Improving the quality of loans for small and medium-sized business customers at the branch of the Bank for Investment and Development of Vietnam – bidv from Son - 1

MINISTRY OF EDUCATION TRAINING

THANG LONG UNIVERSITY

--- O 0 O ---

GRADUATION THESIS

TOPIC:

IMPROVE Lending QUALITY FOR SME CUSTOMERS AT VIETNAM BRANCH OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - BIDV Tu Son

Instructor: Ngo Khanh Huyen Student: Diem Thi Linh Trang Student Code: A16542

Specialization: Finance - Banking

HANOI - 2014

THANK YOU

To complete this thesis, I would like to express my deep gratitude to Master Ngo Khanh Huyen, who has guided me throughout the process of writing my graduation thesis.

I would like to express my sincere thanks to the teachers and teachers in the Faculty of Economics, Thang Long University for their dedication in imparting knowledge during 4 years of study. With the knowledge acquired during the study process, it is not only the foundation for the thesis research process, but also a valuable luggage for me to enter life firmly and confidently.

I would like to thank the Board of Directors of Vietnam Bank for Investment and Development Branch - BIDV Tu Son for giving me data to complete the thesis and creating favorable conditions for me to practice at the branch.

Finally, I wish you good health and success in your noble career. Dong wishes all officers and employees at the branch of Bank for Investment and Development of Vietnam - BIDV Tu Son always have good health and achieve many good successes in their work.

Thank you sincerely!

Students perform

Diem Thi Linh Trang

GUARANTEE

I hereby declare that this graduation thesis is my own work with the support of my supervisor and has not copied the research works of others. The secondary information used in the Dissertation is original and clearly cited.

I take full responsibility for this promise!

Students perform

Diem Thi Linh Trang

TABLE OF CONTENTS

FOREWORD

CHAPTER 1. GENERAL THEORIES ON Lending QUALITY FOR SME CUSTOMERS AT COMMERCIAL BANK 1

1.1 Small and medium enterprises in economy 1

1.1.1 Small and medium enterprises 1

1.1.2 Roles and characteristics of small and medium enterprises 3

1.1.2.1 The role of small and medium enterprises 3

1.1.2.2 Some characteristics of small and medium enterprises 5

1.2 Lending activities of commercial banks for small and medium enterprises 5

1.2.1 The concept of 5 . lending

1.2.2 Types of bank loans for small and medium enterprises...5 1.2.2.1 Lending purposes 6

1.2.2.2 Loan term 6

1.2.2.3 Credibility for customers 7

1.2.2.4 Loan method 7

1.2.3 Basic factors in bank lending activities 8

1.2.3.1 Loan capital 8

1.2.3.2 Loan term 9

1.2.3.3 Loan interest rate 9

1.2.3.4 Loan limit 9

1.2.4 Characteristics of commercial banks' lending activities for small and medium enterprises 9

1.2.5 The role of banks' lending activities for small and medium enterprises 11

1.2.5.1 For bank 12

1.2.5.2 For customers 12

1.2.5.3 For the 12 economy

1.3 Quality of bank loans to small and medium enterprises 13

1.3.1 The concept of loan quality 13

1.3.2 The need to improve loan quality 14

1.3.2.1 Improving loan quality is necessary for economic development 14

1.3.2.2 Improving the quality of loans determines the existence and development of commercial banks 14

1.3.3 Indicators reflecting the quality of banks' loans to small and medium enterprises 14

1.3.3.1 Qualitative criteria 14

1.3.3.2 Quantitative indicator 16

1.3.4 Factors affecting the quality of bank loans 19

1.3.4.1 Factors on the bank's side 19

1.3.4.2 Customer factors 21

1.3.4.3 Macro-environmental factors and competitors 22

CHAPTER 2: SITUATION OF LIVING QUALITY FOR SME ENTERPRISE AT VIETNAM BANK FOR INVESTMENT AND DEVELOPMENT BRANCH - BIDV Tu SON 26

2.1 General overview of the branch of the Bank for Investment and Development of Vietnam – BIDV Tu Son 26

2.1.1 History of establishment and development of Vietnam Bank for Investment and Development Branch – BIDV Tu Son 26

2.1.2 Overview of Vietnam Bank for Investment and Development Branch – BIDV Tu Son 27

2.1.2.1 Introducing the branch of Vietnam Bank for Investment and Development – ​​BIDV Tu Son 27

2.1.2.2 Functions and duties of departments 28

2.1.3 Loan activities of the branch of the bank for investment and development of Vietnam – BIDV Tu Son 29

2.1.4 Financial results 32

2.1.5 General assessment of business activities 33

2.1.5.1 Things to do in recent times 34

2.1.5.2 Limitations 34

2.2 Current status of loan quality for small and medium-sized enterprise customers at the branch of Vietnam Bank for Investment and Development – ​​BIDV Tu Son .35 2.2.1 Qualitative analysis 35

