Factors affecting individual customers choices of commercial banks to borrow an empirical study in ho chi minh city

HO CHI MINH CITY UNIVERSITY OF BANKING GRADUATION THESIS FACTORS AFFECTING INDIVIDUAL CUSTOMERS’ CHOICES OF COMMERCIAL BANKS TO BORROW: AN EMPIRICAL STUDY IN HO CHI MINH CITY MAJOR:

HO CHI MINH CITY UNIVERSITY OF BANKING

GRADUATION THESIS

FACTORS AFFECTING INDIVIDUAL CUSTOMERS’ CHOICES

OF COMMERCIAL BANKS TO BORROW: AN EMPIRICAL

STUDY IN HO CHI MINH CITY

MAJOR: FINANCE – BANKING

CODE: 7 34 02 01

NGUYEN DUY NAM LONG

HO CHI MINH CITY, 2023

HO CHI MINH CITY UNIVERSITY OF BANKING

GRADUATION THESIS

FACTORS AFFECTING INDIVIDUAL CUSTOMERS’ CHOICES

OF COMMERCIAL BANKS TO BORROW: AN EMPIRICAL

STUDY IN HO CHI MINH CITY

MAJOR: FINANCE – BANKING

CODE: 7 34 02 01

Student’s full name: NGUYEN DUY NAM LONG

Student’s ID: 050607190242 Class: HQ7-GE04

SUPERVISOR NGUYEN THI MY HANH, PHD

HO CHI MINH CITY, 2023

ABSTRACT

The research topic is about “Factors affecting individual customers’ choices

of commercial banks to borrow: an empirical study in Ho Chi Minh City” from

2022 to 2023 The study conducted a survey involving 652 individuals residing in

Ho Chi Minh City that needed to borrow money from commercial banks Based on the collected data, a range of quantitative methods were employed, including descriptive statistics, multiple regression analysis, correlation matrix, and ordinary least squares (OLS) modeling to determine the optimal model

The results revealed that out of the seven factors, all seven factors significantly influenced individual customers‟ choices of commercial banks to borrow These factors included interest rate (IR), service quality (SQ), loan policy (LP), convenience (C), fees and insurance (FI), reputation and brand (RB), influence of relatives and friends (IRF) Among them, the interest rate factor had the strongest impact on the dependent variable, while the convenience factor had the least influence Additionally, except for education level, other study sample characteristics did not affect the choice of commercial banks for borrowing

Based on the experimental results, the author provided recommendations related to each identified factor to improve personal credit quality, attract new customers, retain existing customers, and increase profitability for commercial banks Moreover, the author hoped that this research would serve as a high-quality reference for future studies and a valuable resource for practical application in the banking sector

Key words: Individual Customers, Individual Loans, Borrowing Decisions, Factors Influencing Choices, Commercial Banks, Ho Chi Minh City

TÓM TẮT

Đề tài nghiên cứu “Các nhân tố ảnh hưởng đến việc lựa chọn các ngân

hàng thương mại của các khách hàng cá nhân để vay tiền: một nghiên cứu thực nghiệm tại thành phố Hồ Chí Minh” trong giai đoạn 2022-2023 Bài nghiên cứu

này đã tiến hành khảo sát 652 đối tượng đang sinh sống trên địa bàn thành phố Hồ Chí Minh đã, đang và sẽ có nhu cầu vay tiền tại các ngân hàng thương mại Dựa trên các dữ liệu thu thập được, một loạt các phương pháp định lượng được sử dụng bao gồm: thống kê mô tả, kiểm định đa cộng tuyến, ma trận tương quan, mô hình bình phương tối thiểu (OLS) để cho ra mô hình tối ưu nhất

Kết quả cho thấy có 7 trong số 7 nhân tố có ảnh hưởng tới quyết định lựa chọn ngân hàng thương mại để vay tiền là: lãi suất (IR), chất lượng dịch vụ (SQ), chính sách cho vay (LP), sự tiện lợi (C), các loại phí và bảo hiểm (FI), danh tiếng và thương hiệu (RB), sự ảnh hưởng của người thân và bạn bè (IRF) Trong đó, nhân tố lãi suất có ảnh hưởng mạnh mẽ nhất tới biến phụ thuộc trong khi nhân tố sự tiện lợi

ít có tác động nhất Bên cạnh đó, ngoại trừ trình độ học vấn, các tính chất khác của mẫu nghiên cứu không có ảnh hưởng đến sự lựa chọn ngân hàng thương mại để vay tiền

Dựa trên kết quả thực nghiệm thu được, tác giả đã đề xuất những khuyến nghị liên quan tới từng nhân tố đã nêu nhằm cải thiện chất lượng tín dụng cá nhân

để thu hút khách hàng mới, giữ chân khách hàng cũ cũng như tăng lợi nhuận cho các ngân hàng thương mại Đồng thời, tác giả cũng mong muốn bài nghiên cứu này

sẽ trở thành nguồn tài liệu tham khảo chất lượng cho các nghiên cứu liên quan sau này và trở thành nguồn tư liệu quý giá được các ngân hàng áp dụng vào thực tiễn

