Development of consumer loan at joint stock commercial bank for investment and development of viet nam – bien hoa branch

Conclusion and implication: Some shortcomings in the development of consumer loans at BIDV Bien Hoa branch such as: unstable growth, undiversified products, low balance of outstanding lo

HO CHI MINH UNIVERSITY OF BANKING

HO CHI MINH UNIVERSITY OF BANKING

NGUYEN TRAN THAO UYEN

DEVELOPMENT OF CONSUMER LOAN AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT

OF VIET NAM – BIEN HOA BRANCH

GRADUATION THESIS THE MAJOR: FINANCE AND BANKING

CODE: 7 34 02 01

HO CHI MINH CITY, 2022

STATE BANK OF VIETNAM MINISTRY OF EDUCATION &TRAINING

HO CHI MINH UNIVERSITY OF BANKING

STUDENT: NGUYEN TRAN THAO UYEN STUDENT ID: 050607190627

CODE: 7 34 02 01

SUPERVISOR Associate Prf Dr HOANG THI THANH HANG

HO CHI MINH CITY, 2022

ABSTRACT

Vietnam entered the middle income stage The consumption activities of society are increasing and the demand for consumer loans also increases Consumer loan activities are growing strongly in recent years Although on the progress of development, but on the bank's side, there are still some shortcomings affecting the development of consumer loan Therefore, it is necessary to have solutions to develop consumer loans to ensure stable and sustainable growth The research objective is to analyze the current situation of consumer loan activities at BIDV- Bien Hoa branch From there, propose solutions to develop consumer loan activities at BIDV- Bien Hoa branch To achieve the set research objectives, the study mainly uses qualitative research methods Research results: the study has systematized the factors affecting the development of consumer loan such as: environmental factors such as economic, social, cultural, system policies and economic programs of the state Factors from customers include: legal capacity, credibility, collateral and financial ability of the customer Subjective factors affecting the development of consumer loans include: Professional ethics of staff, techniques, procedures and process of application appraisal Consumer loan has seen growth in the number of customers, loan outstanding balance and control of the bad debt ratio Conclusion and implication: Some shortcomings in the development of consumer loans at BIDV Bien Hoa branch such as: unstable growth, undiversified products, low balance of outstanding loans, bad debt ratio high in the bad debt structure of the bank The author also proposes some solutions to develop consumer loans at BIDV- Bien Hoa branch in the coming time

Keywords: consumer loan, commercial bank, BIDV

ACKNOWLEDGMENT

First of all, I would like to express my deepest gratitude to the teachers of Banking University Especially, I would like to thank my supervisor Associate Prf Dr Hoang Thi Thanh Hang, who directly guided and imparted knowledge to me and helped me

a lot during the process of writing this thesis

Besides, to be able to complete this thesis, it is impossible not to mention the great support from the bank, Mr./Ms., individual customers at BIDV- Bien Hoa branch has created favorable conditions, provided data to help me more convenient in survey and evaluation

I would also like to express my sincere thanks to my family and friends who have encouraged and supported me throughout the process of studying and writing this thesis

Perhaps knowledge is infinite, but each person's acquisition of knowledge always has certain limitations, so in the thesis it is inevitable that limitations and shortcomings can be avoided Sincerely hope to receive your sincere suggestions for the thesis to achieve the best results

Finally, I would like to wish the teachers of the Faculty of Finance and Banking, Banking University of Ho Chi Minh City have health, happiness, success on her teaching path Wishing the leadership, brothers/sisters, customers at BIDV- Bien Hoa Branch, more success in their work We wish you more prosperity in the future

Sincerely,

COMMITMENT

I hereby declare that this is the research work: "Development of consumer Loan at

Joint Stock Commercial Bank for Investment and Development of Viet Nam - Bien

Hoa branch" This is a post made by me under the guidance of Associate Prf Dr

Hoang Thi Thanh Hang The content and research of this topic is honest and has not

been published in any way In this report, there are references to some documents of

clear origin under the guidance of teachers of Faculty of Finance – Banking at

Banking University The data in the tables of analysis, comments and reviews have

been collected by the author himself from various sources and are clearly shown in

the reference list

Student’s Signature

Nguyen Tran Thao Uyen

TABLE OF CONTENT

ABSTRACT iii

ACKNOWLEDGMENT iv

COMMITMENT v

LIST OF ABBREVIATIONS x

LIST OF DIAGRAMS, TABLES AND FIGURES xi

INTRODUCTION vii

1 Rationale vii

2 Research Objectives viii

3 Research Questions viii

4 The Scope of research ix

5 Literature review ix

6 Research method xii

CHAPTER 1: THE THEORY OF DEVELOPING CONSUMER LOAN AT COMMERCIAL BANKS 1

1.1 Consumer loan activities of commercial banks 1

1.1.1 The concept of consumer loan 1

1.1.2 Characteristics of consumer loan 2

1.1.3 Classification of consumer loan 3

1.1.3.1 Based on the loan purpose 3

1.1.3.2 Based on the form of loan security 4

1.1.3.3 Based on the repayment method 4

1.1.3.4 Based on the form of loan 4

1.2 Developing consumer loan activities of commercial banks 8

1.2.1 The concept of development consumer loan activities of

commercial banks 8

1.2.2 Criteria for evaluating the development of consumer loan activities of commercial banks 9

1.2.2.1.Market share growth of consumer loan activities at commercial banks ……….9

1.2.2.2.Loan outstanding balance at commercial banks 9

1.2.2.3.Non-performing consumer loan at commercial banks 10

1.2.2.4.The profit of consumer loan at commercial banks 12

1.2.3 The experiences in development consumer loan activities of commercial banks and the lessons for BIDV- Bien Hoa branch 12