2.2.2 Analysis of quantitative indicators 36

2.2.2.1 Loan turnover and proportion of loans of small and medium enterprises 37

2.2.2.2 Debt collection target 40

2.2.2.3 Loan balance target 41

2.2.2.4 Overdue debt ratio 42

2.2.2.5 NPL ratio 43

2.2.2.6 Credit turnover ratio 44

2.2.2.7 Profit target 45

2.2.2.8 Capital efficiency index 46

2.2.2.9 Credit risk coefficient indicator 47

2.3 Evaluation of loan quality for small and medium enterprises 47

2.3.1 Results achieved 47

2.3.1.1 For small and medium enterprises 47

2.3.1.2 For branch of bank for investment and development of Vietnam – BIDV Tu Son 48

2.3.2 Limitations and causes 49

2.3.2.1 Limit 49

2.3.2.2 Cause 49

CHAPTER 3: SOLUTIONS TO IMPROVE LIVING QUALITY FOR SMALL AND SMALL ENTERPRISES AT VIETNAM BRANCH OF BANK FOR INVESTMENT AND DEVELOPMENT - BIDV Tu SON 52

3.1 Orientation to improve loan quality for small and medium enterprises

................................. ................................. ............52

3.1.1 General development direction of the branch of the bank for investment and development of Vietnam – BIDV Tu Son 52

3.1.2 2014 targets of the branch of the bank for investment and development of Vietnam – BIDV Tu Son 53

3.2 Solutions to improve loan quality for small and medium enterprises at the branch of the Bank for Investment and Development of Vietnam – BIDV Tu Son 54

3.2.1 Diversifying lending activities for small and medium enterprises 54

3.2.1.1 Diversification of loan types for small and medium enterprises ..54

3.2.1.2 Diversifying loan forms for small and medium enterprises 54

3.2.1.3 Diversifying lending methods 55

3.2.2 Building a Marketing Strategy 55

3.2.3 Strengthening consulting activities for small and medium enterprises 56

3.2.4 Improve the quality of loan appraisal for small and medium enterprises

................................. ................................. ..................56 3.2.4.1 About information collection.......... ................................. ...........57

3.2.4.2 Analysis and customer evaluation 57

3.2.5 Completing the loan guarantee mechanism for small and medium-sized enterprises at the branch of the Bank for Investment and Development of Vietnam – BIDV Tu Son 58

3.2.6 Training and retraining credit officers of the branch of the bank for investment and development of Vietnam – BIDV Tu Son 59

3.3 Recommendations to improve lending quality for small and medium-sized enterprises at the branch of Vietnam Bank for Investment and Development – ​​BIDV Tu Son .61

3.3.1 Recommendations to the Government and relevant ministries 61

3.3.2 Recommendations to the State Bank 62

3.3.3 Recommendations to the branch of the Bank for Investment and Development of Vietnam – BIDV Tu Son 62

CONCLUSION 64

LIST OF Abbreviations

Abbreviation Full name

SMEs Small and Medium Enterprises

Commercial Bank Commercial Bank

PGD ​​Transaction office

Production and Business Production and business

LIST OF TABLES, PICTURES, Graphs, Formulas

Table 1.1 Criteria for identifying SMEs in Vietnam 2

Table 1.2 Evaluation of the role of SMEs in Vietnam 4

Figure 2.1 Organizational structure of the branch of the Bank for Investment and Development of Vietnam – BIDV Tu Son 28

Table 2.1 Summary of lending activities from 2001 to 2013 29

Table 2.2 Evolution of outstanding loans by economic sectors 31

Table 2.3 Bad debts of branches in the period 2001-2013 31

Table 2.4 Financial results of branch of Vietnam bank for investment and development – ​​BIDV Tu Son period 2011-2013 32

Table 2.5 Loans to SMEs by term 37

Table 2.6 Loan turnover by type of enterprise 38

Table 2.7 Debt collection revenue by time 40

Table 2.8 Summary of outstanding loans of small and medium enterprises by term 41

Table 2.9 Ratio of overdue debts of small and medium enterprises in the period 2011-201343 Table 2.10 Ratio of bad debts of small and medium enterprises in the period 2011-2013 44

Table 2.11 Credit turnover for small and medium enterprises 45

Table 2.12 Revenue and expenditure for the period 2011-2013 45

Table 2.13 Capital efficiency in the period 2011-2013 46

Table 2.14 Credit risk coefficient for the period 2011-2013 47

FOREWORD

1. Reason for choosing the topic

In recent years, small and medium-sized enterprises (SMEs) have continuously grown in both quantity and quality of business activities and have increasingly affirmed their important contributions to the economic development. country. With many innovations in policies, the Government has created many favorable conditions for small and medium enterprises to develop. During their existence and development, the capital needs to expand and improve the efficiency of production and business activities of SMEs are very large. Therefore, for banks, SMEs are considered as a large potential object, creating conditions for banks to increase profits and expand markets. However, it is a fact that small and medium enterprises are facing many difficulties in accessing bank loans as well as effectively using such loans.