Từ khóa: Khách hàng cá nhân, Tín dụng cá nhân, Quyết định vay tiền, Những yếu tố ảnh hưởng đến sự lựa chọn, Ngân hàng thương mại, Thành phố Hồ Chí Minh

AUTHOR’S DECLARATION

My name is Nguyen Duy Nam Long, a student studying the high-quality

program at HQ7-GE04 class at Ho Chi Minh City University of Banking

I hereby declare that the thesis titled "Factors affecting individual customers'

choices of commercial banks to borrow: An empirical study in Ho Chi Minh City"

is an independent research work conducted solely by myself The data and research

findings were collected, analyzed, and presented honestly and objectively The

entire content and research results have not been previously published in any other

studies

Ho Chi Minh City, August 2023

Nguyen Duy Nam Long

ACKNOWLEDGEMENT

Firstly, I would like to extend my heartfelt gratitude to my supervisor, Ph.D

Nguyen Thi My Hanh, for her unwavering support and guidance throughout my

graduate thesis preparation Her knowledge and wisdom have been invaluable in

shaping my work

I would also like to express my appreciation to all the faculty members at Ho

Chi Minh City University of Banking Your valuable experience and knowledge

have played a significant role in my learning journey and the completion of this

thesis

Given the constraints of time and my personal limitations in expertise and

knowledge, I acknowledge that this work may contain imperfections Therefore, I

welcome any constructive feedback from my teachers, as it will be highly

appreciated

Lastly, I send my best wishes to all the lecturers at Ho Chi Minh City

University of Banking May you continue to enjoy good health and perseverance in

your noble mission of educating and nurturing future generations

TABLE OF CONTENT

LIST OF ABBREVIATIONS ix

LIST OF FIGURES x

LIST OF TABLES xi

CHAPTER 1 INTRODUCTION 1

1.1 Rationale of the study 1

1.2 Research objective 2

1.3 Research questions 2

1.4 Research subject and research scope 2

1.4.1 Research subject 2

1.4.2 Research scope 2

1.5 Research method 3

1.5.1 Qualitative method 3

1.5.2 Quantitative method 3

1.6 Contribution of the study 3

1.7 Structure of the study 4

CONCLUSIONS OF CHAPTER 1 5

CHAPTER 2 LITERATURE REVIEW 6

2.1 Overview of commercial banks and individual loans 6

2.1.1 Commercial banks 6

2.1.2 Individual loans 7

2.2 Consumer behavior and the decision-making process 8

2.2.1 The Theory of Reasoned Action (TRA) 8

2.2.2 Theory of Planned Behavior (TPB) 10

2.3 Empirical studies 12

2.3.1 Foreign studies 12

2.3.2 Domestic studies 14

CONCLUSIONS OF CHAPTER 2 17

CHAPTER 3 RESEARCH METHOD 18

3.1 Research model 18

3.2 Research hypothesis 19

3.2.1 Interest rate 19

3.2.2 Service quality 19

3.2.3 Loan policy 20

3.2.4 Bank Reputation and Brand 20

3.2.5 The Influence of Relatives and Friends 21

3.2.6 Convenience 21

3.2.7 Fees and Insurance 22

3.3 Research process 23

3.4 Research data 25

3.4.1 Secondary data 25

3.4.2 Primary data 25

3.5 Research method 26

3.5.1 Qualitative research 26

3.5.2 Quantitative research 27

3.6 Detail about data analysis process 29

3.6.1 Descriptive statistics analysis 29

3.6.2 Cronbach's Alpha coefficient 29

3.6.3 Exploratory factor analysis (EFA) 30

3.6.4 Pearson correlation analysis 33

3.6.5 Linear regression analysis 34

3.6.6 OLS model 39

3.7 Independent Sample T-Test and One-Way ANOVA 40

3.7.1 Independent Sample T-Test 40

3.7.2 One-Way ANOVA 41

CONCLUSIONS OF CHAPTER 3 42

CHAPTER 4 RESEARCH RESULTS AND DISCUSSION 43

4.1 Descriptive statistics of the sample and variables 43

4.1.1 Descriptive statistics of the sample 43

4.1.2 Descriptive statistics of variables 47

4.2 Check the reliability of the scale and factor analysis 50

4.2.1 Check the reliability of the scale 50

4.2.2 Exploratory Factor Analysis (EFA) 52

4.3 Regression analysis and model testing 62

4.3.1 Correlation matrix 62

4.3.2 Regression analysis and model evaluation 63

4.4 The impact of sample characteristics on the dependent variable 72

4.4.1 Gender 72

4.4.2 Age 73

4.4.3 Work status 75

4.4.4 Education level 77

4.4.5 Residency status 79

4.4.6 Income 81

4.4.7 Borrowing purposes 83

CONCLUSIONS OF CHAPTER 4 85

CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS 86

5.1 Conclusions 86

5.2 Recommendations 87

5.2.1 Implementing reasonable interest rates 87

5.2.2 Improving the quality and style of service of banks staff 88

5.2.3 Formulating simple loan procedures 89

5.2.4 Enhancing banks‟ reputation and brand 90

5.2.5 Focusing on relatives and friends of customers 91

5.2.6 Convenience of accessing and repaying loans 92

5.2.7 Reducing lending fees and restricting insurance sales 93

5.3 Limitations and further research directions 94

5.3.1 Limitations of the study 94

5.3.2 Future research directions 94

CONCLUSIONS OF CHAPTER 5 96

REFERENCES 97

LIST OF APPENDICES 101

LIST OF ABBREVIATIONS

LIST OF FIGURES

Figure 2.1: The Theory of Reasoned Action (TRA) 9

Figure 2.2: The Theory of Planned Behaviour (TPB) 11

Figure 3.1: Research model 18

Figure 3.2: Research hypothesis 23

