LV Thạc sỹ_Improving credit activities to SME customers in VCB hoan kiem

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM IMPROVING CREDIT ACTIVITIES TO SMALL AND MEDIUM SIZED ENTERPRISES IN VIETCOMBANK HOAN KIEM BRANCH THESIS BACHELOR Page|| TABLE OF CONTENT TABLE OF CONTENT ACKNOWLEDGEMENT ABBREVIATION LIST OF TABLES LIST OF FIGURES & DIAGRAMS .7 EXECUTIVE SUMMARY INTRODUCTION CHAPTER 1: THEORETICAL FRAMEWORK OF BANKING CREDIT ACTIVITIES TO SMEs 13 1.1 Overview of SME customers 13 1.1.1 Definition of SMEs .13 1.1.2 Characteristics of SME customers 15 1.1.3 Roles of SME in Vietnam economy .16 1.2 Overview of banking credit activities to SME .18 1.2.1 Banking credit activities .18 1.2.2 Banking credit activities to SMEs .19 1.3 Factors affected the improvement of banking credit activities to SME 28 1.3.1 Objective factors 28 1.3.2 Subjective factors 30 CHAPTER 2: REAL SITUATION OF CREDIT ACTIVITIES IN VCB HOAN KIEM 33 2.1 Overview of VCB, Hoan Kiem Branch 33 2.1.1 Formation and development process of Vietcombank 33 2.1.2 Formation and development process of VCB Hoan Kiem 34 Page|| 2.1.3 Organizational structure 35 2.1.4 Business Operation .36 2.2 Real situation of credit activities to SME customers in VCB Hoan Kiem 42 2.3 Comments in credit activities to SME in VCB Hoan Kiem 49 2.3.1 Achievements 49 2.3.2 Limitations 51 2.3.3 Reasons for limitation 52 CHAPTER 3: SOLUTION FOR IMPROVING CREDIT ACTIVITIES TO SME IN VCB HOAN KIEM 54 3.1 Strategic direction for improving credit activities to SME in VCB Hoan Kiem 54 3.1.1 General strategic direction of VCB and VCB Hoan Kiem .54 3.1.2 Strategic direction for improving SMEs’ credit activities in VCB Hoan Kiem 54 3.2 Solution 55 3.2.1 Solution for improving SMEs’ credit scale 56 3.2.2 Solution for improving SMEs’ credit quality .60 3.3 Recommendation 61 3.3.1 For the Government .61 3.3.2 For the SBV 63 3.3.3 For VCB Central 63 CONCLUSION 66 APPENDIX 67 REFERENCES .69 Page|| ACKNOWLEDGEMENT For every student, access to reality is very important because it will help him to have the capability of working well, knowing that the problems learned in school is close to reality or not; and if not, what are the differences between them The internship period can be considered as a first real life experience, and this round of practice will prepare for students useful experiences for their later work as the official Therefore, through the process of practicing at Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) Hoan Kiem Branch, I could learn some key features of the formation and the development of Vietcombank Hoan Kiem, capturing an overview of its performance, especially in lending activities during current period After doing the internship at this bank, I could better understand the banking activities in the open market integration From what I have learnt and experienced, it helped me figure out the difference between the actual industries and the learning process in the auditorium During the process of doing graduated thesis, there are some beloved people who are contributed to my success First of all, I would like to thank my lecturers in National Economics University (NEU) and California State University, Long Beach, as well as the staff in Advanced Educational Program, for conveying valuable knowledge during the last school years and providing me opportunities to know real nature of the banking activities through this internship Secondly, I would like to send a sincere thank to Ms…, the member of Customer Department, and others in this department, for helping me to get the data I also send a sincere thank to my supervisor, PhD…, Department of Finance and Accounting, Business School of National Economics University for guiding and enabling me to complete this thesis Finally, I am grateful to my families and my friends for being companions with me in the way of making this bachelor’s thesis With love, … Page|| ABBREVIATION GSO General Statistics Office HOSE Ho Chi Minh Stock Exchange R&D Research and Development SBV The State Bank of Vietnam SME Small and Medium enterprises VCB Vietcombank VCB Hoan Kiem Vietcombank Hoan Kiem Branch VCBL Vietcombank Leasing Company VCBF Vietcombank Fund Management VCBS Vietcombank Stock Company Page|| LIST OF TABLES Table 1.1 SMEs classification by industries Table 1.2 System to measure enterprise’s size of VCB Table 2.1 Vietcombank’s rating vs Vietnam’s national rating Table 2.2 VCB HK Department’s Managers Table 2.3 Income statement of VCB HK in 2010 Table 2.4: Total capital of VCB Hoan Kiem and how it is used (unit: VND) Table 2.5 VCB Hoan Kiem Indicators Table 2.6 Process of SMEs’ credit activities in VCB Hoan Kiem Table 2.7 Credit scale of VCB Hoan Kiem in 2010-2011 (unit: billion VND) Table 2.8 Credit structure for each type of customers (unit: %) Table 2.9 Number of enterprises in VCB Hoan Kiem Table 2.10 Bad Debt rate in VCB Hoan Kiem (unit: billion VND) Table 2.11 Risk distribution for type of customers in VCB Hoan Kiem (unit: %) Table 2.12 SMEs credit turnover of VCB Hoan Kiem (2009-2011) Table 2.13 Revenue from credit activities in VCB Hoan Kiem 2008-2010 (unit: billion VND) Table 2.14 SWOT Analysis of VCB Hoan Kiem SME’s credit activities Page|| LIST OF FIGURES & DIAGRAMS Diagram 1.1 Credit process with SMEs Diagram 2.1 Organizational Structure of VCB HK Diagram 2.2 Structure of Board of Director Diagram 2.3: Credit activities in VCB Hoan Kiem Figure 2.1 Performance Result of VCB Hoan Kiem Figure 2.2 Capital Mobilization (billion VND) Figure 2.3 Currency Classification of Mobilized Fund Figure 2.4 Economics Subject Classification of Mobilized Fund Figure 2.5 Importing-Exporting Payment Figure 2.6 Number of additional customers using Retail banking Figure 2.7 Card Activities Figure 2.8 Total Credit Loans Figure 2.9 Outstanding loans of VCB Hoan Kiem 2009-2011 (billion VND) Page|| EXECUTIVE SUMMARY VCB is one of the biggest commercial banks in Vietnam with a historical experience of over 46 years working in banking sector Since its establishment, VCB has continuously developed in not only term of profits but also in term of quality for credit products and other services related to corporate financing In the context like now, SMEs are now playing an important role in economic growth Not only government and SMEs supporting agencies care about their development and motivation, but also financial institutions now tend to target its customers toward this segmentation, of which VCB has been remarked with lots of changes in policies and organizational structure to better serve this type of clients This thesis discusses the details of bank credit activities for small and medium enterprises at VCB Hoan Kiem Due to the timely supporting policies of government, as well as continuous efforts of VCB Hoan Kiem to face with financial crisis, the improvement of banking credit for this sector has been increased gradually since the considerable diminishment in 2009 However, as the matter of fact, some limitations regarding scale as well as structure of credit for them are remained which need careful attention of the bank This thesis offers some appropriate solutions to improve the SMEs’ banking credit activities at VCB Hoan Kiem The period for this research is from 2009 to 2011 After discussing the basic framework of SMEs credit activities at chapter one and evaluating the real situation in performance of SMEs’ credit activities at VCB Hoan Kiem at chapter two, the thesis brings out solutions to overcome the limitations and to strengthen the effectiveness of SMEs’ banking credit activities Moreover, in chapter three it is recommended that the bank should build a consistent strategy and credit policy for SMEs They are included improving of the quality of credit appraisal for SMEs, enhancing risk management activities, building infrastructure, boosting the capital mobilization activities in order to meet the needs of customers, enhancing the quality of market research, investing in modern technology to meet the credit demand, and marketing activities to promote the image bank Finally, some recommendations are offered for the Government, State Bank of Vietnam, and VCB system to support for the operation at VCB Hoan Kiem Page|| INTRODUCTION Rationale The trend of integration and globalization brings many opportunities as well as challenges to all Vietnam enterprises; competition between industries or even within each industry increase harshly on many aspects and the bank is not exceptional Banks play an increasingly important role, as a pillar sector of the economy The sustainable development of the sector contributes to national economy development In banking operations, credit activities accounted for the largest proportion in the balance sheet, bringing the first source of incomes Unluckily, these activities are always associated with inherent risks Therefore, focusing on how to improve these activities in better way has always been the top priority of commercial banks in general and with VCB Hoan Kiem in particular Until the end of 2009, in spite of still being affected by the global recession, the economy in Vietnam has had the sign of recovery with GDP being approximately 6%, creating better conditions for banks to expand their credit activities VCB is not a special case With the goal of developing credit activities with the safer rate, VCB Hoan Kiem has approached and improved the customers of SME who faced some difficulties in fund mobilization or guaranteed assets The Credit Process number 246 of VCB Central issued in 07/2008 allows this branch to be more active in lending customers of SME Moreover, thanks to only starting business in 2008, the bad-debt rate in VCB HK has been nearly zero (0.03%), leading to the advantage for this branch to find new customers Besides that, at the beginning of 2012, with the banking restructuring initiated from Government, VCB has ranked in the first group which can raised its credit growth up to 17% This information reflected healthy financial ability of VCB, helping to build more trust with enterprises having the demand of borrowing