This chapter presents the summary of the findings, conclusions drawn and the recommendations offered thereafter.
Summary
This research aimed at investigating credit risk management in banks for Agriculture and Rural Development in Thai Nguyen province with an endview of proposing recommendations to improve the Agribank Thai Nguyen’s credit risk management. In particular, it aimed to describe the profile of the respondents with respect to the age, gender, civil status, education, and number of years in service; determine credit risk in Thai Nguyen Agribank, considering assessment of the managers and staff in terms of segment structure, types of customers, types of guarantee, and account outstanding; assess the current status of debts of Agribank Thai Nguyen as perceived by the managers and staff as to overdue, undue, debt requiring attention, under qualified, doubtful, frozen, and bad debts;
identifying factors affecting credit risk management of Agribank Thai Nguyen as assessed by the managers and the staff as to subjective and objective criteria;
find out significant difference in the assessment of two groups of respondents on credit risk management and the factors affecting limitations of the credit risks management of the bank.
With the use of the mixed method of research employing quantitative and qualitative analyses, the study subjected 203 comprising of 40 managers and 163 staff as respondents. The five (5)-point Likert scale questionnaire was also used for the variables being investigated in this study.
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Findings
The following are the findings of the study based on foregoing objectives:
1. Most of the customers are female with 130 accounting to 64% and only 73 or 36% are males; 120 or 59.6% are married, 71 or 35% are single, and both 2.7% are widow/ed and are divorced; 42% are aged below 30 years followed by 30 to 40 years with 66 (32.7%), 41 to 50 years with 32 (15.5%), and 9.8%
above 50 years; 167 or 82.2% of them hold bachelor’s degree while 17.8%
with master’s degree; and 107 or 52.7% have been in the service for 6 to 10 years, 18.3% with less than 5 years, 19.4% with 11 to 15 years, and 9.6%
with 15 years and above.
2. The credit risks in Thai Nguyen Agribank are assessed by the managers and staff in terms of the following:
2.1. Segment structure with 3.5 or more risky which the managers rated with 3.8 (more risky) and 3.4 (risky) for the staff, where credits for personal expenditure with the highest mean of 3.8 (more risky) and service sector with the lowest mean of 3.2 (risky);
2.2. Types of customers with 3.4 (more risky) which the managers rated with 3.7 (more risky) and 3.3 (risky) for the staff, where individuals (3.90) are perceived more risky in contrast to the big companies and organizations (3.10) which are just risky;
2.3. Availability of guarantee which are all just risky as generally rated with 3.10 by managers (3.40) and staff (3.00) wherein having the guarantee properties (3.60) is evidently more risky contrary to having the guarantee properties (2.50) which is just risky; and
2.4. Outstanding account which is generally rated as risky with 3.40 by the managers (3.50 or more risky) and staff (3.30 or risky) where short term
account (3.50) appears more risky compared to medium and long term accounts (3.20) which are just risky.
3. The current status of debts of the Agribank Thai Nguyen as assessed by the managers and staff are as follows:
3.1 Overdue debt is rated more risky by the managers with “both principal and interest can be recovered partially” having the highest mean (4.30) while staff perceived it just risky with the same item having the highest mean of 4.20, however, in general, it obtains 3.30 AWM or risky;
3.2 Undue debt is assessed with 3.2 average weighted mean or risky wherein for both the managers (3.10 or risky) and staff (2.90 or risky), “principal and interest is always paid on time” (managers= 3.9; staff= 3.6) obtains the highest mean;
3.3 Debt requiring attention is rated with 3.60 AWM wherein both managers (3.80) and staff (3.50) perceived its provisions more risky;
3.4 Under qualified Debt is assessed with 2.90 AWM wherein both managers (2.90) and staff (2.90) perceived its provisions risky;
3.5 Doubtful debt is evaluated by the managers (4.20) and by the staff (4.00) more risky wherein “bank controls closely this type of debt” with highest mean of 4.3 and “creditors do not carefully appraise the borrowers” with lowest mean of 3.5 or more risky;
3.6 Frozen debt is generally evaluated with a mean of 3.30 or risky wherein
“there are a lot of customers classified in the frozen debt group” with the highest mean of 3.6 (more risky) and “the rate of frozen debt is too high”
with the lowest mean of 3.2 or risky; and
3.7 Bad debt is assessed with 3.6 AWM or more risky wherein “it is difficult to collect both interest and capital” with highest mean of 3.70 (more risky) while “mortgage is hard to sell” with a lowest mean of 3.5 (more risky).