Figure 3.3: Research process 25

Figure 3.4: Required sample size corresponding to a specific level of factor loading 32

Figure 3.5 Scatter plot 39

Figure 4.1: Gender and age groups of survey participants 43

Figure 4.2: Work status, income and education level 44

Figure 4.3: Residency status 46

Figure 4.4: Borrowing purposes 46

Figure 4.5: Histogram of residual values 69

Figure 4.6: Normal P-P Plot of Regression Standardized Residual 70

Figure 4.7: Scatter Plot 71

Figure 4.8: Means plot (Age) 74

Figure 4.9: Means plot (Work status) 76

Figure 4.10: Means plot (Education level) 78

Figure 4.11: Means plot (Residency status) 80

Figure 4.12: Means plot (Income) 82

Figure 4.13: Means plot (Borrowing purposes) 84

LIST OF TABLES

Table 4.1: Descriptive statistics of variables 47

Table 4.2: Reliability of the scale 51

Table 4.3: KMO and Bartlett test results (I) 52

Table 4.4: Total Variance Explained (I) 53

Table 4.5: Results of rotated component matrix (I) 54

Table 4.6: KMO and Bartlett test results (II) 55

Table 4.7: Total Variance Explained (II) 56

Table 4.8: Results of rotated component matrix (II) 57

Table 4.9: KMO and Bartlett test results (III) 58

Table 4.10: Total Variance Explained (III) 59

Table 4.11: Results of rotated component matrix (III) 60

Table 4.12: KMO and Bartlett test results 61

Table 4.13: Total Variance Explained 61

Table 4.14: Component Matrixa 62

Table 4.15: Correlations 62

Table 4.16: Model Summary 63

Table 4.17: ANOVA 64

Table 4.18: Coefficients 64

Table 4.19: The degree of influence of 7 factors 66

Table 4.20: Conclusion of the hypothesis 67

Table 4.21: Group Statistic (Gender) 72

Table 4.22: Independent Samples Test (Gender) 72

Table 4.23: Descriptives (Age) 73

Table 4.24: Test of Homogeneity of Variances (Age) 73

Table 4.25: ANOVA (Age) 73

Table 4.26: Descriptives (Work status) 75

Table 4.27: Test of Homogeneity of Variances (Work status) 75

Table 4.28: ANOVA (Work status) 75

Table 4.29: Descriptives (Education level) 77

Table 4.30: Test of Homogeneity of Variances (Education level) 77

Table 4.31: ANOVA (Education level) 77

Table 4.32: Descriptives (Residency status) 79

Table 4.33: Test of Homogeneity of Variances (Residency status) 79

Table 4.34: ANOVA (Residency status) 79

Table 4.35: Descriptives (Income) 81

Table 4.36: Test of Homogeneity of Variances (Income) 81

Table 4.37: ANOVA (Income) 81

Table 4.38: Descriptives (Borrowing purposes) 83

Table 4.39: Test of Homogeneity of Variances (Borrowing purposes) 83

Table 4.40: ANOVA (Borrowing purposes) 83

CHAPTER 1 INTRODUCTION

1.1 Rationale of the study

It is undeniable that the banking system plays a vital role in the allocation of capital within the economy, one such important role of commercial banks is that they serve as a conduit for transferring surplus funds in the form of deposits from entities to those in need of capital through borrowing Among these activities, lending holds significant importance as it not only facilitates economic development

by providing funds for production and business purposes to organizations and individuals but also serves as a primary revenue source for commercial banks

Historically, most commercial banks in Vietnam primarily focused on lending to corporate customers; however, there has been a notable shift towards lending to individual customers in recent times This shift is due to the higher risks and complexities associated with lending to businesses On the other hand, lending

to individual customers tends to involve lower risks and simpler procedures Moreover, lending to individual customers often yields higher profits, as they are subjected to higher interest rates and can be offered multiple financial products like insurance through cross-selling opportunities

Until now, there have been only a few studies in Vietnam that have examined the factors influencing individual customers' choices of banks for borrowing Notable examples include the research conducted by Thinh & My (2021), Hai & Hoang (2022), Loc, Ha & Ky (2022), etc However, most of these studies are limited to specific banks, and currently, only one study by Thinh & My (2021) focused on commercial banks in general within the Ho Chi Minh City area Given the scarcity of studies directly related to the topic, conducting similar research to enhance accuracy is highly necessary

As the Vietnamese economy continues to develop, the demand for credit increases, particularly for individual customers living in Ho Chi Minh City, known

as the country's economic center Besides, with 53 domestic and foreign commercial

banks in this city competing fiercely to attract and seek borrowing customers, it is crucial to study and identify the factors influencing individual customers' decisions

in choosing a bank for borrowing To gain insights into the psychology and needs of borrowing of individual customers, the author has chosen the research topic

“Factors affecting individual customers‟ choices of commercial banks to borrow: An empirical study in Ho Chi Minh City.”

