Improving efficiency of credit operations at agribank luc ngan from 2017 to 2019

INTRODUCTION The urgency of the subject Along with the rise of the country's economy from 1990 to present, experiencing 20 years of existence and development The State Bank in general and commercial banks in particular are increasingly asserting their position in the World economy The bank plays an important role in curbing inflation, boosting the nation's economy, shifting the country's economic structure from agriculture to industry and services Along with the general development of Vietnam's banking industry, it is impossible not to mention the existing limitations These are issues that need to be given many solutions to overcome and most of them mainly have credit problems Meanwhile, credit is one of the most important parts to determine the existence and development of a bank Therefore, improving the efficiency of lending activities is one of the major topics that commercial banks are implementing and providing effective solutions to promote lending process and expand the market banking industry Agribank Luc Ngan branch is also one of the branches of the State Bank system of Vietnam However, the current problem exists in the credit department is quite large due to the objective and subjective factors that will be mentioned in the content of this essay From the limitations of the aforementioned banks, after a period of direct practice at the branch and with the help of the teacher, I decided to choose my thesis topic as follows: “Improving efficiency of credit operations at Agribank Luc Ngan from 2017 to 2019” Research purposes The purpose of this thesis is to evaluate the current situation of Agribank Luc Ngan's business opertions and credit operations, identify the causes of the limitations and find effective and practical solutions to improve efficiency of current lending activities of Agribank Luc Ngan in the coming time due to the current shortcomings and limitations that the bank currently encounters relatively in the credit section Object and scope of the study - The object of the study: The credit operations of Agribank Luc Ngan from 2017 to 2019 - Scope of research: Credit operations at Agribank Luc Ngan from 2017 to 2019 Research methods The research method used is to summarize data and analyze data via websites, online newspapers, practice process at Agribank Luc Ngan and collect information from special bank official specialy credit officer Using methods of collating, comparing and statistical data From there, make comments on the current credit operations of Agribank Luc Ngan from 2017 to 2019 and find solutions to overcome the existing problems Research structure Besides the introduction and conclusion, the thesis consists of chapters: Chapter 1: Literature review on effectiveness of credit operations at commercial banks Chapter 2: Credit operations of Agribank Luc Ngan in the period of 2017-2019 Chapter 3: Solutions to improve the effectiveness of credit operations at Agribank Luc Ngan CHAPTER I LITERATURE REVIEW ON EFFECTIVENESS OF CREDIT OPERATIONS AT COMMERCIAL BANKS 1.1 Overview of commercial banks 1.1.1 Definition of commercial banks According to Assoc.Prof Dr Phan Thi Thu Ha of the National Economics University: “Commercial banks are a big economic organization of Vietnam as well as in the world in general There are monetary activities including lending and lending between customers and bank officials The bank acts as the treasurer of society In addition, along with the development of society, the bank is expanding financial services such as guarantee leasing, selling motorbike insurance, cars and other activities depending on the operating areas of each bank.” (PGS.TS Phan Thị Thu Hà, 2009, p 9) According to Assoc Prof Phan Thi Cuc: “A commercial bank is a product of a market economy, a bank is a place of close connection between people and the country's economy The bank is responsible for carrying out loan and lending transactions to ensure the life of the people The stronger the economy, the more service activities of the bank take advantage of the potentials of the economy and social life.” (PGS.TS Phan Thi Cuc, 2015, p 12) Within the scope of the thesis, the author uses the concept of commercial banks by Assoc Prof Dr Phan Thi Thu Ha and this concept will be used throughout the entire thesis 1.1.2 Fuction of commercial banks - Credit intermediation: Credit intermediation is one of the most important functions of the World Bank system in general and Vietnamese banks in particular Along with this function, the bank has the role of taking deposits and lending and earning profits through interest rate differences between deposits and loans Receiving deposits from customers and lending are two of the most important and common functions of a commercial bank today, deciding the bank's survival and its development potential - Payment intermediaries: Commercial banks are the cashiers for the system of enterprises, large and small, organizations and individuals wishing to use the bank's payment services The bank will be responsible for payment of goods, utilities, general services and other charges depending on the needs of the customer All commercial banks provide useful and convenient means of payment such as through payment order, check, cash card, credit card and each payment method will suit each needs of customer Therefore, the demand for cash by customers is decreasing, instead of using credit and payment cards to increase security and convenience Using this payment function will help boost the economy towards