Bank Research Objectives: With the above problem, this thesis would mention aspects of SMEs lending activities of commercial banks, particularly in Military Bank Objectives of research would be understanding clearly the lending activities for SMEs in Military Bank, from that the research would find out the existing problems, causes, limitations and then make recommendations or solutions to improve the SMEs lending activities in Military Bank The summary of research objectives are: - Review theory of lending activities in commercial banks - Clarify the SMEs lending activities in Military Bank - Make solutions or recommendations to improve the SMEs lending activities in Military Bank Research questions In order to have clearly, detail perception on SMEs lending activities of Military Bank and find out the best solutions for Military Bank, the thesis or report must answer some important questions related to the SMEs lending activities in Military Bank There are some mainly following questions: - What are the indicators used to assess SMEs lending activities in commercial bank? - How are the SMEs lending activities in Military Bank? - How the customers feel about the SMEs lending products of Military Bank? - What are the factors that have significantly effected on the SMEs lending activities in Military Bank? - What should Military Bank to improve its SMEs lending activities? Research methodology 4.1 Data collection In this thesis, secondary data would be used Mainly considered secondary data was taken from annual reports, financial reports, articles, websites, financial books and other previous researches… related to lending activities of Military Bank The author went to the library and some Military Banks departments to collect secondary data 4.2 Data processing Basing on collected data, this thesis would coordinate some mainly methods like comparison, analysis, statistics, synthesis, mathematic model … to find out existing problems in SMEs lending activities at Military Bank, from that the causes and limitations were determined then the best recommendations would be made for Military Bank in improving SMEs lending activities Research Scope and Limitations Scope: The thesis studied lending activities for SMEs in Military Bank and the research focused on the situation of these issues in the 2007 → 2010 period Limitation: Because the data which is used to analyse only in 2007, 2008, 2009 and 2010, the author was not able to determine clearly the trend of SMEs lending activities in Military Bank in the long-term Another limitation is that this thesis just mentions about SMEs lending activities of Military Bank, not comparing SMEs lending indicators of Military Bank with the other commercial banks in Vietnam and all over the world Therefore, it is very difficult for researcher in ranking for Military Bank Another research should deal with these problems Research Structure Executive summary Introduction Chapter 1: Lending activities for SMEs in commercial banks Chapter 2: SMEs lending activities in Military Bank Chapter 3: Solutions and recommendations to improve SMEs lending activities in Military Bank Conclusion CHAPTER 1: LENDING ACTIVITIES FOR SMES IN COMMERCIAL BANKS 1.1 Overview of SMEs 1.1.1 Definition of SMEs SMEs (also small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits The abbreviation SMEs occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations and the WTO The term small and medium-sized businesses or SMBs are used predominantly in the USA EU Member States traditionally have their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 250 employees, while, for example, in Belgium it could have been 100 But now the EU has started to standardize the concept Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 as "medium"1 By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO) In most economies, smaller enterprises are much greater in number In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people In many sectors, SMEs are also responsible for driving innovation and competition Globally SMEs account for 99% of business numbers and 40% to 50% of GDP2 Recommendation 2003/361/EC was adopted by European Commission on 6th May 2003 and effected from January 2005 st Dr Jochen M Schaefer – “How Small and Medium-Sized Enterprises Acquire Competitive Technology” closely relationship with other credit organizations, other function offices as well as tax, tariff department to receive usually information from them in purpose of supplying fully in time information demand of entire Military Bank Nevertheless, in the information ages when information technology industry is booming out very hot with faster and faster pace, the information from customers which is very variable and plentiful, is able to collected from different sources, the information collection system of Military Bank also need to met another requirement It is that this system must have ability of selecting necessary, accurate information which have significant effects on lending decisions and many other important decisions of Military bank regarding to customer relationship Like that, the management of Military Bank about real situation of customer would be guaranteed that it will be effective and safe 3.2.7 Improving control, internal supervision and debt collection The operation of control and supervision need to be considered