Khóa luận tốt nghiệp Tài chính ngân hàng: Current situation and solutions for personal loans at Joint Stock Commercial bank for Investment and Development of Vietnam

VIETNAM NATIONAL UNIVERSITYUNIVERSITY OF ECONOMICS AND BUSINESS FINANCE AND BANKING CURRENT SITUATION AND SOLUTIONS FOR PERSONAL LOANS AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND D

Research aims nh ố ố ố

- Overview of theoretical and practical issues related to personal lending

- Analyzing the current situation of personal loans for individual customers at Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV

Facial assessment has been implemented at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), revealing certain limitations in lending to individual customers and the overall quality of loans provided.

The subject of the study is lending activities and loan quality at Joint Stock Commercial Bank for Investment and Development of Vietnam in the period from 2018

- What are the characteristics of personal lending?

- What are the criteria for evaluating the effectiveness of personal loans?

- What is the current situation of consumer loans of BIDV Joint Stock Commercial Bank for Investment and Development in the period of 2018 - 2022?

- What are the strengths and weaknesses of the Joint Stock Commercial Bank for Investment and Development of Vietnam in personal lending in the period of 2018 -

- What are the solutions proposed to improve the efficiency of personal loans at Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV in the coming time?

- Scope of space: At the personal banking room at Joint Stock Commercial Bank for Investment and Development of Vietnam

- Time range: Data and analysis data taken from the Joint Stock Commercial Bank for Investment and Development of Vietnam from 2018 to 2022 Research methodology

- Qualitative research methods: Reading, synthesizing, analyzing through textbooks, professional books, legal documents, relevant professional documents at the internship unit or the Internet.

To effectively analyze secondary data provided by the Bank, utilize Excel software for data processing Employ comparison and trend analysis methods to examine fluctuations related to the research problem over different periods This approach will help identify achievements as well as limitations, allowing for the development of targeted solutions for improvement.

This article aims to thoroughly analyze the personal lending activities at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), highlighting both the strengths and limitations of its current practices By identifying these key aspects, the article proposes actionable solutions to enhance the bank's lending operations, ultimately improving its overall performance in the personal lending sector.

The topic consists of 3 parts:

Chapter II Overview of research and theoretical basis of lending activities to individual customers at the Bank for Investment and Development of Vietnam

Chapter III Analyzing the current situation of lending to individual customers at Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV

Chapter IV Solution - Recommendations on the current situation of individual customers at the Joint Stock Commercial Bank for Investment and Development of Vietnam

CHAPTER II: OVERVIEW OF RESEARCH AND THEORETICAL BASIS

OF LENDING ACTIVITIES TO INDIVIDUAL CUSTOMERS AT THE JOINT

STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF

The study "Development of Personal Lending Services at Joint Stock Commercial Bank for Investment and Development of Vietnam Thanh Xuan Branch" by Nguyen Anh Dung (2018) provides a comparative analysis of individual customer lending activities at BIDV Thanh Xuan and other commercial banks in Hanoi By examining the bank's financial statements, the research quantifies criteria for evaluating personal lending activities Utilizing the Z-score Model, Qualitative Model, and Quantitative Credit Risk Model, the study highlights the strengths and weaknesses of BIDV Thanh Xuan's lending practices, emphasizing the need for improvements in lending standards to better serve specific customers.

The study "Analysis of Factors Affecting the Probability of Loan Repayment of Individual Customers at Ocean Commercial One Member Limited Liability Bank Can Tho Branch" by Dang Ngoc Xuan Tran (2022) aims to identify variables that impact loan repayment risk and provide strategies to mitigate this risk Key independent variables in the final Logit model include age, marital status, education level, occupation, loan purpose, collateral ratio, loan amount, loan term, and loan history The results indicate that occupation, loan purpose, collateral ratio, and loan history significantly affect the likelihood of loan repayment for individual customers Based on these findings, the author presents recommendations for customers of OceanBank Can Tho Branch to enhance their loan repayment prospects.

The study by Pham Vinh Quang investigates the key factors influencing individual customers' decisions when selecting a bank for borrowing in Soc Trang City It aims to identify and analyze the extent to which these factors impact customers' choices regarding loan providers at commercial banks.

