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HA NOI – 2021 THUONGMAI UNIVERSITY BANKING AND FINANCE DEPARTMENT PRESENTATIONS TERM INTERNATIONAL PAYMENT EXPORT IMPORT FINANCING Topic The state of export financing activities and solutions to enh.

THUONGMAI UNIVERSITY BANKING AND FINANCE DEPARTMENT

- -

PRESENTATIONS TERM: INTERNATIONAL PAYMENT & EXPORT-

IMPORT FINANCING

Topic: The state of export financing activities and solutions

to enhance the efficiency of Vietinbank Export Financing activities.

TEACHER : MS PHAM THU TRANG GROUP : 4

CLASS : 21721BKSC2412

INDEX

CHAPTER I: THEORETICAL BASIC 1

1.1 The concept of export financing 1

HA NOI – 2021

1.2 Type of export financing 1

1.2.1 Bank financing 1

1.2.2 Buyer credit 1

1.3 Conditions and process of export financing 2

1.3.1 Principles and conditions for export credit financing 2

1.3.2 Lenders and export credit process 3

1.4 Interest rates and credit fees 4

1.5 Role 5

1.6 Factors affecting export financing activities 6

CHAPTER II SITUATION OF EXPORT FINANCING ACTIVITIES OF VIETINBANK 6

2.1 General introduction about Vietinbank 6

2.2 Business Performance 8

2.3 Current status of Vietinbank's export financing activities 11

2.3.1 Forms of export financing of Vietinbank 11

2.3.1.1 Pre – shipment financing 11

2.3.1.2 Post – shipment financing 11

2.3.2 Export credit financing process 13

2.3.3 Current status of Vietinbank's export financing credit activities 14

2.3.3.1 Export loan 15

2.3.3.2 Collecting 17

2.4 Results of export financing activities 17

2.5 Limitations of export financing activities 18

CHAPTER III: SOME SOLUTIONS TO IMPROVE THE EFFICIENCY OF EXPORT SPONSOR ACTIVITIES AT VIETINBANK 19

3.1 General development orientation 19

3.2 Orientation to improve the efficiency of import and export financing activities at Vietinbank 20

ASSOCIATION OF INDIVIDUAL TASKS GROUP 4

Full Name Position Assigned work Product

results

Point evaluation

31 Dang Thi Diem Member

32 Ho Diem Quynh Member

33 Nong Duc Tien Member

34 Nguyen Thu

Trang

Member

35 Pham Hien Trang Secretary

36 Tran Thuy Trang Member

37 Nguyen Quoc

Trung

Leader

CHAPTER I: THEORETICAL BASIC

1.1 The concept of export financing

Export financing is a cash flow solution for exporters Export Finance facilitates thecommerce of goods internationally

Export financing allows the businesses that sell products to another country to getaccess to working capital before their clients pay for the products purchased

1.2 Type of export financing

1.2.1 Bank financing

1.2.1.1 Pre-shipment financing (Export Working Capital Financing)

“Pre-shipment financing” means financing the temporary working capital needs for thefulfillment of an export transaction

1.2.1.2 Post shipment financing

- Negotiation (Or Purchase) of Bills of Exchange: Negotiation in trade finance meansthe purchase of bills of exchange and/or shipping documents “with recourse” by a bankfrom an exporter Negotiation also refers to “discounting bills of exchange (documentarydrafts) and/or documents”

- Export factoring (international factoring) means trade finance where a factorpurchases the exporter’s receivables without recourse (or with recourse) to the exporter andperforms the credit control of the sales or debt collection functions

- International Forfaiting: Forfaiting means the purchase of future receivables on a

“without recourse” basis “Forfaiting” can be also defined as a purchasing (or discounting)negotiable financial instrument such as a bill of exchange “without recourse

1.2.2 Buyer credit

Advanced payment: In case the documents are not eligible for discount, and there arewithdrawers who do not agree to the discount, the exporter can request the bank to advancethe payment of ordinary goods at the rate of about 50% -60% export value The bankcollects the debt by sending documents abroad to repay the debt, within 60 days from thedate of sending the money documents without receiving the "Yes" notice from the foreignbank, the bank will automatically debit to the deposit account If the customer's account has

insufficient balance, the bank will transfer the delinquent extraction or pre-applicationwithin 7 working days When paying from a foreign bank, the loan will be deducted directlyalong with other related costs.