specially to improve particularly in credit operation Commercial bank in common and Military Bank in private need make strength of examination or test operation and tighten management job as well as anti – risk measures before, at time and after making lending decision in purpose of reducing phenomena in which borrowing customers cannot make payment (both interest and principal) on schedule of credit contract as credit officers have loosen management job, finance and payment supervision operation regarding of customers and left overdue loans, bad loans to increase to new high level In few years ago, the substandard loans and doubtful loans of Military Bank SME department had inflated very fast that was partly caused by losing in control, supervision and test operation, so now, Military bank must strengthen screening work of loans in order to have suitable solutions which will slowdown pace of bad loans growth even reducing level of overdue loans Some first solutions which Military Bank should perform in priority can be: giving responsibility of supervision, test and debt collection for each leader or manager of each branch, from that, each leader will give tasks to each credit officers in purpose of collect bad loans quickly Credit officers of Military Bank have to have responsibility in discovering in time some derogations of customers especial when they use lending capital in wrong of objectives which is mentioned in credit contract The credit 54 officers must collect debt immediately and stop funding these customers because performing in wrong of first purpose in credit contract that is very risk, risky ability become real that is very high, especial when customers join in some risk operations which are different from contract in order to find high profit like gamble, or securities it is very difficult for customers to achieve successfulness in these cases and when they fail, they will can not pay both interest and principal for Military Bank that will cause loss for lending activities so Military Bank must require credit officers to supervise more closely customers, credit officers must make solutions immediately in case of breaking term of credit contract so that Military Bank can avoid risk of operation from customers Nowadays, with quickly developing of banking industry, there are a lot of variable and different lending products which are suitable to many different customers Most of Vietnam entrepreneurs have credit relation with commercial banks, yet there is a not small part of all Vietnam entrepreneurs who invested in stock market and poverty market Securities and poverty are assets which are very sensitive and usually fluctuate with big margin in value So control, supervision and examination operation of credit officers about business situation or finance situation of customer are becoming more necessary Because when stock market plunges or poverty market freezes, these entrepreneurs will be affected strongly Credit officers must take perception quickly about them to have reasonable solutions In the past, control, supervision and debt collection of Military Bank SME department sometimes is loose and not follow routine regulations, some credit officers did not supervise closely finance situation of customers and overdue loans as well as bad loans have increased over the years that has been threatening profitable ability of Military Bank as the tendency is being worse and worse Therefore, Military Bank should tighten more strictly supervision operation of credit officers and situation of using lending capital of customers Simultaneously, Military Bank should make strength process of payment, collecting debt which is still stagnated up to now Military Bank must manage to write down bad loans in order to take back principal, from that credit officers will have foundation to improve profit ability by making new effective loans 55 3.2.8 Improving organization and management operation Organization and management operation of commercial bank play an indirect role which have strongly effect on all operation of commercial bank in common and lending activities in private One commercial bank is organized and managed well, all departments coordinate closely and effectively with each others, all officers of commercial bank have clearly perception about their tasks, the job is not overlapped (some officers lack of job, some officers have too much job), operation machine performs fluently at all part of it, from phase of mobilizing capital to making loans, control, supervision and debt collection even planning work which sets and forecasts target or objectives for coming years, also is suitable to real situation of all department of commercial bank… That will be the solid foundation for commercial bank to operate effectively and of course, lending activities will be profitable and it will grow continuously with stable pace over the years If one department, one part of commercial bank operate not well and not relevantly to other departments, other parts of commercial bank that will make business operation of entire commercial bank difficult in finding more profit For example, if operation of one department such as operation of dealing accounting department is not good and not effective that will make commercial bank face challenges in mobilizing capital, the capital will be mobilized with small amount and high