modernization compared to other developed countries in the region - Money creation function: Business banking the biggest purpose is to make a profit Therefore, the function of making money is an important function to promote the development of banks The function of making money is performed on two basis: payment function and credit function Through the credit function, the bank uses the money deposited by customers to lend to other organizations and individuals, besides that money is made to pay for the services requested by customers This makes the bank's cash flow always rotate (PGS.TS Phan Thị Thu Hà, 2009) 1.1.3 Commercial banks activities Chart 1: Commercial banks activities Conimercial banks activities Capital mobilization Customer deposits Borrowing s Stock issue Use of funds Invest Credit Intermediary activities Reserve (Soure: Author) Commercial banks operate in two main activities: capital mobilization and use of funds Capital mobilization: Banks that want to survive and develop need a large amount of money to maintain their banking activities Therefore, commercial banks mobilize capital through channels such as receiving customer deposits, savings deposits, issuing bonds to have a stable amount of money to maintain other service activities In cases where the mobilization of capital from customer deposits is too small and not enough to sustain other activities, the bank may borrow from other banks or borrow from the State Bank itself to pay in cases where it is granted cypress occurred Use of funds: The use of capital is primarily used for investment, credit and other intermediary activities Credit is the main activity of a bank, reflecting its level of activity and development Besides, the bank invests in securities to increase liquidity and diversify assets Banks can sell securities to increase their earnings and grow their funds In addition, banks can contribute capital with companies and small and large enterprises, creating conditions to increase profits for the bank The bank also acts as an intermediary to carry out transactions for customers without using cash, such as bank transfer and payment services 1.2 Credit operations of commercial banks 1.2.1 Definition of commercial bank credit operations According to Assoc.Prof Dr Phan Thi Thu Ha: “Lending is also known as credit financing activity for banks This is when the bank lends money to customers to serve needs and purposes That money can be used for legal investment, shopping or business Customers borrow within a certain period of time, then will return to the bank both principal and interest on time Lending to a high-yielding but highly risky activity, this risk can result in loss and a loss of bank income.” (PGS.TS Phan Thị Thu Hà, 2009) According to PSG, Dr Le Van Te: “From the perspective of shifting loan funds from savings surplus subjects to those with shortage of savings, credit is considered as a way to disrupt the capital transfer from lenders to borowers In a financial relationship, credit is a property transaction on the basis of repayment between the two entities In particular, the lender transfers the property to the borrower for a specified period of time as agreed upon, the borrower is responsible for unconditionally repaying both principal and interest to the borrower when the payment is due ” (PGS.TS Lê Văn Tề, 2013) Within the scope of the thesis, the author uses the concept of commercial banks by Assoc Prof Dr Phan Thi Thu Ha and this concept will be used throughout the entire thesis 1.2.2 Credit characteristics of commercial banks Lending characteristics of commercial banks have the following specific characteristics: Firstly, lending at banks is done in currency (cash) or journal entries For the safety and convenience of customers, most banks use cash for their transactions Secondly, the bank lends primarily by the money that customers send or loans from the State Bank, not by equity, the bank can use idle money in society to make a profit Thirdly, lending is a continuous activity in society regardless of the circumstances (crisis or flourishing) Lending always takes place so that there is no bankruptcy or deadlock situation Fourthly, the subjects of loans to banks are very diverse: Individuals, organizations, joint stock companies, limited liability companies Therefore, the verification of customers' personal information must be conducted in a similar manner strictly through the evaluation of assets Through this stage, the bank will have sufficient legal basis and conditions to evaluate the ability to recover debts from customers Fifth, lending activities of commercial banks have diverse loan terms There are three types of loan terms: Short-term, medium-term and long-term suitable for each customer and purpose Finally, one of the borrowers who bring high risks to banks is lending to consumers and individuals The source of debt collection from these subjects depends largely on the personal income and economic conditions of each family Because customers who are not joint stock companies not have proof of income on legal documents, the declaration of information is relatively subjective so that the bank can hardly detect errors Since then, the debt recovery occurred many risks 1.2.3 Role of commercial bank credit operations 1.2.3.1 For the bank Lending is a major activity of the bank and plays an important role to show whether the bank is performing well or not Lending to banks is large while the level of outstanding loans is low, showing that banks operate well and business effectively, proving that this is a reputable and thriving