1.2.3.1 Vietnam Bank for Agriculture and Rural Development (Agribank) 12

1.2.3.2 Vietnam Prosperity Joint Stock Commercial Bank (VPBank) 13 1.2.3.3 The lessons for BIDV- Bien Hoa branch 14

SUMMARY OF THE CHAPTER 1 16

CHAPTER 2: THE SITUATION OF DEVELOPING CONSUMER LOAN ACTIVITIES AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - BIEN HOA BRANCH 17

2.1 Overview of Joint Stock Commercial Bank for Investment and Development of Vietnam 17

2.1.1 History of the establishment and development of the Joint Stock Commercial Bank for Investment and Development of Vietnam 17

2.1.2 Functions and tasks of Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 19

2.1.3 Functions and tasks of Joint Stock Commercial Bank for

Investment and Development of Vietnam – Bien Hoa branch 20

2.1.4 Performance of Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 23

2.2 The situation of developing consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 31

2.2.1 Market share growth of consumer loan activities at BIDV - Bien Hoa branch 33

2.2.2 Loan outstanding balance growth at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 36

2.2.3 Non-performing consumer loans at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 38

2.2.4 The profit of loan at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 40

2.3 Evaluating the results of the situation of consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 42

2.3.1 The results 42

2.3.2 The limitations and the cause in consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 43

2.3.2.1 The limitations 43

2.3.2.2 The causes 43

SUMMARY OF THE CHAPTER 2 47 CHAPTER 3: SOLUTIONS TO DEVELOP CONSUMER LOAN ACTIVITIES

AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM 48

3.1 The orientation at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 48

3.1.1 The general orientation at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 48

3.1.2 The general orientation in developing consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa Branch 49

3.2 Some solutions to develop consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 49

3.2.1 Promoting and advertising the consumer loan segment for BIDV - Bien Hoa branch 49

3.2.2 Improving the process and the quality of consumer loan services 50 3.2.3 Regarding the issue of receiving collateral and valuing the secured assets ……….51

3.2.4 Diversifing consumer loan products and link with strategic partners ……….52

3.2.5 Strengthening the control of consumer loan risks 53

3.2.6 Strengthening inspection and supervision of customers' use of loans and sources of debt repayment 54

3.2.7 Improving the quality of human resources 56

3.3 Recommendation for Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch 57

SUMMARY OF THE CHAPTER 3 59

CONCLUSION 60

REFERENCES 61

ATM Automatic teller machine

AGRIBANK Vietnam Bank for Agriculture and Rural Development

LIST OF DIAGRAMS, TABLES AND FIGURES DIAGRAMS

Diagram 1.1: Direct loan structure

Diagram 1.2: Indirect consumer loan structure

Diagram 2.1: BIDV - Bien Hoa branch’s Organizational structure

TABLES

Table 2.1: Business results of BIDV – Bien Hoa branch from 2017 to 2021

Table 2.2: The result of consumer loan at BIDV - Bien Hoa branch 2017-2021

Table 2.3: The result of consumer loan activities at BIDV - Bien Hoa branch

2017-2021 according to purposing of using capital

FIGURES

Figure 2.1: Outstanding loan balance growth ratio at BIDV-Bien Hoa branch

2017-2021

Figure 2.1: Outstanding loan balance growth ratio at BIDV-Bien Hoa branch

Figure 2.3: Outstanding loan balance structure of retail customers at BIDV - Bien Hoa branch

Figure 2.4: Non-performing loan at BIDV - Bien Hoa branch 2017-2021

Figure 2.5: Non-performing loan ratio at BIDV - Bien Hoa branch 2017-2021 Figure 2.6: Business operating expense structure at BIDV - Bien Hoa branch 2017-

2021

Figure 2.7: Business operating profit at BIDV - Bien Hoa branch 2017-2021

Figure 2.8: Business operating profit at BIDV - Bien Hoa branch 2017 – 2021 Figure 2.9: Business operating profit growth at BIDV - Bien Hoa branch 2017-2021

Figure 2.10: Market share growth of consumer loan activities at BIDV - Bien Hoa branch

Figure 2.11: Customer growth of consumer loan according to purposing of using capital

Figure 2.12: Outstanding consumer loan balance growth at BIDV - Bien Hoa branch 2017-2021

Figure 2.13: outstanding loan balance growth of consumer loan according to purposing of using capital

Figure 2.14: Non-performing loan structure according to purposing of using

Figure 2.15: Profit's growth at BIDV - Bien Hoa branch 2017-2021

Figure 2.16: Profit's growth according to purposing of capital loan at BIDV - Bien Hoa branch 2017-2021

INTRODUCTION

1 Rationale

In integration, people’s living standards are also increasingly improved In addition

to basic needs such as food, clothing and accommodation, the needs for material and spiritual life are also being raised more and more such as a more beautiful and comfortable home, better means of transports, travel more, etc Therefore, people’s demand for borrowing money for consumption also grow rapidly This has created better opportunities for commercial banks in consumer loan Consumer loan plays a vital role in improving the quality of life and the level of financial access for people, contributing to the stability and development of the country’s economy Vietnam is considered as a potential market of consumer finance with ideal conditions such as the development stage of economy, the scale of population is large with a high proportion of working Tendency to expand domestic consumption and increase income levels of population which are favorable conditions to boost Vietnamese consumer loan market will continue to develop effectively in the future

Grasping the demand and also joining the same trend, over the years, the unit has continuously promoted outstanding loan, consumer use gradually improving the loan process as well as ensuring credit safety However, the loan policies, regulations and processes are still inadequate and have not been changed in time to meet the needs of customers Thereby, the credit growth of the unit in recent years is not really good Therefore, for these reasons, it is very practical to research and come up with solution

to overcome the restrictions in order to promote the growth of consumer credit at the unit in a scientific manner With that desire, I chose the topic “Development of consumer loan at Joint Stock Commercial Bank for Investment and Development Vietnam – Bien Hoa branch” to conduct my research for the thesis