This article presents strategies to enhance the efficiency of personal lending and attract customers to the Vietcombank Soc Trang branch Utilizing both qualitative and quantitative research methods, the study employs multivariate regression analysis based on an adjusted research model The findings reveal significant differences in bank choice for personal loans among various demographic factors, including gender, age, marital status, occupation, job rank, and income Consequently, the study proposes targeted solutions to advance personal lending activities informed by the survey results.

Shih et al (2014) conducted a study aimed at helping a commercial bank create a marketing model to predict customers' intentions to apply for personal loans within the used-customer market segment Utilizing data mining techniques such as logistic regression, decision trees, neural networks, and support vector machines, the research developed a comprehensive model The findings indicate that customers holding credit cards from other banks represent a significant opportunity for personal loan offerings.

The study by Chen et al (2017) titled "Rationality of the Personal Loan Interest-Rate Markups of Banks" develops a model to analyze rising interest rates on personal loans, focusing on banks' profit maximization capabilities By examining 804 personal loan cases from a Taiwanese bank, the research calculates the optimal interest rate limits for various risk segments, enabling banks to predict potential rate increases over time This model serves as a valuable guide for banks in determining appropriate interest rate adjustments for personal loans.

The study by Johan et al (2006) titled “Towards Official Balance Sheet Estimates for South Africa's Household Sector” examines balance sheet estimates and overall net worth within the household sector It emphasizes the data scarcity in emerging markets and developing nations, drawing lessons from South Africa's household balance sheet compilation The article assesses the reliability of data sources to improve balance sheet estimations and suggests areas for additional surveys or modifications in data collection methods Furthermore, it includes quarterly balance sheet metrics up to 2003, linking them to previously established figures.

12 in Aron and Muellbauer (2006) The findings demonstrate the practical application of personal loans at home and provide useful suggestions for enhancing a bank's personal loan program.

A study by Tiwari et al (2020) identifies key factors contributing to loan delinquency in personal loans, highlighting issues such as poor lender selection, insufficient follow-up, uneven competition among banks, inadequate project feasibility assessments, high interest rates, overfunding, and financial instability The research emphasizes that adhering to strict loan standards, conducting post-disbursement visits, offering lower interest rates, and ensuring accurate documentation can enhance loan performance Utilizing the SPSS model, the survey involved 79 bank loan recipients, revealing that the presence of investor-owned enterprises significantly influences loan repayment outcomes.

Kreiner et al (2020) investigate the intergenerational transmission of financial difficulties using comprehensive administrative data and longitudinal default information from Denmark Their non-parametric analysis reveals that individuals with bankrupt parents are four times more likely to default on loans compared to those without such backgrounds This pattern emerges prominently when children reach adulthood and begin borrowing, demonstrating remarkable consistency irrespective of parental income, the child's elementary academic performance, loan amounts, and duration The findings indicate that inherited financial behaviors significantly contribute to the disparities in financial challenges across generations.

This article presents a conceptual process model to address the shortcomings in personal lending at banks, specifically focusing on the characteristics and trends of credit use By examining the processual nature of credit utilization, the study aims to provide effective solutions to enhance lending practices in commercial banks, with a particular emphasis on the BIDV case.

2.2 Theoretical basis for lending to individual customers at joint-stock commercial banks

Credit is a fundamental economic concept that exists in various socio-economic forms Originating from the Latin term "Creditium," which translates to trust, credit involves relationships where one party borrows a certain amount of value—whether monetary or material—based on mutual trust This can also encompass intangible assets like reputation and credibility, which serve to ensure and guarantee the movement of value over a specified period.

Or to summarize, we can give the general concept as follows:

Credit represents an economic concept involving the temporary transfer of ownership rights to users, accompanied by a specific cost for a designated period.

2.2.2.1 The concept of bank credit

Research SCOpe 1 5ầ5

- Scope of space: At the personal banking room at Joint Stock Commercial Bank for Investment and Development of Vietnam

- Time range: Data and analysis data taken from the Joint Stock Commercial Bank for Investment and Development of Vietnam from 2018 to 2022 Research methodology

Research methodology 18

- Qualitative research methods: Reading, synthesizing, analyzing through textbooks, professional books, legal documents, relevant professional documents at the internship unit or the Internet.