business bank Since then, attracted a large amount of deposits from companies and individuals In order to attract a large number of customers, banks are increasingly expanding their lending scale by diversifying loan products, accompanied by services, making full use of idle cash in society to invest in more useful items, to develop Vietnam's economy Commercial banks play a role as both a borrower, also act as a lender and enjoy interest rates to maintain and develop 1.2.3.2 For the customers Thanks to the bank's lending, customers can fulfill their personal goals Supporting consumption and investment in economic development of individuals as well as organizations contributing to the overall development of the country's economy Lending creates jobs for a number of unemployed parts of the country, tackling the nation's labor surplus 1.2.3.3 For the economy Lending plays an important role and a necessary condition for developing the economy For the former subsidized economy, the role of the bank changed a lot because the former economy was a centralized economy Lending and mobilizing capital play a role of providing budget for people in the current market economy, which is the concentration of different sources of money to invest, maintain and develop Lending is a form of promoting the economy, an economic leverage of each country, expanding their trade and service sectors Lending contributes to change and accelerates the process of capital turnover, money flows are constantly moving in the banking system and ensures that there is no source of money in vain in the economy 1.2.4 Classification of commercial bank credit operations Chart 2: Classification of commercial bank credit operations Credit operations Econom y sectors Time maturity date Guarantee form Business work (Source:Author) 1.2.4.1 Based on economic sectors Currently, banks are lending to households or individuals The purpose is to use for everyday situation that they could not afford before Personal lending is mainly focused on consumption such as buying a house, buying a car, buying household appliances Consumer loans bring a big risk in capital recovery because it depends a lot on household income of family and individual Therefore, the interest rate for consumer loans is usually higher than that for other purposes Business loans to joint stock companies, limited liability companies, large, medium and small enterprises The majority of loans are for systematic investment, business and production projects, loans for agriculture, industry and service purposes 1.2.4.2 Based on time maturity date The term of a loan is very important for banks because it is closely related to the interest rates and profits that the bank has The longer the loan period, the higher the interest rate due to the relatively high risk The bank is divided into groups of loan term: - Short-term loans: These loans are 1-year term and mainly used for personal or household consumption loans - Medium-term loans: These loans are from year to years These loans serve the business purpose of small and medium-sized companies, used for simple production processes, expanding production scale and the advantage is the rapid capital recovery process - Long-term loans: These loans are for more than years and the maximum term may be from 20 to 30 years depending on the use purposes Long-term loans are mainly used for long-term projects such as reforestation, construction of large projects, bridges and airports, etc… 1.2.4.3 Based on guarantee form Depending on the purpose of use, the bank is currently providing unsecured loans and loans with collaterals - Lending with collaterals: A form of customers' mortgage of assets for mortgage purposes of the bank, proving itself capable of repaying debts to the bank on time In the event that an individual or business is losing money and is unable to pay its debt, the bank will consider to recover the customer's property The lending of banks with collaterals aims at reducing risks while borrowing, increasing the stability of the economy - Lending without collaterals (unsecured loans): A form of lending by banks that does not need collateral but only needs to rely on customers' trust Normally, the subjects who provide loans under unsecured loans are mostly traditional customers of the banks, who have high reputation and business with great profits However, unsecured loans are risky and bring many risks for banks 1.2.4.4 Based on business work Depending on the geographical areas and operating conditions, commercial banks provide loans with a variety of business lines such as agriculture, industry, production, services, e-commerce, etc Most of the banks in big city focus on lending to modern services and production, keeping up with the trend of society In contrast, in some small provinces, due to the nature of the locality, the focus is on lending, mainly agriculture, forestry and fishery 1.2.5 Credit forms of commercial banks 1.2.5.1 Loan per time Most of loans were applied to small loans at a time, and customers who did not regularly borrow at banks did not qualify for overdraft limits During the loan process, the bank will monitor the debt and collect both principal and interest on time In case the customer does not pay the debt on time, the bank will convert the debt into overdue debt or collect debt before maturity 1.2.5.2 Loan credit limit This is a form of borrowing when the bank has set a specific limit for customers Customers will mortgage with red books, real estate or any valuable assets that can be mortgaged to banks During the lending period, customers will