1.3 Conditions and process of export financing

1.3.1 Principles and conditions for export credit financing

 Principles of lending

- Loan capital must be repaid both principal and interest according to the committedtime

- Loan capital must be used for the right purpose as committed when borrowing capital

- Loan capital must be secured by the value of mortgaged property, pledge or goods andmaterials

3 Production and business must be profitable, with no overdue debts

4 Must have collateral, pledge, or guarantee

5 There must be a plan to use the loan capital, if possible, for the purpose, efficiency,feasibility and ability to repay the loan, and the source of loan repayment

6 Comply with and enforce all regulations in the credit regulations of the State bankand the credit institutions that are in relationship

 Credit guarantee for export financing

The mortgaged or pledged property must:

- Belongs to legal ownership of the mortgagor, mortgagor, guarantor and is allowed totransfer

- Not being tied to mortgages, pledges or guarantees at other credit institutions

- There is no dispute, or is sealed or blocked, is in the process of dissolution orbankruptcy of the enterprise, is not bound to any other commitment obligations

- Easy to buy and sell on the market, ensuring loan recovery.

- The set of payment documents must be valid for payment and allowed fortransactions

- For mortgaged property that is movable property such as house, land, it must not belocated in the clearing, regulation or local area

- For collateral greater than the loan amount Depending on the type of collateral, there

is an appropriate valuation method

1.3.2 Lenders and export credit process

- Foreign currency loans

- Local currency loans (banks lend local currency to meet capital needs in exportbusiness, collection of export goods, or production of export goods )

 Export credit process

Depending on the policy and business model of each bank, the financing process andthe organizations and individuals involved in the export credit process have different points.But in general, an import-export credit process usually includes the following basic steps:

Step 1: Receive loan application

When an import-export business needs a bank loan, the enterprise must send thefollowing documents to the bank:

- Legal records

- Economic profile

- Loans profile

Step 2: Verify your profile

- Check the legitimacy of legal documents

- Assess the business, financial and company situation of the enterprise

- Assess the feasibility of the business plan

- Assess the reputation and development ability of customers

- Appraisal of mortgaged, pledged and guaranteed properties

Step 3: Credit officer makes a report

Step 4: Disbursement

Step 5: Check during loan disbursement

Step 6: Check after lending

Step 7: Collect debt, calculate interest and collect interest

Step 8: Liquidation of the contract

1.4 Interest rates and credit fees

Credit interest rate is the percentage between interest and loan amount in a certainperiod (month/year)

Factors that affect credit interest rates:

- The group of factors that shift the supply curve of loanable funds:

+ Average income of economic entities

+ Expected return and expected inflation:

+ Risk of losing capital

+ Liquidity

- Group of factors that shift the demand curve for loanable funds:

+ Expected return of investment opportunities

+ Expected inflation

Real interest rate = Nominal interest rate – Inflation rate

• Government debt

• Fixed interest rate

• Floating interest rate (variable, volatile)

Cost of Capital + Fixed Rate Margin

or include: Fixed Cost of Capital + Variable Rate Margin.

• Mixed interest rates

• Credit rate fee: is the monthly/yearly percentage between the total cost of the loanand the actual amount of the loan used When borrowing, the borrower must calculate thecredit rate fee, because it reflects the actual the cost that the borrower has to pay to borrowmoney

The actual total loan amount includes the total nominal loan amount minus theprocedure fees, immediate fees paid to the Bank, the loan security deposit The credit fee isalways greater than the interest rate, the narrower this spread, the lower the actual price ofthe credit

Credit interest rate is calculated according to the formula:

PTD = CP/TV x 100%

PTD: is the credit rate fee

CP: is the actual total cost, including interest and other fees related to the loan

TV: is the actual loan amount that the customer can use this indicator isdetermined by the difference between the amount of credit as committed and theamount that the bank retains and collects immediately.