Keeping up with the development trend of banking products and services, consumer loan at BIDV - Bien Hoa branch was also developed The goal of this thesis is to evaluate the situation in the consumer loan in this branch, based on the system of evaluation indicators for consumer loan and the factors (subjective and objective) affect to consumer loan of commercial banks Based on the theoretical basis and the

data collected from the branch, the author reviewed that consumer loan at BIDV – Bien Hoa branch had significant developments both in outstanding loan, the number

of customers and performance However, the consumer loan of the branch has not really matched with its potentials and advantages In addition, there are some challenges of consumer loan in BIDV Bien Hoa which are need to exploit and deal with in order to effectively recommendations and solutions for BIDV- Bien Hoa branch to exploit their full potentials and strengths As a result, this branch can expand business activities, minimize risks and increase profitability in business operations

2 Research Objectives

a General objective

Analysing of the situation of development of consumer loan at Joint Stock Commercial Bank for Investment and Development of Vietnam-Bien Hoa branch, thereby the author proposes some solutions, recommendations to enhance consumer loan at BIDV -Bien Hoa branch

b Specific objectives

- Analysing the situation of development at BIDV –Bien Hoa branch

- Propose some solutions to contribute to the development of consumer loan at Joint Stock Commercial Bank for Investment and Development of Vietnam - Bien Hoa branch

3 Research Questions

To achieve the research objectives, the author has raised the following research questions as a basis for the implementation and implementation of the steps to carry out the thesis, including:

The first research question: Which criteria affect on developing consumer loan activities at Joint Stock Commercial Bank for Investment and Development – Bien Hoa branch?

The second research question: How is the current status of consumer loan activities

at Joint Stock Commercial Bank for Investment and Development – Bien Hoa branch?

The third question: Which solutions should be implemented and carry out to complete and develop consumer loan activities at Joint Stock Commercial Bank for Investment and Development – Bien Hoa branch?

4 The Scope of research

The study scope: Develop consumer loan activities at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch

The time of study: Surveying, synthesizing data and the situation of consumer loan development activities at BIDV- Bien Hoa branch from 2017 to 2021

5 Literature review

Consumer loan is always an issue that is of interest and research by economists Along with the strong development of the consumer loan market in Vietnam, there have been many studies conducted by organizations and individuals with the desire

to contribute to the expansion of consumer loan in Vietnam helping this loan segment

to be widely deployed to the people and keep up with the world consumer loan market

Domestic articles:

Nguyen Thi Minh (2017), Consumer loan: The inevitable trend of commercial banks, Financial Magazine on July 2017 The post emphasized that expanding and developing retail banking, focusing more on the individual customer segment, who have consumer needs is also becoming a trend of commercial banks Vietnam In addition, the author also thinks that banks need to promote consumer credit in the main areas: loan for purchase, construction and major repair of houses; credit card loans; and general consumer loans

Foreign articles:

Stiglitz & Weiss (1981), Credit Rating in markets with imperfect information, American Economic Association, Vol 71(3) The authors argue that credit distribution under a non-price mechanism is not only the result of government intervention, but also from the behavior of lenders and borrowers in an information asymmetric environment in credit market

Bertola et al (2006), The Economics of Consumer Credit, MIT Press, Cambridge Research has shown that consumer loan faces many of the same problems as manufacturing loans As with the supply of producer credit, consumer credit is hampered by moral hazard and adverse selection problems in the asymmetric informational environment of credit markets In the highly developed credit market, the consumer credit industry has developed sophisticated “scoring” procedures to assess customer risk

Zhu & De'Armond (2005), The Factors of Consumer Debt: A look at demographic, economic, and credit management variables among participants of the 2001 Consumer Expenditure Survey The authors used information from a survey of consumer spending of 7,579 individuals in the United States in 2001, using logit regression analysis to conclude that the factors have a statistically significant influence on the ability to access credit individual consumption use: the individual's race, marital status, employment status and education level; personal income, benefits and housing In which, the individual's education level, income and allowance have positive effects; Single individuals, unemployment has a negative impact on access

to credit The factors that have a statistically significant influence on the amount of credit capital of an individual, including: age, educational level of the individual; income and other sources of loans

Research by Zinman, J (2010) titled Restricting consumer credit access: Household

survey evidence on effects around the Oregon rate cap Oregon on family associations) studied the impact of interest rate caps on consumer loan to households

in the Oregon region (Washington state – USA) The study was carried out by survey method with the number of votes collected from customers is 1040/17940 Research results show that the application of the ceiling interest rate does not bring benefits to customers, but can help banks avoid unexpected losses Zinman's research has helped the author a lot in terms of research methods, especially the use of the survey to clarify the research problem, as well as suggest solutions for loan activities consumption However, Zinman's survey object is a different customer than the author's Therefore, this is also an issue that needs to be taken into account when conducting research and

implementing this thesis

Research by Bolt, W and Humphrey, D (2017) on Assessing bank competition for

consumer loan conducted an assessment of the effective competition (CE) of 2,644

US banks for consumer loan activities period 2008-2010 Using the analysis of competitive indexes such as HHI, Lerner Index, and H-Statistic, the results show that banks with large loan amounts have not the best CE index as well as banks with high loan rates The minimum loan requirement has a low CE At the same time, the best and lowest competing banks are not in the best-known states in America, nor are the largest banks with less competitive value Thereby, it can be seen that the study of Bolt, W and Humphrey, D is very suitable for the thesis in proposing solutions, especially related to the aspect of improving the competitiveness of the units in the locality for operations consumer loan However, the reference is also considered because banks in the US are larger and have more specific regulations for consumer loan