1.5 Research method

1.5.1 Qualitative method

At the beginning of the research, the author conducted several qualitative research to find out which factors affected individual customers‟ choices of commercial banks to borrow This included:

• Content analysis

• Professional approach method

• In-depth interviews through open-ended questions

1.5.2 Quantitative method

After finishing the research model and succeding in identifying key factors, the author used the quantitative method to create a questionnaire and analyze collected data

• Develop a questionnaire with Likert - 5 scale questions

• Analyse data through SPSS 23: Cronbach's Alpha, EFA, Pearson correlation, OLS multiple linear regression model, One-way ANOVA, and Independent T-test

1.6 Contribution of the study

Practical Implications for Banks: The findings of the research can offer valuable insights for commercial banks operating in Ho Chi Minh City, enabling them to understand the key factors that influence individual customers' decisions to borrow This understanding will help banks develop more effective marketing strategies, product offerings, and customer service initiatives to attract and retain customers

Consumer Empowerment: By identifying the factors that influence individual customers' choices of commercial banks to borrow, the research could empower consumers to make more informed decisions It will provide customers with a better understanding of the key factors to consider when selecting a bank for

borrowing, allowing them to make choices that aligned with their preferences, needs, and financial goals

Future Research Directions: The research can serve as a foundation for future studies in the field of consumer behavior and banking It will help researchers to delve deeper into specific factors, explore new variables, or investigate the impact

of factors in different geographical regions or customer segments In addition, this research will also contribute to the continuous development of knowledge in the field and foster further advancements in understanding customer decision-making in the banking sector

1.7 Structure of the study

The study will be presented in five chapters as follows:

CHAPTER 1: INTRODUCTION

CHAPTER 2: LITERATURE REVIEW

CHAPTER 3: RESEARCH METHOD

CHAPTER 4: RESEARCH RESULTS AND DISCUSSION

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS OF CHAPTER 1

In Chapter 1, the author presented the importance of personal credit for commercial banks and its significance for the economy Given the intense competition among credit institutions in general and commercial banks in particular

in Ho Chi Minh City, it is essential to study and identify the factors that influence the choice of commercial banks for borrowing

Furthermore, in this chapter, the author clearly stated the research objectives, research questions, research subjects, scope, and research methodology Although quantitative methods were predominantly used in the study, utilizing quantitative methods to gather relevant information was necessary for model construction and conducting surveys Finally, the author expressed the aspiration that their thesis would bring value to commercial banks, loan customers, and future related research

Moving on to the next chapter, the author will provide an overview of the theory related to the research topic, summarize various models, and review previous studies relevant to the subject

CHAPTER 2 LITERATURE REVIEW

2.1 Overview of commercial banks and individual loans

2.1.1 Commercial banks

Commercial banks are financial institutions that operate as intermediaries between individuals, businesses, and organizations in need of funds and those who have excess funds to invest These banks play a vital role in the economy by providing a wide range of financial services and serving as a key component of the financial system

One of the primary functions of commercial banks is to accept deposits from individuals, businesses, and other entities These deposits can be in the form of current accounts, savings accounts, fixed deposits, or other types of accounts By accepting deposits, commercial banks offer a safe and convenient place for individuals and businesses to store their money while earning interest on their deposits Another significant function of commercial banks is to provide loans and credit facilities to individuals and businesses They assess the creditworthiness of borrowers and extend funds to meet various financial needs such as personal loans, home mortgages, business loans, and working capital financing Commercial banks earn interest income by charging borrowers for the funds they lend

Aside from receiving deposits and lending money, commercial banks also facilitate payments and money transfers They offer services such as issuing checks, providing debit and credit cards, and enabling electronic fund transfers, allowing individuals and businesses to make payments to suppliers, employees, and other parties Additionally, commercial banks may provide foreign exchange services to facilitate international transactions and currency conversions

In addition to traditional banking services, commercial banks often offer a range of ancillary services These may include wealth management, investment advisory, insurance products, and treasury services Commercial banks may also

engage in underwriting securities, facilitating mergers and acquisitions, and providing financial advice to corporate clients

Overall, commercial banks play a crucial role in mobilizing savings, allocating capital, facilitating economic transactions, and supporting economic growth Their services contribute to the efficient functioning of the financial system and serve the diverse financial needs of individuals, businesses, and the broader economy