1.5 Role

The role of credit for the Bank's export activities is reflected in the following aspects:

- Bank credit contributes to improving business efficiency of enterprises in the market.Effective business is a requirement of economic accounting and is also one of the conditionsfor providing credit of banks Therefore, bank credit promotes businesses to pay moreattention to business efficiency and increase profits Besides, the flexibility in terms of timeand interest rates of bank credit will encourage the initiative and creativity of businesses inusing capital to suit their capital needs in each period different period

Bank credit helps to promote export activities faster

- Derived from the high risk in the export business and due to the lack of mutualunderstanding between the buyer and the seller, the bank's presence will not pay when thebank guarantees to provide credit to the customer Importers and vice versa, thanks to thecredit source of the importer's bank, can carry out important imports while their financialcapacity is not yet met

- The bank is a focal point to receive funding from foreign countries for exportactivities Because at present, most of the funding of international financial - monetaryinstitutions for a certain country is done through the banks of the host country

The role of bank credit for export activities is even more meaningful when the bankimplements the State's policies, including export-oriented policies banks will provideexporters with large credit lines at favorable interest rates so that they can solve the problem

of shortages in their business

1.6 Factors affecting export financing activities

These are factors beyond the control of the country, which directly or indirectly affectthe export activities of enterprises The following factors can be mentioned

- The economic growth of the export market: It influences the demand and solvency ofexport clients, therefore influencing firm export operations Gross domestic product (GDP),

population income, inflation, and interest rates are indicators of the export market'seconomic progress.

- Political condition, international cooperation: It expresses itself in the trend of countrycooperation This would result in the development of economic and political blocs of agroup of nations, impacting companies' export market condition

- Characteristics and socio-cultural changes of the export market: Having a greatinfluence on the needs of customers, thereby affecting the purchasing decisions ofcustomers and affecting export activities enterprise's exports

- The level of scientific and technological development of the export market: It willaffect many aspects of the socio-economic life of that market, thus affecting the demand andpurchasing power of customers

- Trade policies of countries with export markets for company

- Influence of the world socio-economic situation: Any change in export policies,inflation, unemployment or economic recession growth of other countries will affect theexport activities of exporting enterprises

CHAPTER II SITUATION OF EXPORT FINANCING ACTIVITIES OF VIETINBANK

2.1 General introduction about Vietinbank

Vietinbank (Vietnam Joint Stock Commercial Bank for Industry and Trade) is a owned Vietnamese bank The Bank was established to carry out banking transactionsincluding mobilizing and receiving short-term, medium-term and long-term deposits fromorganizations and individuals, short-term, medium-term and long-term loans toorganizations and individuals on the basis of the nature and capacity of the Bank's capital;performing foreign currency transactions, international trade finance services, discountingcommercial papers, bonds and other valuable papers, and other banking services permitted

state-by the State Bank of Vietnam Vietinbank has experienced more than 30 years ofestablishment and development:

 Phase I: 1988 – 2000:

Established and transformed from a one-tier into a two-tier bank, officially put VietnamJSC Bank for Industry and Trade into operation

 Phase II: 2001 – 2008:

Successfully implemented the organizational restructuring project, targeting debtshandling, organization model, general policies & mechanisms and business operations.

 Phase III (from 2009 to 2013):

Successfully implemented equitization, strongly innovated, and developedbreakthroughs in banking activities

 Phase IV (from 2014 to present):

Focus on building and implementing strategic governance, making breakthroughs intechnology, continuing to comprehensively innovate banking operations, promotingbusiness growth associated with with guarantee of efficiency, safety and sustainability.VietinBank is the leading commercial bank today, providing a wide range of modernbanking and financial products and services of international standards This is also the firstVietnamese commercial bank to open a branch in Europe

 GOVERNANCE MODEL AND STRUCTURE:

2.2 Business Performance

Despite going through a difficult year due to the impact of the Covid-19 epidemic,Vietinbank's business activities in 2020 still achieved positive results

Vietinbank's total assets as of 31/12/2020 reached more than VND 1,340 trillion, a on-year (yoy) increase of 8.1% and well achieved the target set by the General Meeting ofShareholders (GMS).

year-Credit balance reached nearly VND 1,300 trillion, up 7.8% yoy, meeting the target set at

2020 annual GMS Right from the beginning of 2020, Vietinbank actively implementedsaving solutions including cost reduction and quality management of growth creatingfavorable conditions for growing credit, lowering lending interest rates as well as promptlyremoved difficulties for enterprises to enable enterprises and individuals convenientlyaccess credits and banking products with the lowest cost

Funding growth was in line with demand for capital, the structure of funding varied bycurrency, and the proportion of demand deposits continued to increase Fund mobilizedfrom enterprises and individuals reached nearly VND 990 trillion, an increase of over VND

97 trillion (up 10.9%) In which, demand deposits from customers increased by 27.8% Theratio of current accounts’ balance increased from 17.0% in 2019 to 19.6% in 2020