cost, so lending interest rate will follow, of course, credit department (customers and assessment department) will met difficulty with small capital but high interest rate, credit department will be not easy to making loans well with potential profit And like that, treasury department also have not got enough capital which is temporarily surplus to join in interbank market or other finance markets One indispensable result will happen It is that operation of entire commercial bank will be worse and worse in which there are lending activities Therefore, general manager of commercial bank in common as well general manager of Military Bank in private should make examination usually of operation situation of all departments, from that general manager will have the most suitable decision which explains clearly about tasks and function of each department in each period in the detail ways in purpose of stimulating operation of commercial bank better and better 56 3.3 Recommendations 3.3.1 Recommendations for Vietnam State Bank System of legislation documents about commercial bank operation in Vietnam have not still been perfect yet, slowly adjusted, lacked of synchronization and overlapped that made business of commercial bank difficult in developing So Vietnam stated bank should coordinate with ministries and industries of government which have relation with banking industry operation in order to make adjustment job of issuing regulation documents such as, commercial bank law, guidance circulars, government degrees about collateral in lending operation, mortgages in purpose of creating better and more clearly law corridor for commercial bank in Vietnam For example: when the Vietnamese financial market faced difficulty in 2009, the Vietnam state bank has limited the lending interest rate that does not exceed 150% of basic interest rate This will make stability the credit market Nevertheless, it also makes lending activities less flexibility So now, when the economy is better and better and the real interest rate is having tendency of exceeding the ceiling interest rate, but the instead of change the interest rate policy for the interest rate which becomes more flexible, the state bank hiked the basic interest rate The author recommend that state bank should change the interest rate policy with wider margin Another example, it is the housing prices and poverty prices which is being used for assessing the collateral The conference price of Vietnam committee is very different from the real price, so the Vietnam State Bank should make cooperation with resources ministry to make a reasonable price list of real estate And the Vietnam State Bank should issue circular in this issue for commercial bank in order to assess collateral more accurately About credit information: because of lacking of credit information which is happening in banking industry so Vietnam stated bank should improve system of credit information as well as some anti-risk measures by establishing and upgrading or widening information system about entrepreneurs in Vietnam in order to supply to credit organizations In addition, Vietnam state bank should issue concrete principles about transferring credit information between credit organizations or commercial banks In purpose of supporting for operation of credit information transference and supervising or controlling banking operation, Vietnam state bank should make strength applying high 57 information technology into banking operation By applying new information technology, commercial banks will receive information accurately, immediately and quickly, that will contribute to reduce risk in credit operation in private as well as commercial bank operation in common Moreover, Vietnam state bank need to have better policy which will regulate interest rate and exchange rate reasonably, simultaneously, this policy will contribute to stabilize money, curb inflation as well as stimulating citizen to make deposit from that entrepreneurs will be confident in producing, investors will feel safe to invest 3.3.2 Recommendations for Small and Medium Entrepreneurs Vietnam SMEs should manage to make themselves better in order to improve lending activities beside some solutions, support procedures from Vietnam stated bank because up to now there has been a phenomenon in which Vietnam SMEs are lack of capital whereas commercial bank especial Military Bank still has available capital but commercial bank is not able to make loans It is not caused by hate of commercial bank, in the reality, commercial bank is afraid of solvency of Vietnam SMEs Therefore, in order to remove this fence which makes credit relation between commercial bank and Vietnam SMEs stuck Vietnam SMEs need to solve some following problems: The first, Vietnam SMEs must build themselves the business plan or business project which is effective and feasible Effective business project is the decisive factor which affects on lending decision of commercial bank so SMEs which really want to borrow more capital from commercial bank, must submit the feasible project file which persuades credit officers to make loans Like that, SMEs have to improve their ability in setting project file because there are so many SMEs who have good idea and good chance but they are not able to set the project file and commercial banks don’t fund them Beside, SMEs also need themselves