2.1.2 Individual loans

Regarding the concept of lending, according to Article 4, Clause 16 of the Law on Credit Institutions, “Lending is a form of credit provision whereby the lender delivers or commits to deliver a certain amount of money to the borrower for

a specific purpose within an agreed period, with the principal and interest being repayable” It can be understood briefly: "Lending activity is a bank giving money

to a customer with a commitment that the customer must repay both principal and interest within a specified period" The bank grants the right to use capital to customers, customers use this capital to invest in production and business to earn profits, to ensure repayment of principal and interest to the bank In this context, commercial banks engage in lending activities targeting two customer segments: individuals and businesses In this thesis, the author only discussed lending activity targeting individual customers

The purpose of lending to individual customers is to provide them with financial benefits by offering an amount of money to customers to meet their needs Individual customers include all individuals with legal capacity, civil behavior capacity, and responsibilities as stipulated by law They often seek funds for purposes such as home purchases, education fees, car purchases, etc Additionally, individual customers also borrow money to support small-scale business activities

Although the loan amounts for individual customers are typically small, the number of individual borrowers is substantial Additionally, due to the lower credibility of individuals compared to large companies and corporations, the interest

rates for lending to individual customers are usually higher to compensate for the associated risks Furthermore, since the loan amounts are relatively small, the documentation requirements are fewer Consequently, the loan application process and evaluation for individual customers are much simpler compared to business customers As a result, the disbursement process is much faster than that of large businesses

2.2 Consumer behavior and the decision-making process

2.2.1 The Theory of Reasoned Action (TRA)

The Theory of Reasoned Action (TRA), was initially developed by Fishbein and Ajzen (1975) in the field of social psychology This theory explains that behavioral intentions lead to behavior, and intentions are determined by an individual's attitudes toward the behavior, as well as the subjective norms surrounding the performance of those behaviors (Fishbein & Ajzen, 1975) In this model, attitudes and subjective norms play a crucial role in behavioral intentions The TRA has been widely used to study various behaviors, including the examination of attitudes and norms before and after adopting a behavior (Nor, Shanab, & Pearson, 2008)

Figure 2.1: The Theory of Reasoned Action (TRA)

(Source: Fishbein & Ajzen (1975))

The Theory of Reasoned Action (TRA) can be applied to understand individual customers' choices of commercial banks for borrowing purposes According to TRA, the decision to borrow from a particular bank is influenced by the individual's intentions, which are shaped by their attitudes and subjective norms related to the behavior

Attitudes toward borrowing from a commercial bank can be influenced by the combination of behavioral beliefs and outcome evaluations Behavioral beliefs could include trust in the bank's services, interest rates, convenience, and reputation For each belief there is a consequence or can be called outcome evaluations, determine whether customers view it as positive or negative For instance, low interest rates might be seen as a positive consequence, while complicated loan terms might be seen as negative In addition, evaluate how important each consequence is

to individual customers Some customers might highly value low interest rates, while others might prioritize the bank's reputation or customer service

Subjective norms refer to the social influences and expectations that individuals perceive regarding their borrowing behavior, this include normative beliefs and motivation to comply Normative beliefs influence an individual's perception of what other people would like them to do in a given situation Motivation to comply refers to the extent to which an individual is motivated to

conform to the expectations or wishes of important others These norms can be influenced by the opinions and recommendations of family, friends, colleagues, and society at large For example, if an individual's social circle has positive experiences with a particular bank, they may be more inclined to choose that bank for borrowing

By considering attitudes and subjective norms, TRA helps to explain how individual customers evaluate and weigh the different factors that influence their bank selection for borrowing Therefore, applying TRA in the context of individual customers' choices of commercial banks for borrowing can provide insights into the factors that drive decision-making and help banks tailor their services and marketing strategies to meet customer needs and preferences

2.2.2 Theory of Planned Behavior (TPB)

The Theory of Planned Behavior (TPB) is an extension of the Theory of Reasoned Action (TRA) and was developed by Icek Ajzen in 1991 TPB builds upon TRA by incorporating an additional factor: perceived behavioral control, to better explain human behavior Both TRA and TPB theories acknowledge the influence of subjective norms on behavioral intentions (Fishbein & Ajzen, 1975; Ajzen & Fishbein, 1980) TPB suggests that an individual's behavioral intention and subsequent behavior are influenced by three main factors: attitude, subjective norms, and perceived behavior control In the banking industry, several studies have demonstrated a significant direct relationship between attitudes and behavioral intentions (e.g., Eri, 2004; Shih & Fang, 2004; Ramayah et al., 2004; Gopi & Ramayah, 2007; Amin et al., 2011)

Figure 2.2: The Theory of Planned Behaviour (TPB)

(Source: Ajzen (1991))

Because the author had previously mentioned how attitudes and subjective norms can be implemented in the study of individual customers‟ choices of commercial banks to borrow from, this section only demonstrated the third factor in TPB: Perceived Behavioral Control