To effectively process secondary data provided by the Bank, utilize Excel software for data analysis Employ comparison and trend analysis methods to examine fluctuations related to the research problem across different periods This approach will help identify achievements and limitations, allowing for the development of targeted solutions for improvement.

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This article aims to thoroughly assess the personal lending operations at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), highlighting both its strengths and limitations By identifying these key aspects, we can propose effective solutions to enhance the bank's lending activities and overall performance.

The topic consists of 3 parts:

OVERVIEW OF RESEARCH AND THEORETICAL BASIS OF LENDING ACTIVITIES

Research OVerViCW n

In the study "Development of Personal Lending Services at Joint Stock Commercial Bank for Investment and Development of Vietnam Thanh Xuan Branch" by Nguyen Anh Dung (2018), a comparative analysis of individual customer lending activities at commercial banks in Hanoi is conducted to provide an accurate assessment of the situation The research focuses on BIDV Thanh Xuan's personal lending activities by analyzing the bank's financial statements to quantify evaluation criteria Utilizing the Z-score Model, Qualitative Model, and Quantitative Credit Risk Model, the study highlights the advantages and disadvantages of BIDV Thanh Xuan's lending practices, emphasizing the need for improvement in lending standards for specific customers.

The study "Analysis of Factors Affecting the Probability of Loan Repayment of Individual Customers at Ocean Commercial One Member Limited Liability Bank Can Tho Branch" by Dang Ngoc Xuan Tran (2022) aims to identify variables that impact loan repayment risk and propose strategies to mitigate this risk Key independent variables analyzed include age, marital status, education level, occupation, loan purpose, collateral ratio, loan amount, loan term, and loan history, utilizing a Logit model The results indicate that factors such as occupation, loan purpose, collateral ratio, and loan history significantly affect the likelihood of loan repayment for individual customers Based on these findings, the author provides recommendations for customers of OceanBank Can Tho Branch to help lower their loan repayment risk.

This study by Pham Vinh Quang explores the factors that influence individual customers' decisions when selecting a bank for loans in Soc Trang City It aims to identify and analyze the key elements that impact these borrowing choices and the extent of their influence on customer behavior.

This article proposes solutions to enhance the efficiency of personal lending activities and attract customers to Vietcombank's Soc Trang branch Utilizing both qualitative and quantitative research methods, the study employs multivariate regression analysis based on an adjusted research model The findings reveal significant differences in bank choice for personal loans among various demographic groups, including gender, age, marital status, occupation, job rank, and income Consequently, the study presents targeted solutions to develop personal lending services informed by the survey results.

Shih et al (2014) conducted a study aimed at helping a commercial bank create a marketing model to assess customer intentions for personal loan applications within the used-customer market segment Utilizing data mining techniques such as logistic regression, decision trees, neural networks, and support vector machines, the research developed an effective model The findings indicate that customers holding credit cards from other banks represent a significant potential market for personal loans.

The study by Chen et al (2017) titled "Rationality of the Personal Loan Interest-Rate Markups of Banks" aims to develop a model for understanding rising interest rates on personal loans while evaluating banks' profit maximization strategies By analyzing 804 personal loan cases from a Taiwanese bank, the research calculated the optimal interest rate limits for various risk segments, allowing banks to predict potential rate increases over time This model serves as a valuable guide for banks in determining appropriate interest rate adjustments for personal loans.

In the study by Johan et al (2006), titled “Towards Official Balance Sheet Estimates for South Africa's Household Sector,” the authors discuss balance sheet estimates for the household sector and overall net worth The research emphasizes the scarcity of data in emerging markets and developing countries, drawing lessons from South Africa's household balance sheet compilation To improve the accuracy of these estimations, the article assesses the reliability of data sources and suggests areas for additional surveys or modifications in data collection methods Furthermore, the study includes quarterly balance sheet metrics up to 2003, linking them to previously established figures.

12 in Aron and Muellbauer (2006) The findings demonstrate the practical application of personal loans at home and provide useful suggestions for enhancing a bank's personal loan program.