be given a certain period of time as a premise for the next loan 1.2.5.3 Overdraft loan An overdraft loan is a form of unsecured loan that brings many benefits to customers Overdraft limit is the amount that a credit institution is allowed to spend in excess of the payment account This method is quick, simple, easy to apply but should only be applied to customers who truly trust and not create risks for the bank 1.2.5.4 Commercial bill discount Commercial paper is a type of debt receipt in the process of buying and selling of economic organizations This paper has a 90-day repayment period, which is equivalent to a business cycle of companies Currently, commercial banks are lending commercial discount, commercial banks repurchase commercial bills that are not yet due to repayment of businesses and the interest received will be deducted directly at the discount time Table 1- Compare commercial bank lending forms Loan credit limit Loan each time The same Differences Over draft Commercial loan bill discount They are all forms of lending at commercial banks to create profits Applicable to small, nontraditional bank The bank sets specific lending limits for each loans customer The form of unsecured loans applies to reputable traditional customers, the amount of money is spent beyond the payment The bank repurchases commercial papers before the maturity date of economic organizations account (Source: Author) 1.3 Effectiveness of credit operation at commercial bank 1.3.1 Definition of effectiveness of credit operation at commercial bank Lending is the main activity of the bank, lending provides income to the bank and maintains that bank's operations The effectiveness of lending activities reflects the bank's business results and future development trends The bank's lending performance is known to keep pace with the trends between customers and the needs of society (PGS.TS Phan Thi Cuc, 2015) According to the accounting and auditing magazine of Ms Le Thi Hong Tam Department of Economics - Nam Dinh University of Technology and Education, the Looking at the data table, the result shows that the outstanding loans to businesses in 2018 were very little VND 8,050 million, accounting for 0.7% of the total loans, in 2018, the outstanding loans increased by 8,759 million VND, accounting for 0.9% Total outstanding loans and in 2019 decreased to 10,823 million VND, accounting for 0.6% of total outstanding loans On the other hand, the result shows a large disparity when lending to households and individuals accounts for the majority of total outstanding loans In 2018, outstanding loans were 1,491,125 million VND, accounting for 99.3% of total loans In 2019, outstanding loans increased by 242,389 million VND, accounting for 99.1% of total loans In 2019, outstanding loans were 1,875,203 million VND, an increase of 141,689 million VND compared to 2018 and accounted for a very large proportion of 99.4% of the total outstanding loans in 2019 The general assessment shows that the situation of borrowing capital by economic sectors at Agribank Luc Ngan is too big Currently, the bank only focuses on lending small items of households and individuals, accounting for 99% Meanwhile, lending to individuals and households carries greater risks in recovering bad debts and risky debts, since the debt collection is mainly based on the income of individuals The office is very high On the other hand, for branches in big cities, the proportion of loans to businesses is very high due to the large number of large investors, so the debt recovery problem is solved more thoroughly At Agribank Luc Ngan now, lending by enterprises and joint stock companies is too little at less than 1% Lending objects are so different, leading to the fact that the expansion of the scale and the subjects of lending are still limited and need to be effectively overcome in the following years 2.5.5 Criteria for evaluating the efficiency credit operations at Agribank Luc Ngan from 2017 to 2019 Table 12- Criteria for evaluating the efficiency credit operations at Agribank Luc Ngan from 2017 to 2019 (Union: VND) Oder Target 2017 2018 2019 Good Good Good Good Good Good Qualitative indicators Legal basis Loan Regulations and Loan Contracts Diversify lending methods 3 Diversify lending industry 7 Limitted Limitted Quantitative indicators Lending scale Credit balacne growth(%) Limitted 30.2 16.5 7.8 Profit evaluation (%) 4.3 4.8 4.8 Overdue debt ratio(%) 0.47 0.8 0.46 Bad debt ratio(%) 0.36 0.34 0.32 13.4 12 14.7 86.6 88 85.3 88.3 90.9 93.4 Loans with guarantee 10 11 ratio(%) Loans without guarantee ratio (%) 12 Interest income growth rate (%) (Source: Balance sheets and business results of Agribank Luc Ngan for the period 2017-2019) => Comments: In terms of legal basis, we find that in the past years, Agribank Luc Ngan branch has well complied with the laws of the state on the principles, conditions and lending process seriously and efficiently Relatively good loan quality does not allow the situation that the law must interfere in lending to overdue debts Regarding lending regulations and loan contracts, Luc Ngan and Agribank have complied with commitments in what loan contracts require and stipulate, loan quality has improved day by day At present, Agribank Luc Ngan is making loans in three modes: lending by installments, small-sized loans and loans by financial compensation But most of the customers are farmers, so most of the banks are lending on a small scale and on a large scale basis The diversification of lending methods is small, not many customers, so it has not attracted other economic