Research by Malik, M and Thomas, L C (2010) on Modeling credit risk of portfolio

of consumer loan has conducted to determine the model of credit risk for consumer loan Consumer loan activities in the UK with data collected from 50,000 customers participating in transactions at commercial banks in the UK from 2001 to 2004 The results show that macroeconomic factors have a very strong impact to consumer loan and can use the two researchers' model to estimate the credit risk of consumer loan Although, the article was studied in 2010, but the results are worth paying attention

to in the author's thesis, especially the macroeconomic aspect However, the operating environment of the UK will have certain differences compared to Vietnam Therefore, the application of research results must also be considered in accordance with the reality of Vietnam as well as the characteristics of the area of operation and the target group of customers in Gia Lai

Researches and publications on consumer loan development are summarized above mostly from the perspective of a commercial bank, or a branch of a commercial bank,

or research on consumer loan by organizations credit institutions in general

However, there are no research articles on consumer loan activities at BIDV- Bien Hoa branch Therefore, the topic “Development of Consumer Loan at Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch” does not overlap with published works

CHAPTER 1: THE THEORY OF DEVELOPING CONSUMER LOAN AT COMMERCIAL BANKS

1.1 Consumer loan activities of commercial banks

1.1.1 The concept of consumer loans

According to the Law on Credit Institutions (2010): “Consumer loan is one of the

forms of credit extension in which the bank transfers to the customer the right to use

an amount of value (money) with the conditions that the two parties agreed to help individual customers or households use a sum of money for consumption purposes before they are able to pay, enabling them to enjoy a higher standard of living under the principle of refund pay both principal and interest after a certain period of time

Textbook of Banking Credit-Banking University of the Economic Publishing House of Ho Chi Minh City has defined consumer credit as follows: This is a form

of credit to finance the spending needs of consumers, include individuals and households In order to meet the living needs of the population with material costs such as housing, transportation, personal belongings or services such as education, health care, tourism, culture, art

In the Economic Dictionary of author Nguyen Van Ngoc, consumption

(consumption) is understood as the behavior of using goods to satisfy current needs

39/2020/President/President's rule stipulates loan activities of credit institutions

and foreign bank branches to customers, defining loan as a form of credit extension

in which credit institutions deliver or commit to deliver to the customer a sum of money to use for a specified purpose within a certain period of time in accordance with the agreement on the principle of repayment of both principal and interest

Through the above synthesis, it can be understood that consumer loans are loans to finance the spending needs of individuals or households Based on regulated conditions, the bank acts as an intermediary to provide consumers with an amount of value (money) to meet life needs such as education, health care, transportation, etc that help consumers can use goods and services before they can afford to pay, creating

conditions for them to enjoy a better standard of living

1.1.2 Characteristics of consumer loan

 Subject of consumer loans

Subjects of consumer loans are individuals and households that need to borrow capital

to serve the purpose of shopping and cover the expenses of that household This is a group of potential customers, diverse in economic sectors, with diverse income levels,

so the number of consumer loans is usually very large In addition, the society is developing, the quality and education level of the people are increasingly improved, leading to an increase in the demand for bank loans to improve living standards Consumer loan is also very rich and diverse

 The Scale

The size of each loan of Consumer loan is usually much smaller than that of corporate customers Starting from the borrowers are individuals and households with the purpose of borrowing capital to meet consumption needs or production and business

on a small scale, so the amount of loan from commercial banks is not high Furthermore, when a customer intends to purchase any item, the expected product tends to accumulate in advance Customers come to the bank to find additional capital for the temporary shortfall Therefore, the size of each loan to meet the capital needs

of individual customers is usually not too high for the bank's assets However, the number of loans of Consumer loan is very large The size of the population is increasing, the target audience is all classes of people in society, so the number of loans is very large

Most consumer loans have higher interest rates than business loans The reason comes from the relatively high risk compared to business loans Besides, consumer loans also have the highest cost of all types of bank loans At the same time, the quality of information of consumer borrowers is often low, can be faked and potentially risky Offering a high interest rate also helps the bank to limit the risk of customer incidents For short-term loans, the interest rate is fixed at the beginning and does not change until the end of the loan term For medium and long-term loans, the loan interest rate

is usually adjusted once a year based on the deposit interest rate, plus a certain margin depending on each bank

 The method of loan security

Because the borrowers do not use the loan for production and business activities, the repayment depends on the customer's income sources The control of these sources is very difficult to the bank In order to reduce risks, in most consumer loans, banks require customers to secure their assets

1.1.3 Classification of consumer loans

There are many different criteria for dividing consumer loans On different grounds, different forms of consumer loans can be classified:

1.1.3.1 Based on the loan purpose

 Reside

Including loans to finance the purchase of apartments, townhouses or villas, construction or repair, home improvement, for residential purposes It can be said that residential loans are real estate loans for consumption purposes, these loans are usually medium and long-term from 5 years to 10 years and even up to 30 years, secured by government bonds Assets formed from loans, should be called real estate mortgage loans Loan interest rates can be fixed or floating Residential loans are often of great value and long-term, so the installment method is often applied

 Non-reside

Non-resident are loans for living improvement needs such as vehicle purchases,

household appliances, travel, study abroad or entertainment, etc The characteristic

of this type of loan is the loan size It can be small, short time so the risk will be lower than residential consumer loans

1.1.3.2 Based on the form of loan security

Unsecured consumer loan is where the borrower is not required to use collateral, pledge or guarantee by a third party, but the loan is based on the customer's own reputation

Secured consumer loan is loan where the lender requires the borrower to have assets pledged, mortgaged or guaranteed by a third party

1.1.3.3 Based on the repayment method

Installment loan is a form of loan in which the borrower repays the loan (including principal and interest) to the bank many times, according to certain terms, of great value and the borrower's periodic income is not enough ability to pay off all loans

Non-Installment loan is a form of loan that the borrower makes for a bank payment only once in a while Usually the loans for a donation are provided for a small value loan, not long-term loan