money However, VCB Hoan Kiem is still facing on some constraints Vietnam economy, still experiencing unpredictable fluctuation with high inflation, the dramatically decline of real estate market and securities transaction, has affected strongly to the development of credit activities To cover overspending budget, government has issued more bonds to mobilize capital, and becoming itself the competitor of Vietnam enterprises who pay money under taxes, especially SMEs, leading to higher interest rate in banks Moreover, the Page|| 10 inflexibility of VCB Central in policies of marketing and products makes VCB Hoan Kiem difficult to approach customers Being born in complex economical context, VCB Hoan Kiem, with the pressure coming from operating expenses, has carefully considered in developing credit growth, choosing customers and finding new ones Until now, VCB Hoan Kiem has not been able to turn fully the capital sources, mobilized itself, into effective use of credit With this reason, I want to have a research deeply on this problem to find the methods of expanding and making credit activities more effectively The topic for the bachelor’s thesis will be “Improving credit activities to SME customers in VCB Hoan Kiem” Research objectives The objectives of this research are deeply understanding about the real situation of credit activities in VCB Hoan Kiem, comparing this fact with the level of the whole VCB system, seeing how the internal and external factors affected these activities and giving the recommendation to make it better The thesis will also focus on the SME customers, knowing more about the characteristics of SME and finding the way to improve credit activities in VCB Hoan Kiem with this type of customer Moreover, after making this research, the author of this project will have a chance to use her knowledge applying in reality She will have more information about the structure and business activities of VCB in particular and the bank system in general, as well as the characteristics of SME customers Furthermore, researching this topic will help author understand the fact of credit activities in Vietnam, with the stark example as VCB Hoan Kiem, understanding the factors affected the credit activities and knowing about the methods to expand and make credit activities more effectively Research questions To reach some objectives mentioned above, the research questions in this thesis are including:  What is the theoretical framework of SMEs credit activities in commercial banks?  What is the performance of SMEs credit activities in VCB Hoan Kiem?  Which solutions can be used to make SMEs credit activities in VCB Hoan Kiem better?  Which is also the recommendation for VCB Central, SBV and Government? Page|| 55 - Strengthening SMEs’ investment in some economics sectors, such as mass media, - trading and health Stopping investment and gradually reducing debts from SMEs who are in losses or - unstably manufacturing Researching more about characteristics, habits, demand of each type of SMEs both in - current and in future Developing operation, especially product marketing Using suitable form of credit, investment and service to satisfy SMEs’ demands - effectively Carrying out training in operation of risk management, guarantee, project assessment, etc to all of banking staff to expand their knowledge and apply in reality 3.2 Solution SMEs in Vietnam play an important part in the economy Thus, in order to improve SMEs’ credit activities, VCB Hoan Kiem have better understand about branch’s position in Hanoi market, as well as its strength, weakness, opportunities and threats showing in the table below: Strength High ability in fund mobilization, laying the foundation for growth of outstanding loans in general and SMEs’ credit in particular Model technology allows VCB Hoan Kiem to manage customers’ data better and helping online services Strong brand name in international payment and commercial sponsorship Young banking staff is easier to approach new knowledge and technology better, as well as working in high pressure Weaknesses Upgraded from Transaction Office No.1 for only years, thus working style is still passive in customers finding SMEs’ credit policies make SMEs limit in ability of approaching credit sources Working network is distributed unequally, not near enough with area having SMEs VCB Central’s strategy is not flexible enough for VCB Hoan Kiem to expand credit activities to SMEs Opportunities Threats Globalization and high economics SMEs are existing some weaknesses: growth increase SMEs’ credit demand unhealthy financial ability, unclear Number of SMEs in Hanoi market is financial report, etc very large and dramatically increasing Strong competition from other branches Government carefully focuses on SMEs’ and other commercial banks Page|| 56 development High inflation make SMEs difficult in SBV decreases interest rate floor (12%) approaching credit sources and ranking VCB as Bank Group (credit growth of 17%) Table 2.14: SWOT Analysis of VCB Hoan Kiem SME’s credit