to research market, business environment or economy risks in purpose of creating facilitates for using borrowing capital from commercial bank safer and more profitable The second, SMEs should renew technology and equipment Because of limitation about size and finance, SMEs must screen to buy technology as well as equipment which are suitable to them SMEs should not choose the high technology and modern equipment 58 They should select technology basing on taste of market Market need which product, SMEs should select the technology which produces that product Nevertheless, in process of using, SMEs should consider to improve technical equipment to upgrade current technology ability of them SMEs need some programs which renew technology to improve productivity, save cost and promote quality of products In that, SMEs must take care of applying quality management system which is relevant to international quality criteria The last, SMEs should consider to develop human resource The human resource of SMEs which includes both manager and employees is mainly not trained basically So they have many limitations in special skill, technical ability and management In the long-term, SMEs need build one policy of training human resource basing on developing strategy and structure of industry in purpose of improving performance of business operation SMEs should base on training criteria of government to have some good programs which will educate and create new good international skill for their human resource Nevertheless, when SMEs organize some training programs, SMEs must count and compare between cost and profit to have accurate, reasonable and effective decision 59 CONCLUSION The SMEs lending activities of Military Bank over the last several years can be considered to be relatively good compared to its peers The non-performance SME loans ratio of around 3% is well below the 5%standard level of Vietnam state banks The collateral loans ratio is higher than 50%, the level that is deemed to be safe according to industry standard Thus, Military Bank has achieved significant success as far as risk management is concerned Military Bank’s financial results surpass analysts’ expectation as well as its planned figures Income from interests on loans has increased remarkably over years especially in 2009 Moreover, Military Bank has improved its loan structure dramatically Military Bank has reduced loans for state owned enterprises and diversified its loan portfolio across different industries This leads to a significant growth in both its lending activities despite the economic recession Yet, there are still some existing problems which need to be solved First, loans and volume of loans of Military Bank has increased at a dangerously risky pace Military Bank made a lot of loans to real estate sector, which is facing many troubles at the moment Second, Military Bank only focus on customers who have had longterm relation with Military Bank, but forgot new good customers, the nonperformance loans ratio is still at the acceptable level yet, it is surging over the time especially in 2009 If this trend continues, it will become very worrisome Third, the collateral loans ratio is also performing worse and approaching level of 50% that is able to threaten the safety of Military Bank Besides, the performance of Credit Officers is not good enough They’re not only lack of skill in collecting bad debt but also lack of good attitude at work In order to exist and develop persistently in the long term with new sustainable success, Military Bank should adopt some solutions which will improve lending activities for SME such as improving quality of human resource, quality of control and supervision, quality of information, quality of assessment and quality of risk management If Military Bank completes these jobs well, Military Bank will achieve better targets which were set for coming years especial in the recovery process of the world economy The world economy as well as the Vietnam economy are unlikely grow quickly and persistently immediately There is able to be stagflation period after recovery period because of stimulus programs of government which has pumped a great amount of money into the economy, will spur inflation risk Therefore, when the inflation looms but unemployment rate still increase, the payroll continues contracting, the stagflation condition will be serious and the economy will face the difficulty Of course, commercial banks which are blood line of the economy will cope with troubles so Military Bank will have to manage to achieve new success REFERENCES PGS TS Phan Thị Thu Hà (2004) Ngân hàng thương mại NXB Thống Kê PGS TS Nguyễn Thị Mùi (2003) Quản trị ngân hàng thương mại NXB Tài Chính TS Nguyễn Hữu Tài (2002) Lý thuyết tài tiền tệ NXB Thống Kê PGS PTS Lê Văn Tề (2000) Từ điển kinh tế tài ngân hàng NXB Thanh Niên GS TS Lê Văn Tư (2000) Quản trị ngân hàng thương mại NXB Tài Chính TS Nguyễn Minh Kiều Quản trị ngân hàng thương mại Tạp chí tài viết: Các doanh nghiệp vừa nhỏ: lạc quan trước thềm năm (16/02/2011) Altman E.I (1997) Credit risk measurement John Wiley LTD Frederic S Mishkin The Economics of Money, Banking, and Financial Markets 10 Joel Bessis (2007) Risk Management in Banking John Sons LTD 11 Peter S Rose (2000) Commercial bank management 12 Recommendation 2003/361/EC was adopted by European Commission on 6th May 