Perceived behavioral control refers to the individual's perception of their ability to control and carry out the behavior of borrowing from a particular commercial bank Therefore, higher perceived control over borrowing might increase the likelihood of choosing a specific bank In addition, perceived behavioral control included control beliefs and perceived power Control beliefs reflect the perceived ease or difficulty of carrying out a behavior based on external factors while perceived power is the individual's perception of their actual control over the factors that can facilitate or impede the behavior When considering borrowing from a commercial bank, individuals might have control beliefs such as the availability of online loan application, understanding of the bank's terms, their creditworthiness, or access to required documentation Regarding perceived power,

if a person believes they have good credit and understands loan terms well, they

have high perceived power to overcome these specific control beliefs and borrow successfully

Martin Owusu Ansah (2014) conducted a study titled "Banking Decision Makers in Ghana: An Analysis of Secondary School Teachers in Kumasi City." The study involved direct interviews with 250 high school teachers in Kumasi, Ghana The research findings revealed that the factors influencing bank selection among the participants included interest rates, the prestige and safety of the bank, the number

of years the bank had been established, low service charges, and ease of obtaining loans It is important to note that this study was conducted in 2014, which may render the findings potentially outdated and less applicable to current circumstances Furthermore, the author provided limited specific recommendations, which can also be seen as a limitation of the study

Christos C Frangos et al (2012) conducted a study titled "Factors Affecting Customers' Decision for Taking out Bank Loans: A Case of Greek Customers" The authors collected data from 277 Greek citizens using a questionnaire with self-determined scales, which was validated through confirmatory factor analysis The research findings indicated that personal marital status, customer service, shop design, and interest rates were the most significant predictors of customers' decision

to take out bank loans It was important to note that this study was conducted in

2012, which might limit its applicability to current circumstances due to potential changes in the banking industry and customer preferences Another significant limitation was the relatively small sample size of 277 Greek customers Additionally, the study only focuses on participants from the larger area of Athens, which can introduce bias to the results as people from the capital may have different perspectives on taking out loans compared to those residing in other regions Finally, it is worth mentioning that the researchers did not include all possible factors that could influence a customer's decision to choose a specific bank

Hafeez Ur Rehman and Saima Ahmed (2008) conducted a study titled "An empirical analysis of the Determinants of bank selection in Pakistan: A customer view." The study surveyed 358 customers from private, privatized, and nationalized banks in Lahore, Pakistan The research findings revealed that customer service, convenience, bank facilities, and the general environment of the banks were influential factors in the choice of banks by individual customers in Lahore, Pakistan It is important to note that this study was conducted in 2008, which limits its applicability to current circumstances as banking practices and customer preferences may have changed since then Additionally, the study only focused on three factors influencing customers' bank selection, indicating that the research model may not be comprehensive and may have certain limitations Lastly, the study did not provide specific recommendations but rather summarized the research methodology and achieved results

2.3.2 Domestic studies

Based on a survey conducted in July and August 2021, involving 210 individual customers who had obtained loans from commercial banks in Ho Chi Minh City, the research conducted by Tran Vuong Thinh, & Huynh Thi Tra My (2021) identified six factors that influence their decision in selecting a suitable commercial bank for borrowing money The study revealed that the factor

"convenience" did not have a significant impact on the decision-making process, primarily due to the survey being conducted only within the limits of Ho Chi Minh City However, the remaining six factors were ranked in descending order of influence: lending policy, staff, price, bank's brand name, the influence of relatives, and promotions It should be noted that the survey sample size in this study was relatively small compared to the overall scale of Ho Chi Minh City, which may limit the accurate reflection of customers' preferences Additionally, the assertion that the

"convenience" factor did not affect the decision to choose a commercial bank for borrowing money may not be entirely accurate, as the author's definition of convenience primarily focuses on geographical proximity In reality, convenience is not only about geographical locations but also about several banking services related to the lending process such as the speed of documentation processes, loan status and repayment schedules through mobile banking platforms, etc

Vu Minh Hieu, & Tran Ngoc Thanh (2020) conducted titled “Determinants

of the bank choices in loan purchases of individual customers – an empirical study

in Ho Chi Minh City, Vietnam” This study used qualitative and quantitative methods to identify the factors that influence individual customers' decisions when choosing a bank for loan purchases in Ho Chi Minh City While 250 survey questionnaires were distributed, only 239 valid responses were obtained The findings indicated that Loan Policy, Price Perception, Service Quality, Images, and Reputation had a positive impact on influencing individual customers' decisions when choosing a bank for loan purchases It should be noted that the sample size of this article was limited to 239 respondents, which is relatively small compared to

other studies As a result, the findings may not provide an entirely accurate representation, particularly when considering the broader context of Ho Chi Minh City Furthermore, the recommendations provided by the authors still have some shortcomings and therefore are not entirely convincing

Le Quang Khoi, Chau Quang Tuan, & Dang Quoc Viet (2020) conducted a study titled “Research on factors influencing individual customers' loan decisions at SCB Binh Thanh Branch” The research data was collected through a survey of 285 individual customers who had borrowed money at SCB Binh Thanh Branch The findings revealed six significant factors that positively impact the loan decisions of individual customers at SCB Binh Thanh Branch, ranked in descending order: Interest rate, bank brand, loan procedure, service quality, promotional activities, and the influence of relatives The study selected Ho Chi Minh City as the research location but it is limited to a single bank, SCB, and the survey was conducted solely among customers who had borrowed money from SCB As a result, the utility and reliability of the study may be constrained, and the findings can not reflect the broader scale of the entire city