According to Tiwari et al (2020), the primary factors contributing to loan delinquency in personal loans include poor lender selection, insufficient follow-up, unequal competition among banks, inadequate project feasibility assessments, high interest rates, overfunding, poor financial conditions, and significant asymmetries The study suggests that adhering strictly to loan standards, conducting post-disbursement visits, offering lower interest rates, and ensuring thorough documentation prior to disbursement can significantly enhance loan performance Utilizing the SPSS model, the survey targeted 79 individuals who had taken out bank loans, revealing that the presence of investor-owned enterprises affects loan repayment outcomes.

A study by Kreiner et al (2020) titled “Financial Trouble Across Generations: Evidence from the Universe of Personal Loans in Denmark” investigates the roots of financial difficulties by analyzing comprehensive administrative data and longitudinal default information for the entire Danish population The research indicates that individuals with bankrupt parents are four times more likely to default on loans than those without such backgrounds This intergenerational pattern becomes evident when children reach adulthood and gain the legal ability to borrow money, remaining consistent across various factors including parental income, a child's academic performance in elementary school, loan amounts, and duration The findings suggest that inherited financial behaviors significantly contribute to the disparities in financial challenges faced by different generations.

This article addresses the limitations of existing studies on credit use by introducing a conceptual process model that emphasizes its dynamic characteristics By analyzing current trends, it aims to enhance understanding of personal lending issues at banks, specifically focusing on the BIDV case, and proposes effective solutions to improve lending practices in commercial banks.

Theoretical basis for lending to individual customers at joint-stock commercial banks

2.2.1 Credits Credit is an economic category, born and existing in many socio-economic forms. The word "Credit" is derived from the Latin word Creditium which means trust, trust, based on trust, that will carry out relationships that borrow an amount of value manifested in monetary or material form for a certain period of time, even intangible values such as reputation, credibility to ensure and guarantee the movement of a certain amount of value.

Or to summarize, we can give the general concept as follows:

Credit is a financial concept that represents the temporary transfer of ownership rights to users for a specified duration and cost.

2.2.2.1 The concept of bank credit

Bank credit refers to the financial relationship between banks or credit institutions and borrowers, which can be individuals or businesses In this arrangement, the bank provides assets to the borrower for a specified period, and upon maturity, the borrower is obligated to repay both the principal amount and the accrued interest to the lending institution.

Bank credit contains three contents:

- There is a transfer of the right to use capital from the owner to the user;

- This transfer is temporary or permanent;

- This transfer comes at a cost.

In the economy, banks act as financial institutions, so in credit relationships with businesses or individuals, banks are both borrowers and lenders.

Banks play a dual role in the financial system by accepting deposits from individuals and businesses, as well as issuing certificates of deposit and bonds to raise capital As lenders, they provide credit to borrowers, facilitating access to funds for various needs.

In general, bank credit has a number of outstanding advantages such as:

Monetary lending is a widely utilized form of bank credit, offering flexibility that caters to the diverse needs of various economic participants As a result, it encompasses a broad range of activities within the financial landscape.

- Lending mainly with borrowed capital of sectors of society rather than capital wholly owned by an individual or organization such as commercial credit.

- Almost maximum satisfaction of capital in the economy because it can be raised with idle money in society.

- Loan terms are abundant, be it short-term, medium-term or long-term.

- First, concentrate and redistribute monetary capital on a return basis.

- Second, save cash and circulation costs for society

- Third, reflect and control economic activities

2.2.2.4 The role of bank credit

- First, bank credit provides capital for the economy and contributes to the development of production and circulation of goods.

- Second, credit contributes to monetary stability and price stability.

- Third, bank credit contributes to stabilizing life, creating jobs and stabilizing social order

2.2.2.5 Forms of credit granting 2.2.2.5.1 Based on the purpose of the credit

Real estate loans are specialized financing options designed for acquiring and constructing various types of properties, including residential homes, commercial buildings, factories, and land across industrial and service sectors.

- Industrial and commercial loans are short-term loans that help the industrial, commercial, and service sectors with operating capital.

- An agricultural loan is a form of loan used to pay for expenses associated with agricultural production, such as labor, fuel, animal feed, pesticides, plant types, and fertilizers.

- Lending to financial institutions, such as banks, financial firms, firms that lease financial assets, firms that provide insurance, credit funds, and other firms.