1.1.3.4 Based on the form of loan

Direct loan is a form of consumer loan in which a direct relationship is formed

between a bank and a borrower during the process of receiving documents, approving loans and disbursing loans The distinguishing feature from indirect credit is that the loan is disbursed directly to customers

Diagram 1.1 Direct loan structure

Source: Direct loan structure at commercial banks

(1) Bank and consumers enter into credit contracts with each other

(2) Consumers prepay suppliers a portion of the purchase amount

(3) The bank pays the missing amount to the supplier

(4) Provide delivery of assets to consumers

(5) The consumer pays the debt to the bank

Indirect Consumer loan is the close connection between the bank granting process

and the purchase of goods and services The development of this model brings benefits to all three parties, which is to earn interest for credit institutions, increase revenue and profit for goods distribution companies, and at the same time bring customers a better process of consuming goods and services because it is faster and more convenient to use

Diagram 1.2 Indirect consumer loan structure

Source: Direct loan structure at commercial banks

(1) The credit institution and the supplier enter into a debt purchase and sale contract

In the contract, the credit institution sets out the conditions on the subject of the sale

by the customer, the maximum amount of sale and the type of assets sold

(2) The supplier and the consumer enter into a contract of sale Typically, consumers have to pay a portion of the property value

(3) Provide assets to consumers

(4) Provide the sale of all goods sales documents to a credit institution

(5) Credit unions pay money to suppliers

(6) Consumers pay installment payments to credit institutions

The roles of consumer loan

For the consumers

As it mentioned above, human needs are often very rich and diverse from purchasing household items, living amenities to shopping and building houses, traveling, resting, etc But not always income and accumulation allow them to meet that need That leads to the fact that people buy homes and other convenience purchases as they get

older, when the perceived benefits from enjoyment tend to decrease Therefore, consumers always find ways to skillfully combine the satisfaction of needs with the time factor and the ability to pay in the present and in the future That is, they will enjoy the income they will receive in the future On the other hand, prior satisfaction

of needs will motivate consumers to strive to pay for that need as soon as possible because usually when borrowing from a bank to shop, then that same asset will become a security for the bank, but no one wants to hold assets that are not theirs This indirectly increases the future income of consumers It is for the above reasons that more and more individuals and households come to banks with the hope that the bank will help them in purchasing essential goods and high-value goods to satisfy their needs consumer demand and improve living standards

For the commercial bank

The main activity of commercial banks is to receive deposits with the responsibility

to repay and use that money to make loans, along with efforts to mobilize capital, commercial banks also try their best in providing credit to all individuals, organizations at home and abroad Loans often account for more than half of the total asset value from 1/2 to 2/3 of the bank's revenue For individuals, households, banks make main types of loans such as buying cars, buying means of living, funding for the learning process or building and repairing houses, etc customers are often not too concerned about interest rates but only interested in the benefits they enjoy, then the total amount they have to pay, so consumer loans are often priced quite high, making Consumer Loan still considered as the most profitable credit item for the bank On the other hand, credit card can limit and eliminate the effect of the business cycle (which in turn leads to a significant downturn in many traditional bank loan business accounts) and avoid Due to fierce competition from foreign banks, through credit CV, the bank also expanded its operations and made effective use of mobilized resources

In addition, credit card also contributes to diversifying business activities and spreading risks for the bank Although providing credit to retail partners, banks face many risks for 1 customer However, with a large number of customers and small loans, Consumer loan has the ability to spread high risks for banks compared to loan

activities of enterprises Currently, with the goal of diversifying products and creating unique attractions to attract customers

For the Economy

For most actors in the economy, whether directly or indirectly, they also enjoy the benefits brought by the bank's activities The bank's implementation of customer credit card only satisfies the essential needs to improve the quality of consumers This loan also promotes production, creates jobs, increases the competitiveness of production and business firms, and creates dynamism for the economy Through credit granting activities to consumers, commercial banks have contributed to stimulating demand in the economy, improving the efficiency of capital use, and increasing the competitiveness of domestic goods Thereby supporting the State in achieving social goals such as hunger eradication, poverty reduction, job creation, income increase, reduction of social evils, improvement of living standards for the people

1.2 Developing consumer loan activities of commercial banks

1.2.1 The concept of development consumer loan activities of commercial banks

The 1994 Vietnamese dictionary of the Social Sciences Publishing House, Vietnamese dictionary center, development is defined as “to change or make change from less to more, narrow to wide, low to low to high, from simple to complex, for example: cultural development, leapfrog development

Hanoi-Ho Dieu (2001) mentioned in the book "Bank Credit" that the development of consumer loan is an increase in both the size and quality of the loan These are the expansion of the loan scale, the increasing number of borrowers, the diversification

of borrowers, the reduction of the non-performing loan ratio, meeting the needs of customers and ultimately bringing efficiency to the customers Bank Besides, the bank still maintains its position in the market

In general, the development of consumer loan is an increase in both the size and

quality of the loan: the loan scale expands, the number of borrowers increases, the diversification of loan products, the debt ratio decrease, meet the needs of customers and ultimately bring efficiency to the bank and at the same time maintain the bank's position in the market

1.2.2 Criteria for evaluating the development of consumer loan activities of commercial banks

According to Vu Van Thuc (2014), Tran Thi Thuy Duong (2021), Dai Thi Loi (2020), Nguyen Thi Hong Anh (2017), there should be criteria to evaluate the development

of consumer loans at commercial banks include: market share, loan outstanding balance, non-performing loan and profits

1.2.2.1 Market share growth of consumer loan activities at commercial

banks

In a market economy, the number of customers is a common criterion for evaluating any business service For banking services in general and credit card activities in particular, this is an important criterion to show the development and success of business activities The development of credit card activities is reflected in the increase in the number of customers taking loans and participating in the use of banking products and services In order to attract customers, banks must have credit policies suitable to customers' needs in terms of specific conditions such as: loan size, loan approval criteria, interest rate, term, payment methods, loan term, transaction procedures, service fees, etc