Nguyen Ha Hong, & Lien Trinh To (2019) conducted a study titled “Factors Influencing Family Business Decision for Borrowing Credit from Commercial Banks: Evidence in Tra Vinh Province, Viet Nam” The authors directly interviewed

300 business households in Tra Vinh province, some of whom had borrowed from commercial banks while others had not The research identified seven factors that influenced the borrowing decisions of family businesses from commercial banks in Tra Vinh province However, the findings revealed that only four out of seven factors, namely brand names, loan procedures, interest rates, and service attitudes, significantly impact the borrowing decisions of household businesses in banks Among these, brand names and interest rates exerted the strongest influence The study was conducted in 2019, making it potentially outdated and less applicable to the current circumstances, especially considering the continuous changes in both

banks and customer preferences Additionally, there are some other important factors that the authors did not address

CONCLUSIONS OF CHAPTER 2

In Chapter 2, the author provided a detailed explanation of personal consumer lending and discussed the concept of commercial banks Additionally, this chapter introduced two theoretical models, TRA and TPB, to enhance the understanding of the decision-making process of customers Furthermore, the author examined the subjects and research methodologies employed by previous researchers in the field, including four domestic studies and four foreign studies These theories provide a solid foundation for the author to create a questionnaire, construct a research model, and analyze the data using the quantitative method in the following chapters

In the next chapter, based on the information and knowledge gathered in this chapter, the author will propose the research model, hypotheses, and research methods

CHAPTER 3 RESEARCH METHOD

3.1 Research model

Based on theoretical framework and previous empirical studies, the author identified 7 factors that affect individual customers‟ choices of commercial banks to borrow These factors were Interest rate, Service quality, Loan policy, Reputation and brand, The influence of relatives and friends, Convenience, Fees and insurance

(Source: Compiled by the author)

Figure 3.1: Research model This model includes:

- 1 dependent variable: Individual customers‟ choices of commercial banks to borrow (CC)

- 7 independent variables:

 Interest rate (IR)

 Service quality (SQ)

 Loan policy (LP)

 Reputation and brand (RB)

 Influence of relatives and friends (IRF)

Hypothesis H1: Interest rate has a positive (+) impact on the individual customers‟ choices of commercial banks to borrow from

3.2.2 Service quality

Research conducted by Christos C Frangos et al (2012) and Le Duc Huy (2015) demonstrated that service quality directly influences the decision of individual customers when choosing a bank for borrowing money The bank's respect for customers, professionalism in providing customer advice, and quick processing to minimize waiting time are crucial factors in attracting customers In terms of loan services for individual customers, having a team of professional credit staff enables the bank to minimize errors, accelerate the disbursement process, and consequently attract and build a loyal customer base Therefore, service quality is

an essential factor in customers' evaluation when selecting a bank for borrowing money

Hypothesis H2: Service quality has a positive (+) impact on the individual customers‟ choices of commercial banks to borrow from

3.2.3 Loan policy

According to Hieu & Thanh (2020), loan policy plays a significant role in influencing the choice of individual customers when considering a loan purchase at Agribank – Tan Phu Furthermore, the research conducted by Ho Pham Thanh Lan (2015) and Luong Trung Ngai (2019) revealed a positive correlation between loan procedures and the loan decisions made by individual customers Simplified loan procedures are found to encourage customers to pursue more loans Presently, numerous individuals perceive bank loans are complicated and time-consuming, leading to the belief that acquiring one is a challenging process Consequently, streamlining the loan procedure not only alleviates customer concerns but also enhances their willingness to borrow from the bank

Hypothesis H3: The loan policy has a positive (+) impact on the individual customers‟ choices of commercial banks to borrow

3.2.4 Bank Reputation and Brand

The bank selection criteria conducted by Almossawi (2001) revealed that a bank‟s reputation is a crucial factor in its decision-making process Almossawi (2001) and Haque, Osman, and Ismail (2009) further emphasized that young individuals prefer to engage with well-known and reputable banks Additionally, research conducted by Kennington et al (1996) and Yue and Tom (1995) demonstrated a positive correlation between a bank‟s brand name and the decision-making process of individual customers when selecting a bank for borrowing purposes As a trusted institution for asset deposits, capital sourcing, investment opportunities, and payment intermediation, a bank‟s reputation holds paramount

importance among customers in general and individual customers in particular when making their bank selections

Hypothesis H4: The bank brand has a positive (+) impact on the individual customers‟ choices of commercial banks to borrow

3.2.5 The Influence of Relatives and Friends

According to Mokhlis (2009), the influence of people and recommendations

is a significant factor in bank selection for both male and female customers Despite the preference of young individuals for independent decision-making, Almossawi (2001) highlights the relevance of recommendations from friends and relatives Ornella Ricci and Massimo Caratelli (2013) and Le Duc Huy (2015) further emphasize that the choices of customers, including friends, relatives, colleagues, and organizational acquaintances who have previously borrowed loans, are influenced by the recommendations of their peers When individuals who have utilized services from a credit institution recommend it and share their positive experiences with the customers, it directly impacts their decision-making process Therefore, when customers are referred to a bank by friends, relatives, colleagues,

or mass organizations, it facilitates their loan decision-making process at the bank