- Personal loans are varieties of personal loans that call for credit card issuance in order to provide loans to satisfy consumer needs or pay for typical living expenses.

- Finance and operation leasing are both types of financial leasing Real estate and mobile property, primarily machinery and equipment, are examples of rental assets.

A short-term loan is defined as a loan with a repayment period of less than one year This type of financing is commonly utilized to invest in liquid assets for businesses and to address the immediate financial needs of consumers.

A medium-term loan typically spans one to five years and is utilized for financing fixed asset purchases, new technology investments, business expansion, and the construction of small structures, all with a relatively short repayment period.

A long-term loan is defined as a financing option with a repayment period exceeding five years, often extending to twenty, thirty, or even forty years These loans are commonly utilized for significant projects such as large-scale production expansion, capital renovations, and investments in fixed assets, while also providing a portion of capital for operational expenses.

2.2.2.5.3 Based on the creditworthiness of the customer

- A long-term loan is a form of loan with a period longer than five years and a maximum term of up to twenty, thirty, or even forty years.

These loans are primarily utilized to support significant production expansion, fund capital renovations, and invest in the development of fixed assets, while also covering a small portion of operational capital needs.

2.2.2.5.4 Based on the loan method

A one-time loan, also known as an itemized loan, is a specific type of credit offered by commercial banks Clients are required to submit a set of loan documents for a fixed duration, during which both the client and the bank agree upon a predetermined credit limit.

Lending under credit limit, commonly referred to as a revolving loan, is a financial product offered by commercial banks that allows clients to borrow money for a predetermined period by submitting minimal documentation This type of credit arrangement is ideal for short-term borrowers who need ongoing access to funds and maintain a stable business relationship with the bank.

Overdraft lending allows banks to extend credit to customers by permitting them to withdraw more than their current account balance, effectively meeting their immediate financial needs.

2.2.2.5.5 Based on loan repayment method

Loans with a single repayment schedule require borrowers to repay the full amount at the specified time outlined in the credit agreement The contract also details the interest rate, which can be paid on a monthly, quarterly, or annual basis.

- Multiple loan repayment but no set debt term, so borrowers may repay the loan whenever they are able to, based on their financial capacity.

Installment loans involve periodic repayments, which can be either equal or varying based on the terms of the agreement These loans operate on the principle of installment payments throughout the duration of the contract.

Lending to Individual CuSfOIN€TS -.- Ác HT TH HT TT Tu HT TH ng 17

2.3.1 The concept of lending to individual customers Pursuant to Clause 16, Article 4, Law on Credit Institutions No 47/2010/QH12, Loan is a form of credit whereby the lender assigns or undertakes to deliver to the customer an amount of money to be used for a specified purpose within a certain period of time as agreed upon on the principle of repayment of both principal and interest.

2.2.3 Features of individual customer loans The first is that the size of loans is usually small, but the number of loans is large loan purposes of individual customers are mainly as follows:

Many businesses seek additional capital to support their production and operational activities, which are often not on a large scale Typically, customers approach banks when they have a specific amount of capital, leading them to request only a modest amount to cover shortfalls.

Personal loans cater to daily consumption needs, enabling individuals to cover living expenses such as purchasing a home, car, or household items, as well as funding home construction, repairs, and education abroad These loans, though typically smaller, address a diverse range of credit needs across various income levels, from high-income to low-income individuals.

Personal customer credit is costly

The diverse characteristics of individual customers lead to significant costs in expanding networks, advertising, and marketing to improve access to science and technology resources across various regions Additionally, developing a skilled workforce to ensure prompt and accurate service—from document reception to lending decisions and debt collection—incurs further expenses, including management costs and operational overheads Consequently, the interest rates for science and technology credit are typically higher than those for corporate clients Furthermore, due to the often incomplete and challenging nature of obtaining information about an individual's identity, background, and financial status, banks invest heavily in the loan appraisal and approval processes for personal loans.

The third is that individual customer credit is riskier than corporate customers

Personal loans carry inherent risks, particularly related to the borrower's circumstances Factors such as sudden illness, accidents, unemployment, or family tragedies can quickly alter an individual's or household's financial stability, making it crucial for borrowers to assess their situation before taking on debt.