sectors The growth of outstanding loans of Agribank Luc Ngan branch is showing signs of gradually decreasing in the period of 2017-2019 from 30% to 8% This proves that the source of customers that the Bank is targeting is shrinking The bank is still focusing on lending to farmers and farmers mainly, not expanding other economic sectors Finding customers is having difficulties and needs solutions Looking at the criteria evaluation table, we see that the profit from credit activities for the Bank is very limited at only 4.5% in the past years Meanwhile, according to the theory of the Bank, the main purpose of business is to make profit and credit is an indispensable part for the Bank to be able to operate Agribank Luc Ngan branch mainly lends to farmers and individuals Because the area is a mountainous district, the area is difficult to access, the scale is relatively limited, the economic sector is limited, focusing mainly on agriculture, not focusing on industry and services, so the quality is very good lending is still poor compared to other branches, which has not attracted many customers and customers According to the regulations of Agribank's system, bad debt ratio and overdue debt of 3% or more are considered as poor loan quality and ineffective banking activities Looking at the evaluation criteria table, we can see that the ratio of bad debts and overdue debts of Agribank Luc Ngan in the period of 2017-2019 are below 1% This is a quite progressive success in lending activities at Agribank Luc Ngan branch, proving that the relatively good loan quality is not enough to assess the quality of the current loan The capital circulation speed in the period 2017-2019 was relatively high and increased steadily over the years Demonstrating that cash flow is always transferred in the banking system, the Bank recovers debt quickly and invests effectively The higher the ratio of loans with the collateral, the better the credit quality is However, it is found that the ratio of loans with collaterals of Agribank Luc Ngan branch is only at 13% while the rate of unsecured loans is very high at 86.7% This is a quite alarming rate showing that the Bank's operations will be at risk and increase the possibility of capital loss in the following years Therefore, it is necessary to translate and change the lending process of the Bank to improve credit quality in the coming time The growth rate of loan interest income was relatively good over the years and increased year by year In 2017, the growth rate will reach 88.3% and by 2019, the growth rate will reach over 93% This is a progressive step of the branch, but compared with other branches in the Agribank system, it is still limited by the peculiarities of the operating area 2.5.6 Comparing the efficiency of credit operations at Agribank Luc Ngan and other banks in 2019 Table 13- Comparing the efficiency credit operations at Agribank Luc Ngan and other banks in 2019 (Union: %) ORDER Target Agribank Luc Agribank Ngan Luc Nam Vietcombank Qualitative indicators Compliance with laws Good Good Good Well implementing loan Good Good Good 3 3 Limitted Diversity regulations & contracts Diversifying lending methods Diversifying lending industry Quantitative indicators Lending scale Limitted 7.8 10.8 16.2 4.8 2.8 0.46 1.5 1.1 Bad debt ratio 0.32 0.5 0.8 The ratio of loans with 14.7 25.2 87.9 85.3 74.8 12.1 Growth rate of outstanding loans Profit rate The ratio of overdue debt guarantee The ratio of loans without guarantee Loan growth rate 93.4 87.7 79.2 (Source: Author) The author can see that the commercial banks operating have very similarities and differences depending on the location of each bank The purpose of all banks is to make a business profitable, although the profitability of each bank is not the same due to its distinctive but distinct characteristics In terms of common ground, all commercial banks being considered have overdue and bad debt ratio below 3% Show that the banking industry in Vietnam handles bad debts relatively well The growth rate of outstanding loans and profits was relatively high, the interest rate from lending activities always exceeded 50%, typically at Agribank Luc Ngan, the loan interest rate reached over 90% This shows that lending activities at banks are always ongoing and exciting Agribank Luc Ngan and Agribank Luc Nam are two banks under Bac Giang province Because the operating areas are relatively similar, the figures reflecting the lending criteria are relatively similar Because the travel area is still difficult, people's life is not high so focusing on agricultural loans is mainly, the lending scale is limited because customers are not rich and diverse In 2019, Agribank Luc Nam's loan growth rate reached 10% higher than Agribank Luc Ngan 3%, showing that the scale at Agribank Luc Nam is higher With the reason that the operating area is located on the development axis of the center of Bac Giang city, the lending scale is more diverse Although the scale of development is wider, the profit is not as high as Agribank Luc Ngan Profit ratio of Agribank Luc Ngan in 2019 is 4.8%, while at Agribank Luc Nam is only 2.8% Although the two locations are primarily agricultural loans, Agribank Luc Ngan is still somewhat more profitable in terms of agricultural loans with more diverse agricultural products On the other hand, compared to the figures the author has compiled from the financial statements Vietconbank always leads in terms of outstanding loan growth as well as loan guarantee measures Vietcombank's 2019 loan growth rate was 16.2%, twice as high as Agribank Luc Ngan The rate of loans with secured assets is always much higher than that of Agribank Luc Ngan In 2019, the proportion of loans with collaterals at Vietcombank reached 87.9% while at Agribank Luc Ngan only reached 25.2% Also because of the difficult operating area, the loans here are very small, so according to the State's regulations because applying Decree No.