activities Based on factors affected SMEs’ credit activities and reasons, several of solutions have been shown to expand credit scale and developing credit quality of VCB Hoan Kiem to SME customers 3.2.1  Solution for improving SMEs’ credit scale Creating stable capital sources for expanding SME’s credit scale In order to expand credit scale in general and SMEs’ credit activities in particular, VCB Hoan Kiem needs a stable foundation as rich fund to satisfy customers’ credit demand Besides demand of buying working assets, SMEs also have demand to buy fixed assets and investment in technology Thus, it cannot be denied that need of medium and longterm credit from SMEs is very huge However, VCB Hoan Kiem has to follow government’s regulation about using short-term fund mobilization for medium and longterm credit Therefore, the best way to have a stable fund for SME’s credit activities is increasing long-term capital mobilization from individuals and organizations In recent year, the total fund mobilization of VCB Hoan Kiem has dramatically increased, but short-term fund still makes up the majority Moreover, the strong competition from other commercial banks through interest rate, advertisement and promotion is a serious obstacle to attract customers, included SMEs To solve some current difficulties, VCB Hoan Kiem should focus on their strength With the advantages as 3rd position branch in fund mobilization in VCB system, a famous brand name and transaction office network distributed in Hanoi market, VCB Hoan Kiem has benefits to attract more deposits from individuals and organizations Besides, expanding transaction office network is very necessary to develop the ability in branch’s mobilization Furthermore, to increase medium and long-term fund, VCB Hoan Kiem had Page|| 57 better issue promotion strategies for customers such as lucky draw, free fees in several services, etc In lines with the encouragement to develop SMEs from Vietnam government, there are many organizations and financial institutions show their cares to SMEs such as Switzerland Green Credit Fund, SMEs Development Fund sponsored by EU, etc Thus, VCB Hoan Kiem should be more active in finding sources from international institutions to sponsor for SMEs Based on that, VCB Hoan Kiem will follow the role as intermediary branch to provide capital These funds usually have big valuation, long using time, so they are very suitable with SME’s demand of medium and long-term credit  Expanding operating network Widespread transaction office network helps a branch not only in increasing fund mobilization but also in approaching customers easier, especially SMEs Number of SMEs is very large, but distributed unequally Thus, VCB Hoan Kiem needs large network to attract type of customers To this solution, VCB Hoan Kiem needs a detail plan Besides problems in expenses of opening new offices, VCB Hoan Kiem ought to research the places to take a new transaction office These places should be distributed equally in Hanoi market, being near with center of high-income population and SMEs In fact, if transaction offices are located too neatly, branch will not attract customers in other areas without wastage In the one hand, high-income individuals, with their needs, will help branch to develop fund sources In the other hand, located near SMEs will take advantage in increasing number of SME customers, saving time and expenses for branch to supervise customers Until now, VCB Hoan Kiem has transaction offices, included one in branch and fives in Lo Duc, Nguyen An Ninh, Dinh Cong, Bach Mai, and Kim Dong It can be seen that, this network is distributed unequally in Hanoi market With the main transaction office located in Phan Chu Trinh street, VCB Hoan Kiem has benefit in expanding credit scale because this place belongs to the center of city However, credit scale for SMEs of VCB Page|| 58 Hoan Kiem is still limited Thus, it finds necessary to open new transaction offices, and the places might be in Hai Ba Trung and Tay Ho District There is an undeniable fact that transaction offices of VCB Hoan Kiem are mainly doing operation as fund mobilization Therefore, in order to expanding credit scale for SMEs, VCB Hoan Kiem had better develop the right, as well as working limitation of transaction offices, including allowing them to provide credit to SMEs with given limits for each office  Strengthening products’ marketing and introduction One of the weaknesses still existed in VCB Hoan Kiem is high passivity, leading to operating scale has dome difficulties in expanding, especially credit activities Branch is still dependent on customers who will come to bank themselves In strongly competitive conditions, if VCB Hoan Kiem cannot move out this thinking, it will not compete with other branches in the system Three years is not long enough for a branch to have a dramatically improvement, as well as enhancing financial ability and competitive ability Although the number of SMEs in Hanoi is very large, if VCB Hoan Kiem does not innovate itself, others will