The quality of financial information of borrowers is usually not high

When evaluating loan applications, banks consider various factors, including the legitimacy of capital requirements, the borrower’s ability to repay debt, and the value of fixed assets For institutional clients, gathering customer information is relatively straightforward due to the abundance of publicly accessible resources, such as financial statements, social insurance data, and tax records.

18 payment situation, reputation of relations with partners In contrast, for individual customers, the hit

Determining personal price, repayment sources, and loan purposes can be challenging, often resulting in incomplete and unclear information This lack of clarity increases the risk of asymmetric information, which can lead to inaccurate customer assessments during the appraisal process.

Personal Client Loan has unlimited liability on the loan amount

Corporate customers, excluding private enterprises, are protected during unexpected events like bankruptcy or dissolution, as their liability is limited to their registered charter capital This limitation can result in banks facing challenges in debt recovery if the business's capital is insufficient In contrast, individual customers bear full responsibility for their debts to creditors, including banks, in such situations.

2.2.4 Forms of lending to individual customers

A short-term loan is defined as a loan with a duration of less than one year, often utilized to finance investments in liquid assets for businesses and to address consumers' urgent financial needs.

A medium-term loan is a financing option with a repayment period ranging from one to five years, ideal for acquiring fixed assets, investing in new technology, expanding operations, and constructing small buildings with a short payback period.

A long-term loan is a type of financing that spans over five years, with terms that can extend up to twenty, thirty, or even forty years These loans are primarily utilized for significant purposes such as expanding production capabilities, undertaking major renovations, and investing in fixed capital development, along with a smaller allocation for operational capital needs.

2.2.3.2 Forms of lending according to the purpose of using capital

- Purpose-based lending is a form of loan used to cover gaps in customer production and business operations Borrowers are people or households operating a small-scale, home-based company.

Consumer loans offer financial assistance for everyday expenses and essential purchases for families They primarily cater to individuals with modest yet stable incomes, resulting in a significant number of borrowers seeking support.

2.2.5 Individual customer lending operations role

The bank effectively meets the increasing demands of its customers by providing personal lending options for various needs such as vehicle purchases, construction projects, home repairs, and international education This allows customers to manage their daily living expenses while accessing a range of financial services In addition to consumer loans, the bank offers products for manufacturing, commercial financing, investment, and development, empowering individuals to enhance their income and quality of life As a result of competitive pressures and economic growth, the bank's loan offerings have become more diverse, featuring various terms, interest rates, and repayment options, enabling customers to find the ideal loan product for their needs.

Lending to individual customers enables banks to innovate new services and diversify their lending products This strategy not only enhances business diversification but also strengthens the bank's competitive edge against rivals, ultimately increasing income and distributing risks across its commercial operations.

Individual customer lending boosts aggregate demand, expands the production footprint, encourages economic growth and development, generates employment, lowers unemployment, promotes people's standards of living, and stabilizes social order.

2.2.6 Some indicators of loan efficiency evaluation Loan turnover: is an indicator reflecting the amounts that banks lend to customers, regardless of whether credits have been collected or not.

Debt collection turnover: An indicator reflecting the principal collections that the bank has collected from its loans, including loans of this year or the previous year.

Loan balance: is the entire amount that the bank has lent but has not yet collected the debt, the outstanding balance is determined at a time.

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

3.1.1 Basic information ¢ Name of issuer: Joint Stock Commercial Bank for Investment and Development of Vietnam. se International transaction name: JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM. e Abbreviated name: BIDV e Charter capital: VND 34,187,153,340,000. ¢ Head office: BIDV Tower, 35 Hang Tre, Hoan Kiem District, Hanoi. e Phone: 04.2220.5544 ôLogo se Website: www.bidv.com.vn s Email: Info@bidv.com.vn

BIDV has received significant recognition from esteemed domestic and international organizations, including an upgrade in its issuer and deposit ratings from Ba3 to Ba2 by Moody's, with the outlook revised from Positive to Stable Additionally, BIDV has been honored with several prestigious awards, such as being named one of the Top 10 Commercial Banks in Vietnam for 2022 by Vietnam Report, included in Forbes Vietnam's Top 50 Best Listed Companies, and recognized as the "Best Retail Bank in Vietnam 2022" as well as the "Best Supervisory Depository Bank."