“116/2018 / ND-CP on policies for agricultural and rural development of the Government on September 7, 2018.” they will be considered in the mortgage group 2.6 Evaluation of lending activities of Agribank Luc Ngan branch in the period of 2017-2019 2.6.1 Achievements In 2017, 2018 and 2019, all Agribank officers and directors of Luc Ngan tried to complete the set goals Receiving the trust of customers is the biggest achievement that Agribank has received in the past This is a condition to create motivation for the development of the branch as well as the whole system of Agribank in general Author find that although the ratio of unsecured loans is very high, the NPL ratio is below 3%, indicating that Agribank staff are doing well in recovering capital and handling bad debts Accompanying it is the low overdue debt rate below 1% The profit gained and the interest income from loans increased steadily over the years, proving that the bank is operating and operating effectively because the purpose of business is to bring profit It also reflects the trust of customers with Agribank and is always a traditional and close customer of the bank Customer confidence is also reflected in the declining call numbers to the hotline This proves that the quality of bank staff and the way to show it to customers is improving day by day 2.6.2 Limitations Subjectively, in addition to the results achieved in 2017 and 2018, business activities of Agribank Luc Ngan branch also have some shortcomings as follows: The bank lends a wide range of industries but only focuses on agriculture and the agricultural sector brings great risks due to seasonal factors The work could not cope with the sharp decline of seasonal loan balance in Luc Ngan The ratio of loan without guanrantee is much higher than that of loans with collaterals, posing great risks The handling of bad debts and overbad debts has not been exact and thorough The progress of handling bad debts, recovering bad debts, has dealt with risks slowly, has applied measures to sue the court, but the process of handling assets has faced many difficulties In 2019, outstanding loans not only did not grow but also decreased sharply compared to December 31, 2018 in the second and third quarters, failing to reach the target plan set out by Agribank Luc Ngan branch, lacking in Stable and unbalanced with medium and long term loans 2.6.3 Cause of limitations In 2017 and 2018, the economy in general and Luc Ngan branch in particular faced many difficulties such as low prices of livestock products, especially low pig prices, greatly affecting farmers and weather erratic causes the rate of litchi flowering and fruiting rate is low, the main litchi crop is in crop failure, yield is low compared to previous years Partly because of the lychee crop in 2019, the selling price has increased many times in previous years, the source of money in the population has increased sharply, borrowers pay more but there is no demand for re-lending Unlike urban areas, Luc Ngan is a mountainous district so people are mainly farmers whose main business is planting and raising animals The town is dominated by individual business households and there are few joint stock companies or large businesses People small businesses so they not have the need to use too much capital, not have the need to borrow too much money from the bank In addition to agricultural products, products on services are also being strongly developed but not yet diversified in products People have not grasped the modern products and services, so the outstanding loans of the service sector are still poor While in other developing provinces, products and services account for the majority of the bank's total outstanding loans The bank has not really actively sought new customers, only focuses on the number of existing and existing customers and is focusing mainly on lending to farmers and farm households, not expanding the business sectors Other Finding customers is facing many difficulties In addition to the above reasons, there are other reasons that make the lending situation of Agribank Luc Ngan limited In part, it is also due to the lack of good manners of some accountants, such as the fact that customers coming to the bank for direct transactions are not explained clearly and their attitude is not welcoming Staff qualifications are still low compared to requirements, especially in the field of information technology, some officials still work according to habits, less creative thinking, the quality of appraisal in some officials is not good, passive and not working properly business processes Some units and officials have not developed their own work plans and programs, leading to embarrassing and passive guidance Agribank's operation in Luc Ngan branch is subject to more intense competition with other commercial banks and people's credit funds, so far in Luc Ngan branch there are 04 commercial banks and 03 credit funds People in the area and many other commercial banks are competing in the district Agricultural Bank mainly operates in the field of rural agriculture, large and dispersed areas, difficult transportation, unqualified cadres, the structure of outstanding loans is mostly for households