occupy this rich market In order to expand SMEs’ credit scale, it will be necessary to increase the number of SME customers To this idea, VCB Hoan Kiem had better bring its products closer to customers through advertisement and marketing Branch should also based on SME organizations or association to save its expenses After upgrading from Transaction Office no.1, credit activities in guarantee or project sponsorship are very small Due to being safer than lending, expanding these activities is a right step for VCB Hoan Kiem Moreover, in the process of product marketing, branch ought to focus on VCB brand name, which is very famous in commercial sponsorship and importing-exporting settlement to improve guarantee and project sponsorship Especially in period of globalization, SMEs have big opportunity to import and export goods, leading to SMEs’ demand in commercial sponsorship, creating good conditions for VCB Hoan Kiem to improve credit scale Page|| 59  Studying SMEs customer carefully to propose with VCB Central VCB Hoan Kiem should research carefully about SMEs’ demand to propose with VCB Central to deploy new products and new form, as well as credit promotion to SME customers Nowadays, most of commercial banks consider SMEs as potential customers, bringing huge profits to banks for a long time To attract this kind of customers, commercial banks have carried out some promotion and preferential treatment For example, An Binh commercial bank (ABBank) has applied interest rate being equal only 95% of others With this proof, it can be said that competition in SMEs market in Hanoi is very serious, and in the condition like now, showing preferential treatment is compulsory factor for VCB Hoan Kiem to keep its position Besides promotion in interest rate, VCB Hoan Kiem can use other promotion in simplifying credit procedure, longer extending credit time, diversifying guaranteed assets to match with SMEs’ form, etc These treatments will encourage SMEs to borrow loans more, leading to expanding credit scale  Working with other branches in credit providing for SMEs VCB Hoan Kiem is very young when compared with others in the whole system Therefore, co-operating with other branches, even other commercial banks in credit activities is very essential Not only can VCB Hoan Kiem attract more SME customers but also they share risks in credit activities with others Besides, credit quality will be more ensured Finally, learning strategies from other commercial banks will help VCB Hoan Kiem save time and expense of researching about SME customers who are very diversified and crowded 3.2.2  Solution for improving SMEs’ credit quality Being active in finding potential SME customers Finding new customers will be one of the ways to diversify SMEs’ types, reducing credit risks, partly contributed to improve credit quality Page|| 60 At this moment, VCB Hoan Kiem mainly finds customers through traditional way as relationships This way is very limited because number of SMEs will be small, and among them, number of SMEs good enough to provide loans is smaller Thus, another effective way that VCB Hoan Kiem should consider is finding customers through SMEs organizations or associations These associations will contain large number of SME members, being reliable information channel for commercial banks, as well as guaranteeing for SMEs who not have enough securities to borrow loans In Hanoi, Association of Small & Medium Enterprises was set up in 15/05/2000 VCB Hoan Kiem can provide credit for this association to get the benefits as showing above VCB Hoan Kiem can also find customers based on current customers Following this, current customers will have some branch’s bonuses if they can find a new one  Diversifying SME customers in economic sectors Nowadays, VCB Hoan Kiem has been providing credit to new economic sector, such as hydroelectricity, knitwear, chemical products, etc It cannot be denied that SMEs have more ability in losses and bankruptcy than big enterprises Thus, focusing on one or two economic sector will make VCB Hoan Kiem face with problems of higher risks from SME customers; that is the reason why VCB Hoan Kiem had better diversify SMEs’ form Besides, researching about potential development of economic sectors will help branch to reduce risks in the right way Furthermore, in globalized period, many SMEs are still unclear enough in their manufactured effect VCB Hoan Kiem should consider SMEs’ strategies in opening period to provide credit suitably  Modernizing technology to improve customer management On the contrary with the large number of SMEs, the credit bankers in VCB Hoan Kiem are limited Besides, most of SMEs have unclearly financial system, disorganized material facilities, causing difficulties in customer’s supervision and assessment Therefore, VCB Page|| 61 Hoan Kiem needs to improve technology level to manage customers better Moreover, focusing on Internet investment is very important to online services, data controlling, etc  Focusing on banking staff training Quality of credit