Density of consumer loan outstanding balance= (consumer loan outstanding balance/ total loan outstanding balance) *100

This indicator shows the degree of concentration of the bank's loan activities on the group of consumer borrowers in order to study the fluctuations of the customer group

in order to adjust the credit structure according to the appropriate customers

1.2.2.2 Loan outstanding balance at commercial banks

Loan outstanding balance is the amount owed by a borrower to a credit institution at

a given time Loan outstanding balance is an important indicator in assessing the scale

as well as the expansion of the credit portfolio of a credit institution This indicator reflects the growth rate or decline in the amount of capital provided by banks to the economy

Loan outstanding balance = The beginning term + The profit of consumer loan in term-The debt recover of consumer loan in term

1.2.2.3 Non-performing consumer loan at commercial banks

Non-performing consumer loan is a phenomenon arising from an imperfect credit relationship when a borrower fails to meet his/her loan repayment obligations to the bank on time The overdue ratio is the percentage between the past due debt and the total outstanding balance of the bank at a given time, usually the end of the month, the end of the quarter, the end of the year

Non-performing consumer loan rate = Non-performing consumer loan x 100% Total outstanding consumer balance

Determining the non-performing consumer loan ratio is a very important factor in assessing the quality of loans of banks in general and credit institutions in particular,

in order to reflect loans with poor repayment ability If the above ratio is low, it shows that the bank's credit history is good, most of the credit balances are profitable and recoverable On the contrary, if this ratio is high, banks need to take measures to control overdue debts, limit the risk of losing capital due to non-performing consumer loan

Non-performing loan and non-performing loan ratio:

According to Circular 02/2013/TT-NHNN “NPLs are debts classified into group 3 (subprime debt), group 4 (doubtful debt) and group 5 (debt likely to lose capital); The above debt groups have principal and interest debts that are overdue for 90 days or more

The non-performing loan ratio reflects how many percentages of the total loan outstanding balance in the credit portfolio Normally, these debts are handled by making provisions to handle risks when necessary This provision is calculated based

on past due balance and on the basis of secured or unsecured loans The lower this indicator is, the higher the quality of credit records is, and the risks of credit cards are increasingly reduced

Non-performing loan ratio= (Non performing consumer loan/ Total consumer loan outstanding balance) *100

According to Decision No 22/VBHN-NHNN dated June 4, 2014 of the Governor of the State Bank of Vietnam promulgating Regulations on classification of debts, setting up and use of provisions to deal with credit risks in banking activities of the State Bank of Vietnam Credit and debt institutions are classified into 5 groups, specifically as follows:

Group 1 (qualified debts): Debts assessed by credit institutions as being able to fully recover both principal and interest on time

Group 2 (debts to pay attention): Debts that are assessed by credit institutions to be able to fully recover principal and interest but show signs of customers' declining ability to repay

Group 3 (substandard debt): Debts that are assessed by credit institutions to be unable

to recover principal and interest when due and likely to lose part of principal and interest

Group 4 (doubtful loss of capital): Debts that are assessed by credit institutions as having a high probability of loss

Group 5 (capable of losing capital): Debts that are assessed by credit institutions as unrecoverable or lose capital by credit institutions

1.2.2.4 The profit of consumer loan at commercial banks

Profit from consumer loan activities:

Profit from consumer lending activities = income from consumer loan activities expenses from consumer loan activities

-This indicator shows that consumer lending activities bring how much profit In addition, this indicator helps the bank in formulating the development orientation of consumer lending activities

Profit growth rate from consumer loan activities:

Profit growth rate from consumer loan activities= (profit from consumer loan activities in year (n-1) x 100 profit from consumer loan activities in year (n -1) This indicator shows the growth rate of profit from consumer loan in year (n) compared to year (n-1) When this indicator increases, it shows that the bank's profit from consumer loan over the years has increased in relative terms, and consumer

lending is expanding

1.2.3 The experiences in development consumer loan activities of commercial

banks and the lessons for BIDV- Bien Hoa branch

1.2.3.1 Vietnam Bank for Agriculture and Rural Development (Agribank)

Agribank is a state-owned commercial bank, also the largest bank in Vietnam in terms

of capital, assets, staff, network of operations and number of customers In 2021, Agribank launched a credit card product package in which priority is given to the minimum capital of 5,000 billion dong in the credit structure to lend, to quickly meet the unexpected capital needs of people in the agricultural area and rural areas, including deep-lying and remote areas, difficult economic areas, etc According to this loan package, the limit of each loan is not more than 30 million VND to serve the legitimate and urgent consumption purposes of the borrowers Individual and household customers such as expenses for study, medical examination and treatment, purchase of household appliances and equipment, etc and apply reasonable interest rates with time of approval and disbursement within a day With the loan limit

provided by Agribank, when needed, customers in rural areas can completely withdraw money quickly In cases where there is a need to borrow more than 30 million VND, Agribank still applies and deploys appropriate credit packages In addition, Agribank has come up with many solutions to develop credit portfolio, which emphasizes that in addition to continuing to effectively implement policy credit programs, Agribank strongly deploys loan through groups and transaction points mobility by special-use cars to bring capital and convenient banking products and services to all people, especially in remote and difficult areas

In addition, Agribank constantly improves loan processes and procedures, shortens loan approval time, diversifying credit products and banking services to suit each customer Thanks to the implementation of many solutions, Agribank in general and Agribank branch in Lai Chau in particular have developed a credit portfolio with many impressive results, synthesizing data of 25 commercial banks from the State Bank of Lai Chau province, by 2020 the total outstanding credit balance of the whole area the province is 9,147,343 million VND, of which the outstanding loan of Agribank Binh Thuan Branch is 3,027,195 million VND, accounting for 31.7% of the total loan outstanding balance of 25 commercial banks in the area