Realizing the importance and great potential of customers who are SMEs, in recent years, the branch of Vietnam bank for investment and development - BIDV Tu Son has paid more attention to expanding and improving quality loans to this customer segment. However, despite having achieved certain results, the quality of loans for SMEs at the branch of the bank for investment and development of Vietnam - BIDV Tu Son is still limited. Deriving from the reality at the branch of the bank for investment and development of Vietnam - BIDV Tu Son during the time of studying and researching, I found that the issue of lending to SMEs at the branch still had many issues to consider. such as loan sales are still limited, credit indicators such as debt collection targets, outstanding loans, etc. are not really good. Furthermore,

Stemming from that reality, I chose the topic: "Improving the quality of loans for small and medium-sized enterprise customers at the branch of the bank for investment and development of Vietnam - BIDV Tu Son" as the topic of the thesis. graduate.

2. Research purpose

The study focuses on the following three main objectives:

- Clarifying the rationale for lending quality to SMEs at the branch of the bank for investment and development of Vietnam - BIDV Tu Son.

- Analyzing and clarifying the current situation of lending quality for SMEs at the branch of the bank for investment and development of Vietnam - BIDV Tu Son, thereby seeing the limitations and causes of those limitations.

- From the limitations and causes of those limitations, the thesis proposes some solutions to improve the quality of loans for SME customers at the branch of the bank for investment and development of Vietnam - BIDV Tu Son. .

3. Objects, scope, research methods

Research object: Loan quality for SMEs at the branch of the bank for investment and development of Vietnam - BIDV Tu Son.

Research scope: Lending quality for SMEs at the branch of the bank for investment and development of Vietnam – BIDV Tu Son in 3 years from 2011 to 2013.

Research methods: Researching documents at the bank and investigating practices, statistical methods, analyzing, synthesizing, consulting experts...

4. Thesis structure

In addition to the introduction and conclusion, the list of acronyms, the list of tables and graphs, the structure of the thesis consists of three chapters as follows:

Chapter 1: General theory of lending quality for small and medium enterprises at commercial banks.

Chapter 2: Actual situation of loan quality for small and medium enterprises at the branch of the bank for investment and development of Vietnam - BIDV Tu Son.

Chapter 3: Solutions to improve lending quality for SMEs at the branch of the bank for investment and development of Vietnam - BIDV Tu Son.

In the research process will not avoid errors. I look forward to your comments to improve the thesis topic better.

Finally, I would like to thank Master Ngo Khanh Huyen for wholeheartedly helping me complete this thesis.

Thank you sincerely!

CHAPTER 1. GENERAL THEORY ON LIVING QUALITY FOR SME CUSTOMERS AT COMMERCIAL BANK

1.1 Small and medium enterprises in the economy

1.1.1 Small and medium enterprises

In the market economy, an enterprise is understood as an economic organization with legal status organized to conduct business in a certain field for the purpose of public benefit or profit. Normally, the following 3 conditions are required to be recognized as an enterprise:

- Have full legal status.

- Having legal capital to do business.

- Having a name and operating in its own name, being independently responsible for all its business activities.

The types of enterprises in the market economy are very diverse and rich, which can be classified according to the following criteria:

First: Based on the ownership relationship of capital and assets, enterprises are divided into State-owned enterprises, private enterprises and mixed ownership enterprises. Specifically:

- State-owned enterprise is an enterprise established by the State, invested capital and managed by the State as the owner.

- Private enterprises are enterprises in which capital is invested by individuals and are responsible with all their assets for all activities of the enterprise.

- Mixed ownership enterprises are enterprises with a mixture of different forms of ownership in the same enterprise.

This classification clearly indicates the ownership relationship of capital and assets in enterprises of different economic sectors. It is also one of the bases for the State to have appropriate economic policies and development orientations for each type of enterprise.

Second: Based on business purposes, enterprises are divided into business enterprises and public utility enterprises. Specifically:

- Business enterprise is an economic organization established or recognized by the State, operating under the market mechanism. The number one goal is to get maximum profit.

- Public utility enterprises (usually State enterprises) are economic organizations performing activities of production, circulation or provision of public services, directly implementing social policies of the State. Home

country or performing national security tasks. The main objective of these enterprises is economic and social efficiency.

Classification of businesses according to this criterion is the basis for choosing a reasonable criterion to evaluate the social benefits of enterprises and is one of the important bases for determining the State's funding policy.

Third: Based on the business sector, enterprises can be divided into two types: financial enterprises and non-financial enterprises. Specifically:

- Financial enterprises are financial intermediaries such as commercial banks (commercial banks), financial companies, insurance companies, etc. These enterprises are capable of supplying the economy with products and services. types of services in finance, currency, credit, insurance,...

- Non-financial enterprises are enterprises that take production and business as their main activity.

Classification according to this criterion indicates the function of each type of enterprise, through this classification criterion, the State has more grounds to plan management policies suitable for each type of enterprise in each industry.

Fourth: Based on business size, people divide enterprises into large enterprises, medium enterprises and small enterprises.

Pursuant to Chapter 1, Article 3 of Decree No. 56/2009/ND-CP dated June 30, 2009 of the Government on supporting the development of SMEs has defined: Small and medium enterprises are registered business establishments. business in accordance with the law, divided into three levels: micro, small and medium according to the size of total capital or the average number of employees per year, specifically as follows:

Table 1.1 Criteria for identifying SMEs in Vietnam

Scale

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(Source: Decree No. 56/2009/ND-CP)

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