bankers is essential factor affected credit quality in general and credit quality of SMEs in particular To expand SMEs credit scale with ensured credit quality, credit bankers must be flexible, responsible to what they are doing Almost bankers in VCB Hoan Kiem are so young, under 30 years old, so they are very sensitive with environment fluctuation of SMEs and learning new knowledge To improve credit bankers’ quality, VCB Hoan Kiem should take some short-term training regularly to help them know more the importance of SMEs improvement, characteristics of each credit’s form, and how to manage SMEs better In line with it, VCB Hoan Kiem should have suitable system of salaries and allowances, rewarding good credit bankers who have new ideas in credit improvement or manage customers well Moreover, for specialization, VCB Hoan Kiem should split SMEs’ credit activities into private department 3.3 Recommendation As analyzing above, there are many objective factors out of branch’s control affected SMEs’ credit activities Thus, besides effort of VCB Hoan Kiem itself, they need supports from government, SBV and VCB Central 3.3.1 For the Government Firstly, government needs suitable policies to improve environment, economy and society, ensuring stable development of SMEs One of the most important policies is building fair business environment, where SMEs belonging any economic sectors can approach capital sources, labors and technology Moreover, government policies will encourage the development of SMEs, contributing to the whole system in general In order to make these policies effective, avoiding disorganization, government should Page|| 62 define the objectives of these policies through enterprises’ scale At this moment, defining SMEs based on two main standard, including capital size and number of employees without distinguishing economic sector As a result, this way is not suitable anymore because of reducing policies’ effect Besides, most of SMEs have demand to expand their business, but they lack of infrastructure Complicated procedure is considered as main factor to prevent SMEs from hiring or buying land to build business premises, so these procedures should be simplified Furthermore, government needs to focus on national training to improve the knowledge of SMEs’ directors Only when SMEs understanding well about business and globalization they overcome difficulties easier and develop more stable Secondly, government had better create effective legal system to improve SMEs’ credit activities in commercial banks It can be said that these activities bring highest risk in banking operation; thus, the more detailed regulation is, the safer commercial banks will be To solve difficulties in credit relationship, government also adjust tax rules and accounting system to match with enterprise’s size These regulations will motivate clearness in SMEs’ financial reports, which are the cause making commercial banks afraid Besides, government should find the agreement with commercial banks in measuring SMEs, giving SMEs opportunities to approach credit easier Thirdly, government needs to create model technology environment This thing will improve effect in not only SMEs businesses but also commercial bank’s customer management To these strategies, government had better learn technology from developing country, as well as training technology experts 3.3.2 For the SBV As the bank of any commercial banks, SBV plays an important role in directing strategies for developing banking activities To make SMEs’ credit activities strengthen, SBV should something as the following Firstly, SBV needs to complete credit mechanism to be a firm foundation for SMEs’ credit activities Credit activities to enterprises in general and to SMEs are not the same; Page|| 63 so SBV should issue private regulations for both of them instead of accumulating as the one Secondly, SBV had better focus on modernize banking technology Number of SME customers is very large, so customer supervision faces with some troubles Therefore, modernizing technology is one of the best ways to strengthen banking system SBV can promulgate some policies to encourage commercial banks, on their own, invest in infrastructure and banking technology In this field, Banking Information Technology Bureau is considered as the expert researching modern software to consult to commercial banks Thirdly, SBV should adjust mechanism of interest rate suitable with each period Setting interest rate based on reality, especially high inflation period as now is very essential 3.3.3 For VCB Central Firstly, VCB Vietnam needs to build suitable marketing strategies to develop retailing activities in general and SME’s credit activities in particular Marketing strategies must be built based on market research clearly and defining competitive position in credit market to SME customers Marketing strategies are also included product policy, price policy, distribution policy, promotion policy and mixed policies Especially, about product, VCB needs to research new credit