doing business with small loans The above difficulties have affected the business activities of 2017, 2018 and 2019 of commercial banks in general, including Agribank Luc Ngan branch in particular CHAPTER III SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT OPERATIONS AT AGRIBANK LUC NGAN 3.1 Vietnam and International background It can be seen that Vietnam's economy has been innovating for 34 years from 1986 back here The renovation of the market economy has helped Vietnam from a poor, backward agricultural country to become a developing and gradually stable country Between 2002 and 2018, GDP increased by 2.7 times, surpassing the US $ 2,700 mark in 2019, along with 45 million people being eradicated from poverty The percentage of the poor is reduced from 70% to 6% The majority of Vietnamese people are ethnic minorities, accounting for a fairly large number of 86% For 2019, Vietnam's economy is still on a stable development and equipping itself with the ability to cope with immediate difficulties Import-export activities are still on a steady development with GDP increasing by 7% in 2019, approximately the same as that of 2018 Coming to 2020 is a challenging year for Vietnam economy in particular and the world economy in general because of the serious impact of Covid-19 epidemic However, thanks to the development of health care as well as medical staff, the Vietnamese economy is not affected as seriously as other countries in the world Viet Nam has had relatively good proactive measures to prevent and combat diseases and has been recognized by WHO Vietnam's economy is expected to fall by 3.4% from the preepidemic forecast of 6.5% However, if the current regulation of the epidemic is stable, the economy of Vietnam and the World is expected to recover by 2021 The outbreak of the Covid-19 pandemic has hindered the economy, which proves that Vietnam and the World need to boost their economy and improve health quality even more Besides Vietnam's economy, we cannot help but mention that the world economy has been seriously affected recently by the impact of Covid-19 epidemic The figures show that the decline of European economies is becoming more and more serious The United States says 3.2 million more people apply for unemployment benefits and Brazil is on the verge of collapse and is facing a food shortage The economies of France and Germany show that industrial production is declining to below 16% and economic output will decline to 14% in 2020 Perhaps the most affected industry is tourism and the decline of domestic and international airports The number of flights plummeted during the long epidemic as today The world calculates that the international tourism industry will reduce by 60 to 80% of visitors in 2020 In recent times, US economists are warning that a pandemic will make the world economy slump exacerbated in nearly a century 3.2 Opportunities and challenges for Agribank Luc Ngan's credit operations With the development of the current market economy, Agribank Luc Ngan is making an effort to fulfill the goals set out earlier With a strong geographical area of agricultural production with high productivity Especially the local fruits such as Cam Vinh, Dien grapefruit and especially lychee, the local economy is relatively stable Since then, creating motivation for economic development, especially mobilized capital of the bank has been improved Borrowing more capital shows that the cycle of capital circulation in the bank is improved, good bank income, and banks are operating more and more effectively In addition to the opportunities provided by the locality, Agribank Luc Ngan has been facing specific challenges Luc Ngan is a mountainous district with difficult and unfavorable transportation The industry here is mainly based on agriculture so the potential for developing other industries is not much Meanwhile, agriculture is seasonal, so the risks are very high, partly relying heavily on the weather, so the output is not equal every year, leading to a large impact on the economy Each lychee crop, most customers are Chinese traders and depend heavily on not expanding the customer scale It is also because the main industry is agriculture, which leads to limited loans, limited lending scale, small lending subjects, and these are challenges for Agribank Luc Ngan As mentioned in the current situation, loans for agriculture are small loans with no collateral, so the risk of bad debt and risky debt is very high Partly subjective because people are not aware of repaying loans on time, so the situation of lending activities faces many difficulties and challenges Small and medium loans are mainly short-term and mediumterm loans so interest rates are not high, leading to the bank's income being much affected 3.3 Solutions to improve credit operations at Agribank Luc Ngan branch 3.3.1 Solutions to expand credit scale and loan term Besides lending to agriculture, it is necessary to expand lending to current key industries such as industry and services Encourage people to business in the service sector to keep pace with the needs of society Credit growth is associated with developing products and services and improving credit quality, and strictly controlling loans Maintaining medium and long-term loans accounted for 50% of total loans Promote lending to households and give priority to rural agricultural loans Credit growth is planned, strengthening credit quality control, ensuring safety, strictly managing cash flow of large customers and related customers Focus on lending to the priority subjects of the Government, the State