2003 and effected from 1st January 2005 13 Dr Jochen M Schaefer – “How Small and Medium-Sized Enterprises Acquire Competitive Technology” 14 www.msme.gov.in – annual report 2010-11 (in English) 15 Credit report of Military Bank (2007, 2008, 2009,2010) 16 Financial statement of Military Bank (Year 2006, 2007, 2008, 2009,2010) 17 Offering Circular of Military Bank (2008) APPENDICES Appendix 1: Organization Structure SHAREHOLDERS' MEETING INTERNAL CONTROL DEARTMENT SUPERVISORY BOARD BOARD OF MANAGEMENT RESEARCH AND DEVELOPMENT DEPARTMENT BOARD OF DIRECTORS CREDIT COMMITTEE SENIOR COMMITTEES INTERNAL CONTROL DEPARTMENT RISK MANAGEMENT DEPARTMENT SYSTEM MANAGEMENT DEPARTMENT PLANNING AND GENERAL BUSINESS SUPPORT DIVISION TREASURY DIVISION ADMINISTRATION DIVISION ADMINISTRATION AND QUALITY CONTROL DIVISION GROUPS AND FINANCIAL INSTITUTIONS DIVISION NETWORK AND DISTRIBUTION CHANNEL MANAGEMENT DIVISION SME DIVISION INDIVIDUAL CUSTOMERS DIVISION INVESTMENT DIVISION LEGAL DIVISION COMMUNICATION DIVISION FINANCE AND ACCOUNTING DIVISION BUSINESS DEPARTMENT BUSINESS SUPPORT DEPARTMENT INFORMATION TECHNOLOGY CENTER HUMAN RESOURCE DIVISION POLITICS DIVISION REPRESENTATIVE OFFICE IN THE SOUTH Source: Offering Circular of MB for 2008 Appendix 2: Information extracted from audited consolidated income statements of MB for the year ended, and as at 31 December 2008, 31 December 2009 and 31 December 2010 For the year ended 31 December (million) 2008 2009 1,581,122 3,679,299 (947,805) 633,317 (2,258,587) 1,420,712 204,905 261,986 (13,190) 191,715 (70,778) 191,208 Foreign exchange gains - net 21,124 101,403 Investment income-net 83,067 Other operating income 90,842 Interest and similar income Interest and similar expense Net interest income Fee and commission income Fee and commission expenses Net fee and commission income Net income of capital contribution in affiliates - Provision for long-term investment - Dividend income Total operating income Salaries and related expenses Total operating expense (250,677) 524,981 (144,287) 380,694 (72,766) 216,041 177,016 17 76,074 1,054,432 1,638,084 38,367 2,653,511 (118,146) (234,025) (349,706) (39,695) (66,247) (110,425) (203,044) (255,166) (323,928) (360,885) (555,438) 693,547 1,082,646 (784,059) 1,869,452 (40,845) (158,488) (277,835) (43,716) 608,986 (63,275) 860,883 (86,547) 1,505,070 (116,378) 492,608 (164,678) 696,205 (331,343) 1,173,727 Provision for doubtful debts Provision for off balance sheet commitments Profit before tax Profit after tax (1,029) (2,212,353) 1,838,068 54,986 Net profit before provision Corporate income tax 289,191 4,050,421 34,367 Depreciation and amortization of fixed assets and investment properties Other operating expense (167,710) 2010 Appendix 3: Information extracted from audited consolidated balance sheets of MB for the year ended, and as at, 31 December 2008 and 31 December 2009 For the year ended 31 December 2008 2009 2010 Assets Cash on hand, jewels, precious stones 352,321 411,633 Balances with the State Bank of Vietnam 191,318 515,139 13,214,064 16,010,231 290,547 150,175 2,475,726 8,477,960 11,468,799 15,493,509 Equity investments 811,115 1,180,427 Fixed assets 234,445 629,394 Investment properties 114,838 515,906 Other assets 470,466 961,732 Total assets Liabilities 29,623,582 44,346,106 68,547 - 4,992,934 8,531,866 290,126 834,361 17,784,837 27,162,881 2,020,000 2,137,326 53,565 116,840 774,621 805,190 89,086 80,989 26,073,716 39,669,453 2,000,000 3,400,000 306,421 30,200 Balance with other credit institutions Trading securities Investment securities Loans and advances to customers Balances from the State bank of Vietnam Balances and borrowings from other credit institutions Entrusted funds Deposits from customers Valuable papers issued Provision for off-balance sheet commitments Other liabilities Provision for taxation Total liabilities Equity Share capital Share premium 541,132 1,427,595 24,062,971 618,513 9,674,239 29,140,759 891,469 623,041 355,138 1,673,431 69,008,288 4,708,749 11,696,905 474,629 39,978,447 2,420,537 203,387 1,876,888 153,238 61,512,780 5,300,000 869,685 Other capital 509,525 509,525 Retained earnings 537,732 288,766 Reserves 125,843 195,573 70,345 29,623,582 252,589 44,346,106 Minority Interest Total liabilities and owners' equity 3,201 397,307 317,879 607,436 69,008,288 Appendix 4: Lending procedure for SMEs in Military Bank Determining Target Market Lending Proposal Justification Creating file - Receiving demand of customer - Find information - Assessing prospect of loan     Legislation Finance Collateral Other factors Making Agreement Lending Decision        Scale Term Payment Collateral Terms  Credit officer Manager/ Credit Council/General Manager Report for Treasury File procedure and fund File Procedure  Fund customers Re-test the collateral Complete the credit file    Sign the credit contract   Fund Other jobs Give to funding officers Lending Management File Management   Payment Data Terms  Collateral  Payment  Pay on schedule  Pay interest  Pay principal Unusual signs Assessment    Discovery Solving policy  Management  Warning signs Try to collect debt   Restructure End loan Damage  Lack of interest  Lack of principal ... market SMEs operate in many sectors and industries, supply diversified commodities, and increase choices for customers, from that create competition among enterprises which makes the economy more