products, verifying credit activities’ list to satisfy SMEs demand In lending, the main credit activities of Vietnam commercial banks, overdraft is suitable form with SMEs As a short-term form, being simple, flexible without securities, overdraft is used by SMEs in buying working capital However, until now, VCB only deploy this product as an experiment in VCB Central and VCB Hanoi branch In order to improve SMEs’ credit activities, VCB had better develop overdraft through the whole system Besides, with modern technology, in order to increase comfortableness to SMEs, VCB should carry out credit services online for a few next years Based on this system, several steps of credit process will be done by Internet to save time for both customers and credit bankers To this, VCB needs to modernize equipments to satisfy SMEs demand and ensuring credit quality Page|| 64 Secondly, VCB should promulgate some regulations, decisions and guidelines of SMEs’ credit activities soon to lay the foundation for branches to improve SMEs credit activities, assessing SMEs easier and fixing weaknesses Thirdly, VCB had better increase credit limit for VCB Hoan Kiem, expanding decision making right of this branch to improve competitive ability of this branch Moreover, VCB must focus on credit banker training, as well as building suitable system of salaries and allowances to motive banking staff their job in SMEs’ credit activities better Finaly, VCB should increase new products and new credit form to SMEs Because of large number and working on various economic sectors, SMEs have many diversified credit demands Deploying new products and new credit forms will be efficient way to satisfy those demands, laying the foundation for SMEs’ credit growth SMEs’ demand for medium and long-term credit is very high, but the SMEs’ ability to approach this credit source is still limited With this reason, VCB should consider to develop medium and long-term products for SMEs with some detailed conditions For example, VCB might provide long-term credit for SME’s projects suitably followed with development of economics and society of Hanoi These projects usually receive the support from government as well as preferential treatment in taxes and building fees, contributing to the possibility of projects At that time, SMEs’ ability of paying debts will be high regardless of no securities or less guaranteed assets Thus, VCB can get profits from credit activities while credit quality is still ensured A fact existed in Vietnam SMEs is that they have low technology or out-of-date machines and equipments Thus, VCB can provide credit for SMEs based on the purpose of investing in “friendly with environment” technology, in which SMEs will be consulted free This kind of product will improve SMEs working in conditions caused environment pollution, such as food, knitwear, cement, pottery, etc Page|| 65 CONCLUSION After three years upgrading from Transaction Office No.1, effect in VCB Hoan Kiem operation has been developing dramatically In general, in period 2009 – 2011, banking activities in VCB Hoan Kiem has improved both in quantity and in quality This is a certain result when branch’s self-control is more flexible In the context of encouraging retailing activities in VCB, improving SMEs’ credit activities will be strategic target of this branch Based on framework in SMEs’ credit activities of commercial banks, this thesis partly shown the performance in SMEs’ credit activities of VCB Hoan Kiem, appreciating the results and weaknesses Besides its achievements, VCB Hoan Kiem still exists some Page|| 66 limitation such as credit scale is too small when comparing with others in the system, credit activities are not symmetrical with fund mobilization, etc Based on affected factors and reasons of these factors, a lot of solutions and recommendation has been dedicated to improve this activities in VCB Hoan Kiem followed its strategy In the near future, with VCB’s credit procedure being adjusted and completed, with determination of all bankers in VCB Hoan Kiem, SMEs’ credit activities will be potentially achieve many dramatically results in both quantity and quality APPENDIX INTERVIEW QUESTIONNAIRE (Interviewee: Ms, interviewer’s advisor, member of Customer Department, VCB Hoan Kiem) Q: Good morning, Ms I’m going to my thesis that mentioning about your branch, VCB Hoan Kiem After reading some financial documents, I still have some questions and wonder if you can help me to make it clear A: Sure, you can start Q: I wonder in VCB Hoan Kiem, how can credit activities to SMEs be classified? A: You can divide them based on time, meaning short-term, medium and long-term credit Q: What about the classification based on credit form? Page|| 67 A: In VCB Hoan Kiem, we don’t have commercial paper discount We focus most on lending, a little bit in guarantee, and commercial sponsor (that being the work of International Payment & Banking Services Department) Especially, VCB ourselves have specific company which serve only for leasing, VCBL, so we also