Bank Consumer credit limits black credit, actively opening overdraft cards in rural agriculture, promoting lending through the group Looking for customers to expand lending to legal entities according to the assigned plan 3.3.2 Solutions to reduce bad debts and prevent risks Strictly implement regulations on debt classification, making provisions and dealing with credit risks as prescribed Detect potentials in business to take appropriate measures, prevent and prevent risks, and at the same time direct debt analysis and for each credit officer Continue to coordinate with political and social organizations as well as coordinate with the courts to enforce the debt collection Actively reconcile bad debts and debts that are handling risks, motivating and being strict on overdue debt customers to reduce the bad debt ratio significantly Continue to consider and submit to the superior bank to adjust interest rates for overdue penalties, exempt or reduce interest rates for customers of production and business households who meet with difficulties, focusing on measures to handle and recover bad debts 3.3.3 Solutions to improve the sense of responsibility of officials and management Transactors need to have a positive attitude, enthusiasm and more agile in communicating and handling work with customers Be patient and explain to customers because many people are old and they can hardly grasp the situation quickly Strengthen management and supervision of the implementation of credit officers' tasks at the grassroots level, strictly handle cases of non-compliance, causing difficulties and harassing customers Leaders to strengthen grassroots implementation of lending regulations to village clusters Investing, giving more instructions on informatics operations for weak staff Dispatched professional training classes from to months to facilitate transactions with customers 3.3.4 Solutions to improve financial capacity Regularly analyze bad debts, outstanding interests, debts that have been handled, and assign specific plans to each credit officer to increase revenues Through payment and money transfer services, foreign currency trading services to well fulfill non-credit revenue targets Saving expenses, paying norms for expenses such as telephone, electricity, water, materials, printing paper, petrol, etc ensure income - expense gap according to the plan assigned by the superior bank Carry out a profitable business, ensure sufficient salary, shift work and other regimes for officials as prescribed Table 14- Limitation and solution Order Limitation Solution Focus on lending for agriculture Diversify the lending sector, expand lending policies for industries other than agriculture The ratio of loans without collaterals is very high Focus on lending individuals and household Change the policy for unsecured lenders to minimize the risk of bad debts and risky debts Expanding the lending scale to small and medium-sized companies and other economic entities (Source: Athor) 3.3.5 Other solutions Implementing democratic regulations in enterprises, building a solidarity and unity in the units Strengthen discipline, strictly implement working regulations, comply with professional processes Regularly paying attention to the education of ideology, professional ethics associated with the implementation of following Ho Chi Minh's moral example, raising awareness from leaders to all officials In the direction must be closely observed, clearly assigned people, clearly defined jobs Resolutely handle officials who lack sense of responsibility, not follow the process that leads to injuries and risks Always take advantage of the support and assistance of Party Committees and local authorities from the district to the commune to facilitate capital mobilization, service development and loan investment Implement well the emulation movements among officials and employees who strive to fulfill the business tasks of the year CONCLUSION Standing in front of an increasingly developing society, the grasp and capture of the economy today is a deep concern for the banking system in general and Agribank in particular In order to improve the quality of lending to the entire banking system, Agribank Luc Ngan is making an effort to change and overcome its limitations, typically the bulky lending process has not been reduced .In all activities of the Bank, the credit contributes indispensable to creating profits and revenues for the Bank Whether or not banks can survive and develop depends on a very large part of the current credit system Agribank Luc Ngan will continue to strive to make Agribank Vietnam's system always in the "Big 4" group and always a reliable place to bring prosperity to customers The internship at Agribank Luc Ngan was not long, but it helped me to have new experiences in the first step of realizing my career dream Finally, I would like to express my sincere thanks to Ms Dang Thuy Nhung for following me closely, to improve the details of my report Thank you ! ... for evaluating the efficiency credit operations at Agribank Luc Ngan from 2017 to 2019 Table 12- Criteria for evaluating the efficiency credit operations at Agribank Luc Ngan from 2017 to 2019 (Union:... way of development like lychee before 2.5 Credit operations at Agribank Luc Ngan branch from 2017 to 2019 2.5.1 Analysis of the credit operations by business lines at Agribank Luc Ngan from 2017. .. of the total loan balance on par with 2018 2.5.4 Analysis of credit operations by economic sectors at Agribank Luc Ngan from 2017 to 2019 Table 11- Credit operations by economic secctors at Agribank