Hypothesis H5: The influence of relatives and friends has a positive (+) influence on the individual customers‟ choices of commercial banks to borrow

3.2.6 Convenience

According to Renman and Ahmed (2008), convenience is identified as a highly influential factor among various variables when it comes to customer choices The research conducted by Sharma and Rao (2010) on bank selection criteria among MBA students in India also concludes that convenience plays a significant role as a determinant Furthermore, studies by Chan Khanh Bao (2015),

Ho Pham Thanh Lan (2015), and Le Duc Huy (2015) demonstrate that the convenience factor of banks significantly impacts the decision-making process of individual customers seeking capital borrowing Customers prioritize banks with

branch offices and transaction facilities situated in easily accessible locations Besides, the convenience factor is also related to the availability of methods for tracking and repaying their loans Therefore, banks with an extensive network of conveniently located transaction offices as well as modern technologies not only offer convenience for customers but also establish a sense of prestige and trust in terms of the bank‟s market position and size

Hypothesis H6: Bank convenience has a positive effect (+) on individual customers‟ choices of commercial banks to borrow

3.2.7 Fees and Insurance

This is a novel factor that has been introduced by the author, incorporating it based on online information and their own practical experience, which had not been previously explored in earlier research In Vietnam, the prevalent occurrence of customers being forced to purchase insurance to get loan agreements has emerged

as a notable and concerning issue in recent years As a result, this factor holds immense importance and exerts a significant influence on the decision-making process of individual customers when selecting a bank for borrowing money Hence, it is crucial to include this factor in the research model

Hypothesis H7: Fees and insurance have a positive (+) impact on individual customers‟ choices of commercial banks to borrow

Thus, the expected regression model is as follows:

CC = β0 + β1IR + β2SQ + β3LP + β4RB + β5IRF + β6C + β7FI + ε

In which:

 CC: Individual customers‟ choices of commercial banks to borrow

 IR: Interest rate

 SQ: Service quality

 LP: Loan policy

 RB: Reputation and brand

 IRF: Influence of relatives and friends

 C: Convenience

 FI: Fees and insurance

Figure 3.2: Research hypothesis

H1 Interest rate has a positive impact on individual

customers‟ choices of commercial banks to borrow (+) H2 Service quality has a positive impact on individual

customers‟ choices of commercial banks to borrow (+) H3 The loan policy has a positive impact on individual

customers‟ choices of commercial banks to borrow (+) H4

The bank brand has a positive impact on the individual customers‟ choices of commercial banks

(+)

H6 Bank convenience has a positive effect on individual

customers‟ choices of commercial banks to borrow (+) H7

Fees and insurance have a positive impact on individual customers‟ choices of commercial banks

as stated in Chapter 1, the research followed the process as stated in figure 4.1

Specific steps in the research process:

Step 1: Established the research objective as the foundation for the information search and the direction of the topic

Step 2: Searched for information online and review relevant previous studies

Step 3: Based on the collected information, proposed a research model and research hypotheses

Step 4: Conducted a small-scale survey (surveyed 37 customers) using a preliminary questionnaire

Step 5: Analyzed the data collected from the preliminary survey to identify any shortcomings

Step 6: Made necessary adjustments and improvements to the questionnaire Step 7: Conducted a large-scale survey using the finalized questionnaire Step 8: Analyzed the data using SPSS software

Step 9: Interpreted the data analysis results, provided insights into the suitability of the model and the impact of independent variables on the dependent variable

Step 10: Summarized the achievements and provide recommendations based

on the results

(Source: Compiled by the author)

Figure 3.3: Research process 3.4 Research data

To achieved the study objective, a combination of secondary data and primary data was collected through qualitative and quantitative methods:

3.4.1 Secondary data

Secondary data is not directly obtained from primary sources through firsthand research but is instead obtained from existing sources such as published literature, government reports, databases, surveys, or other research studies Researchers analyze and interpret secondary data to gain insights, draw conclusions,

or support their research findings The use of secondary data can be cost-effective, time-saving, and provide a broader perspective by incorporating information from various sources and time periods However, when collecting secondary data, it is important to consider the quality, reliability, and relevance Additionally, secondary data is data that has been collected and processed in the past, so it often does not accurately reflect the current situation and therefore is usually only for reference purposes

In this thesis, the secondary data was collected by the author from scientific research articles both domestically and internationally, online news sources, and books Based on these data, the author proposed a research model and hypotheses

3.4.2 Primary data

Primary data refers to original data that is collected directly from the source for the purpose of a specific research project It is information that is gathered firsthand by the researcher or research team and has not been previously collected

or published by others Primary data is specific to the research objectives and questions and is collected through various research methods such as surveys, interviews, observations, experiments, or focus groups Primary data is considered

to be more accurate and reliable because it is collected directly from the intended population and reflects the current situation of the research subject It allows