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4. The factors affecting the credit risk management of Agribank Thai Nguyen as to the following are:
4.1 In terms of subjective criteria is rated 3.60 or frequently (managers= 3.80;
staff= 3.60) where credit process follows common regulations of State bank and capacity of credit staff is decisive factor (managers= 4.4; staff=
4.2); strict internal inspection and control (managers= 3.70; staff= 3.50);
convenient bank credit policies for customers (managers= 3.4; staff=
3.1); and good information quality in the banking network and outside (managers= 3.1; staff= 2.8), and
4.2 Objective criteria which is evaluated by managers (3.90) while staff or creditors with 3.70 AWM as frequently with the highest mean for “stable political and legal environment” and lowest for “facilitating the economic environment for both the bank and customer.”
5. There is significant difference in two groups of respondents’ assessment on credit risk management particularly on the status of the credit risks, segment structure (0.01), types of customers (0.02), availability of guarantee (.016) at 0.05 level of significance; current status of debts in Agribank Thai Nguyen wherein only undue (sig. = .005), overdue (.014), and bad (.025) debts; and the subjective criteria on the factors affecting credit risk management as incurred in the managers’ (sig= .041) and staff’s ratings (.024).
6. Recommendations on the credit risk management of Agribank Thai Nguyen to minimize the credit risk include developing and improving the policies and processes of credit, expanding guarantee loans, improving the appraisal of borrowers and their projects, developing and improving the information systems of risk prevention, and strengthening inspection and supervision of the debt management loan.
Conclusions
Based on the findings of the study, the following conclusions are drawn:
1. Majority of the bank customers are women who have marital obligations, are relatively young, have graduated college and work for only few years in their respective jobs.
2. Main credits of the bank significantly serve the industries, while the service sector represents a smallest percentage of totals. The segment structure in credit activities, individuals as types of customers, credit with no guarantee properties, and medium and long-term credits post big risks.
3. The biggest risk for bad debts is the difficulty to collect both the interest and capital, overdue and undue debts is that both principle and interest is hardly recovered fully, debt requiring attention is the absence of clear mechanism, qualified debt is the interest that is never made free for customers, doubtful credit is less careful appraisal of the borrowers, and frozen debt is that a lot of customers classified in frozen debt group.
4. The risk under subjective criteria is that the bad information quality in banking network and outside while for objective criteria is the economic environment facilities for both bank and customers.
5. The credit risk management and the factors affecting limitations of credit risks management of the bank are different among groups of respondents.
6. The recommendations posed in the study for the credit risk management is ready for adoption.
Recommendations
Based on the findings and conclusions, the following recommendations are offered thereafter:
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1. The bank may require guarantee properties for credits, carefully manage the segment structure, define exactly targeted customers, pay attention more on long-term and medium credits and review the procedure and conditions to manage, control and minimize risks of credit.
2. The bank may conduct research to find suitable solutions to recover both principle and interest fully, produce clear mechanism for “debt requiring attention”, decrease cost to improve competitive ability of services, carefully appraise borrowers, and establish a good information network.
3. The bank may ensure that security documentation complies with the terms, manage insurance coverage to ensure appropriate coverage is in place over assets pledged as collateral, and is properly assigned to financial Institution, control facility disbursements after all terms and conditions of approval have been met, and all security documentation is in place, monitor compliance with loan terms, implement strict credit management in accordance with the laws and regulations of State Bank, and provide accurate and timely information on credit system
4. The bank may set up the loan principle or the principle of credit, ensure that all customers understand credit portfolio, and that credits are paid on time, maintain control of credit institutions.
5. Banks may ensure accurate determination of the total characteristics of the credit portfolio, concentrations, problem credit and the adequacy of loan loss reverses, provide relevant information to persons responsible for assignment of internal risk assessment to credit, ensure credit information to relevant persons, monitor stringent collateral or guarantee, have necessary changes to streamline and manage contracts, and ensure the list in terms of the credit agreement.
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