1.2.3.2 Vietnam Prosperity Joint Stock Commercial Bank (VPBank)

According to Brand Finance's list of 50 strong brands in Vietnam 2021, VPBank brand is ranked 14th and the private bank has the highest position This is the 5th year that Brand Finance has announced the ranking of 50 strong brands in Vietnam, and for the 3rd year in a row, VPBank has been rated as the strongest brand in the group

of private banks Brand strength of VPBank This is strongly reflected in the strategic consumer finance segment where this bank is leading the market

VPBank's success comes from recklessly choosing segments that are riskier than usual, focusing mainly on household businesses, small businesses and consumer credit In which, the marketing strategy follows the direction of "Customers" is the focus", improving service technology quality; Diversified products and services and

a wide network of transaction points play a key role in the success of VPBank's credit card business

VPBank's marketing strategy follows the "Customer-centric" orientation, transaction points have been completely changed in terms of appearance, model and service facilities VPBank's products and services are always improved and combined with more utilities to increase benefits for customers All have contributed to satisfying existing customers and attracting new customers, expanding VPBank's customer base

in both size and duration at a rapid rate Moreover, the coverage of transaction office locations, ATMs in convenient locations for customers is also a plus point in the effort

to improve customer experience Up to now, VPBank has 1 branch, 1 transaction office and 25 financial transaction points in Binh Thuan province

VPBank is also considered a market leader in applying advanced information technology in products, services and operating systems In addition, the Bank has gradually developed an independent, centralized and specialized risk management system that meets international standards and is aligned with the Bank's business strategy With strategies and products that are considered to be of high quality, VPBank has achieved many certain achievements in the market

1.2.3.3 The lesson for BIDV- Bien Hoa branch

Firstly, banks should come up with a strategy to expand their own consumer loan, through the issuance of appropriate credit policies

Secondly, because consumer loan was born and developed most actively, it originates from developed countries Therefore, these countries are very knowledgeable about consumer loan In order to effectively expand consumer loan, Vietnamese commercial banks need to research and learn more about consumer loan products in countries with developed banking and finance, thereby offering different types of loans consumer loans suitable to the characteristics and needs of Vietnamese consumers

Thirdly, banks should be more open in providing loan conditions to customers, creating conditions for more and more customers to have access to the bank's consumer loan products, ensuring interests of both parties; If the customer needs a loan, it will be met, and the bank must ensure safe and effective business

Fourthly, the bank must have a mechanism to strictly control the customer's income and understand the borrower's job or residence changes in order to effectively manage the loan, avoiding the situation of being disbursed debt default, or debt with high risk

of capital loss

Fifthly, modern technology has contributed to the convenience, speed and satisfaction

of customers when using the bank's products, with modern technology helping the bank to appraise customers quickly accurately and as quickly as possible, shortening the process time of granting a loan, thereby saving costs, better managing customers and increasing the number of loan settlements, facilitating for the expansion of consumer loan

Sixthly, as is known, consumer loans bring great profits, but risks can happen to banks and equally Especially for loans where the collateral is the assets formed from the loan - assets with strong fluctuations, such as the real estate market, this is a dynamic market according to the times Banks need to be careful in these loans, and should also study the volatility of the markets for collateral as well as carefully selected loan conditions

Seventhly, the calculation of loan interest rates must also be carefully considered to come up with the most competitive interest rate structure, but still ensure a significant source of income for the bank

Eighthly, banks should invest in building and expanding their network of branches to attract more customers as well as increase consumer loans Ninth, Vietnamese banks need to attach importance to recruiting and training human resources with high qualifications and working skills to be able to meet the job demands as well as fulfill their tasks

SUMMARY OF THE CHAPTER 1

Through the content of chapter 1, the thesis has clarified the following issues: General overview of consumer loan, the concept of consumer loan; Clearly state the consumer loan activities of commercial banks, through the process of formation and development of consumer loan activities, classification of consumer loans, characteristics of consumer loans, contents of consumer loan activities, forms of consumer loans; Criteria for evaluating consumer loan activities and factors affecting consumer loan activities

In summary, the contents presented in chapter 1, are the basis for analyzing and evaluating the current state of consumer loan activities at the Joint Stock Commercial Bank for Investment and Development of Vietnam- Bien Hoa branch in the chapter

2 and proposing some solutions in the chapter 3

CHAPTER 2: THE SITUATION OF DEVELOPING CONSUMER LOAN

INVESTMENT AND DEVELOPMENT OF VIETNAM - BIEN HOA BRANCH

2.1 Overview of Joint Stock Commercial Bank for Investment and

Development of Vietnam

2.1.1 History of the establishment and development of the Joint Stock

Commercial Bank for Investment and Development of Vietnam

BIDV was established on 26 April 1957 as the Bank for Construction of Vietnam, under which name it operated until 24 June 1981, at which point it changed its name

to the Bank for Investment and Construction of Vietnam It adopted its present name

on 14 November 1990

In January 2007, the Vietnamese government announced that it would sell a minority stake in the BIDV and three other banks In March of that same year, they sought the government's permission to invest in highway projects In September, they announced that they would form Vietnam's first aircraft finance group in Hanoi in a joint venture with Vietnam Airlines, PetroVietnam, and Vietnam Post and Telecommunication

In November 2021 BIDV officially signed a strategic cooperation agreement with Hana Bank and announced the Korean bank as its foreign strategic shareholder who owns 15% of its charter capital This is the biggest M&A deal with a strategic investor

in Vietnam's banking industry The Commercial Joint Stock Bank for Investment and Development of Viet Nam has had 4 name changing in accordance with each period

of national construction and development

1957 -1981: Bank for Construction of Vietnam

1981 – 1990: Investment and construction of Vietnam

1990 – 2012: Investment and development of Vietnam

2012 – present: Joint Stock Commercial Bank for investment and development of Vietnam