not have this activity in branches Q: How can I find the data of SMEs credit activities? A: All data will have in VCB Hoan Kiem income statement and balance sheet that I will show you later Q: As far as I’m concerned, I saw that in spite of fund mobilization up to nearly 6500 billion VND, why VCB Hoan Kiem only use about 1400 billion VND for credit activities? A: It’s not true if you said that we not have ability Actually, we have, but we are a branch, we depend much on VCB Central strategies In 2011, cap for VCB Hoan Kiem’s credit activities is just this number, and we can only follow the instructions Q: Can you give me some information about SMEs’ bad debts in VCB Hoan Kiem? A: This information is out of my reach I will ask another person, Ms…., debt-controlling staff, to help you Q: I saw that SMEs credit activities in VCB Hoan Kiem have still met some limitation According to you, what is the reason for this problem? A: First, it comes from SMEs themselves In recent years, when Vietnam economy has been in trouble with inflation, recession, unemployment, etc., SMEs themselves not have enough conditions for credit providing Second, it may come from strong competition between commercial banks That makes us more difficult when improving SMEs credit activities Q: So, in this situation, what is the solution that VCB Hoan Kiem uses to overcome this problem? Page|| 68 A: As I say above, we are a branch, so the best way for us is that we follow all of the instructions from VCB Central on time We also follow the direction of SBV, you can reference Instruction 01/2012/CT-NHNN to get more information you need Besides, we research carefully about SME customers to help VCB Central develop new product Furthermore, we will be more active in finding customers, expanding network, investing in technology, product marketing, etc Q: What about the strategy of VCB Hoan Kiem in 2010-2015? A: I will send you an email attached this file Q: Thank you for this conversation A: You’re welcome REFERENCES Vietcombank Hoan Kiem (2008) Brochure Company Profile Ngân hàng TMCP Ngoại Thương chi nhánh Hoàn Kiếm Hà Nội 2008 Vietcombank Hoan Kiem (2009) Báo cáo tổng kết hoạt động kinh doanh ngân hàng TMCP Ngoại Thương chi nhánh Hoàn kiếm năm 2009 Vietcombank Hoan Kiem (2010) Báo cáo tổng kết hoạt động kinh doanh ngân hàng TMCP Ngoại Thương chi nhánh Hoàn kiếm năm 2010 Vietcombank Hoan Kiem (2010) Bảng cân đối nguồn vốn sử dụng vốn Ngân hàng TMCP Ngoại thương chi nhánh Hoàn Kiếm năm 2010 Vietcombank Hoan Kiem (2011) Báo cáo tổng kết hoạt động kinh doanh ngân hàng TMCP Ngoại Thương chi nhánh Hoàn kiếm năm 2011 Vietcombank Hoan Kiem (2011) Bảng cân đối nguồn vốn sử dụng vốn Ngân hàng TMCP Ngoại thương chi nhánh Hoàn Kiếm năm 2011 Vietcombank, Cẩm nang tín dụng ngân hàng TMCP Ngoại Thương Việt Nam Nguyen Minh Hang (2009), Improving credit quality in VCB system, Bachelor Thesis, Academy of Banking Page|| 69 Pham Khoa Thu Huong (2008), Improving credit quality in BIDV Thanh Cong Branch, Bachelor Thesis, National Economics University 10 Nguyen Thi Hoa (2009), Solutions for quality improvement of bank credit to small and medium enterprises at GP bank, Bachelor Thesis, National Economics University 11 Nguyen Tuan Nam (2009), Improving lending activities of SMEs in VCB system, Master of Business Administration Thesis, National Economics University 12 David Cox, (1997), Modern Banking, Hanoi National Politic Publisher, Hanoi 13 Peter S Rose, Sylvia C Hudgins, (2010), Bank management & Financial service,Douglas Reiner, United State 14 Assc Prof Dr PhanThi Thu Ha, (2009), Quan tri ngan hang thuongmai, National Economic University Publisher, Hanoi 15 Pham Ngoc Phong, (2006), Marketing in Banking system, Statistic Publisher, Hanoi 16 Luu Thi Huong, (2005), Corporate Finance, Statistic Publisher, Hanoi 17 Nguyen Huu Tai, (2002), Monetary – Finance Theory, Statistic Publisher, Hanoi 18 Fredric S Mishkin, (1995), Monetary, Banking and Financial Market, Science and Technology Publisher, Hanoi 19 Regulation of Financial Institutions, Congress 47/2010/QH12 20 Decision 18/2007/QD-NHNN 21 Decision 90/2001/ND-CP (23/11/2001) 22 Decision 288/QD-NHNT.HDQT (02/10/2006) 23 Decision 1627/2001/QD-NHNN 24 Decree 56/2009/ND-CP (30/06/2009) 25 (2009), Số vòng quay vốn lưu động, http://www.danketoan.com/forum/bao-cao-taichinh/so-vong-quay-von-luu-dong.105458.html 26 www.vietcombank.com.vn 27 www.gso.gov.vn 28 www.wikipedia.com 29 www.thesaigontimes.vn 30 www.vneconomy.vn ... improving credit activities to SME in VCB Hoan Kiem CHAPTER 1: THEORETICAL FRAMEWORK ACTIVITIES TO SMEs 1.1 Overview of SME customers OF BANKING CREDIT 1.1.1 Definition of SMEs Since 1986 up to. .. traditional roles in VCB Hoan Kiem operation Credit form in VCB Hoan Kiem will be showm as the following: Diagram 2.3: Credit activities in VCB Hoan Kiem Following the strategic plan, VCB Hoan Kiem has... IMPROVING CREDIT ACTIVITIES TO SME IN VCB HOAN KIEM 54 3.1 Strategic direction for improving credit activities to SME in VCB Hoan Kiem 54 3.1.1 General strategic direction of VCB