The period 1957 - 1981: Bank for Construction of Vietnam

" Bank for Construction of Vietnam " This is the first period in BIDV's history, with the name "Vietnam Construction Bank" associated with the period of "starting a business - starting a business" (1957 - 1981) with the main function of allocating bank capital State budget for investment in capital construction according to the tasks assigned by the State, serving the construction of the Fatherland in the North and supporting the reunification war in the South

The period 1981 – 1990: Investment and construction of Vietnam

During the financial crisis as well as the world economic downturn (2007 - 2008), BIDV was the force to support businesses, including those in the private sector BIDV chooses to invest in expanding operations in the international market - opening representative offices, setting up branches abroad, and at the same time finding

opportunities, supporting and promoting Vietnamese enterprises to invest abroad

The period 1990 - 2012: Investment and development of Vietnam

BIDV was equitized, becoming a joint stock commercial bank fully operating according to market principles with the full name of "Investment and Development Bank of Vietnam"

On December 28, 2011, BIDV conducted equitisation through the initial public offering (IPO) On April 27, 2012, BIDV officially transformed into a joint stock commercial bank On January 24, 2014, BIDV officially traded shares with stock code BID on the stock exchange After equitization, the state-owned capital ratio fell below 100%, which means a change in the Bank's ownership structure - from only state ownership to including private ownership core

The period 2012 - present: The Joint stock commercial bank for investment and development of Vietnam - Bien Hoa branch

On April 26, 2022, BIDV officially launched a new brand identity on the occasion of its 65th anniversary (April 26, 1957 - April 26, 2022)

Accordingly, BIDV's new logo has a stylized image of a 5-petal yellow apricot flower In the middle is a 5-pointed star, which is inspired by the golden star on the national flag, meaning both a guide and a destination for BIDV's journey to reach All of them bear the same number 5 in Eastern culture, which is the number of development, the aspiration to reach out to the five continents to integrate and stand shoulder to shoulder with regional and international institutions

The main brand identity color is emerald green, one of the four great gems Blue color also symbolizes vitality, sustainable development, a green BIDV bank The complementary color is yellow of apricot blossom, the color of the dawn of a new day, also the color symbolizing the banking and finance industry

2.1.2 Functions and tasks of Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch

International name: JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM - BIEN HOA BRANCH

Abbreviation: BIDV Bien Hoa

Managed by: Dong Nai Province Tax Department

BIDV Bank - Bien Hoa Branch is a member unit, under BIDV Vietnam Joint Stock Commercial Bank, established on the basis of merging the Mekong Delta Housing

Development Bank (MHB) - Dong Nai Branch in 2017 BIDV - Bien Hoa Branch is located at No 248, Cach Mang Thang 8 Street, Quarter 2, Bien Hoa City, Dong Nai

Although it has only been in operation for about 7 years, BIDV - Bien Hoa Branch has affirmed its position and role in the economic development of the province and

of credit institutions in Dong Nai province Not only that, but also recognized by BIDV Vietnam, the operating market share and scale are also expanding, in line with the strategic direction of BIDV Vietnam and always successfully completing the mission from the time of establishment to the end of the year now

BIDV - Bien Hoa Branch always implements the motto of ensuring safety in business, meeting the highest demands of customers for products and services with the best quality and lowest cost In addition, the operation strategy always follows the guidelines and policies of the Party and State and the direction of BIDV Vietnam, in order to ensure the solid development of the industry

2.1.3 Functions and tasks of Joint Stock Commercial Bank for Investment and Development of Vietnam – Bien Hoa branch

Receive deposits in any form: demand deposit, term deposit, ladder deposit, savings deposit in installments for each specific period, bonus savings deposit, super

flexible savings, bills in Vietnam Dong and foreign currencies from economic organizations and individuals with flexible and attractive interest rates

Credit products for all economic sectors with various types of loans: short-term, medium-term and long-term, receiving capital and entrusting investment loans

Implementation of bank guarantee: Bid guarantee, contract performance guarantee, payment guarantee, loan guarantee

Foreign currency trading activities; international payment via SWIFT system is fast, accurate and safe, remittance payment via Western Union fast money transfer

service

Transfer of electronic money in both inner city and abroad quickly and

conveniently

Providing cash and means of payment, banking services, etc to customers

conveniently and quickly

Implementation of banking and non-banking services

Organizational structure

The Board of Directors of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has issued Decision No 3166/QD – BIDV dated November 30, 2020 on approving the sample organizational model of the branch and promulgating its functions, the main tasks of Operation Departments/Teams, Transaction Offices under BIDV's branch In order to implement the organizational model in accordance with the direction of the General Director of the Joint Stock Commercial Bank for Investment and Development of Vietnam, BIDV Bien Hoa branch has arranged the personnel model as follows:

Diagram 2.1: BIDV - Bien Hoa branch’s Organizational structure

(Source: Decision No 3166/QD – BIDV on the model organization model and main functions and tasks of Operation Departments/Teams, Transaction Offices

under BIDV - Bien Hoa branch)

Function

Customer Relationship Management Division: As the direct business division, the focal point for marketing credit needs, foreign currency trading, capital mobilization, etc from customers Customer management department at the branch includes: 04 departments for corporate customers and 02 rooms for individual customers

Risk Management Division: Consists of the Risk Management Department with the function of controlling operational risks at the branch in all areas of activity such as credit, capital mobilization, foreign currency trading, treasury transaction, etc Operation

block includes departments Includes: Credit Administration Department The

BOARD OF DIRECTORS

- Company customer

- Personal customer

DIRECTORS

RISK MANAGEMENT

INTERNAL MANAGEMENT

VICE DIRECTOR 2

be in charge of operational part