Vietnam 2022" (The Asian Banker); "Best Corporate Bank in Southeast Asia 2022" and

BIDV has been recognized as the "Best SME Bank in Southeast Asia 2022" by Global Banking and Finance, and has also earned accolades for having the "Best Supply Chain Finance Product in Vietnam" and the "Most Innovative Digital Banking Application in Vietnam in 2022" with its iBank app Additionally, it leads in payment acceptance sales and foreign online spending sales, according to MasterCard The bank received the Sao Khue Award 2022 for six products utilizing Information Technology from VINASA, and notably, it is the first and only bank to be honored as the "Most Innovative Risk Management Bank in Vietnam 2022" by International Business Magazine (IBM).

3.1.2 History of establishment and development of BIDV Investment and Development Joint Stock Commercial Bank

Established on April 26, 1957, Vietnam Construction Bank, now known as the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), holds the distinction of being the oldest bank in Vietnam's credit institution system BIDV's journey of construction and development has been marked by challenges and milestones that reflect the historical periods of national protection and the growth of the Vietnamese nation.

In history, the Joint Stock Commercial Bank for Investment and Development of Vietnam has changed its name 4 times in accordance with each period of national construction and development

- 1981 - 1990: Bank for Investment and Construction of Vietnam

- 1990 - 2012: Bank for Investment and Development of Vietnam

- 2012 - present: Joint Stock Commercial Bank for Investment and Development of Vietnam

3.1.3 Business areas BIDV Bank participates in investment and development in various fields including financial investment, banking, insurance, securities After nearly 65 years of establishment and development, BIDV has achieved many successes, providing quality products and services worthy of the leading bank in Vietnam.

Financial investment is considered the most prominent field of BIDV, creating BIDV's brand name in the investment market in Vietnam.

BIDV has played a pivotal role in the establishment of numerous enterprises through capital contributions, significantly investing in key national projects Notable collaborations include the Highway Development Company (BEDC), the Air Leasing Joint Stock Company (VALC), and Long International Airport, showcasing BIDV's leadership in driving essential infrastructure initiatives.

BIDV always strives to be creative and innovative in order to bring new products and services with many features and utilities, meeting the needs of customers such as:

- Card service: Issuing a variety of cards including international debit cards, international credit cards, domestic debit cards

- Loan products: Housing loan, study abroad loan, car loan, house construction, mortgage loan, production and business loan, mortgage loan

- Deposit products: Payment deposits, time deposits, demand deposits, securities trading deposits and special-use deposits.

- Foreign exchange and capital market: providing services for buying and selling foreign currency, structured products

- Treasury: Asset preservation services, exchange of unqualified money for circulation, exchange of gold bar packaging, seizure of money in sealed bags, collection/expenditure of mobile cash

- Online banking: mobile banking, BIDV online, ATM service.

- Payment and transfer: Support domestic and international money transfers, payment services, card payment acceptance services for individual business households.

BIDV provides 2 main insurance products suitable to the needs and conditions of each customer, specifically:

- Life insurance cooperated by BIDV with MetLife supports customers in saving finance, protecting and building future plans, including: American Safe Home Insurance,

American Safety Insurance, Personal Accident Insurance, Critical Illness Insurance, etc Death Insurance and Extended Death Insurance, Happy Gifts

BIDV collaborates with BIC to offer a range of non-life insurance products, including BIC Binh An and BIC Home Care This partnership aims to enhance asset protection and safeguard the well-being of customers, ensuring comprehensive coverage for their needs.

In order to promptly meet all financial needs of customers, BIDV provides a wide range of securities products/services including:

- Securities brokerage services are cooperated by BIDV with BSC to provide services such as securities investment consultancy, portfolio structure consultancy, :

- Securities services: Customer transaction services, Bond payment services, Financial services, Depository registration services.

- Stock trading includes: Home Trader, Web Trader, Mobile Trader, Bloomberg and phone trading

- Trading derivatives is cooperated by BIDV with BSC, providing the opportunity to use and experience high-level products with affordable trading fees.

BIDV remains a top choice for both domestic and international customers in Vietnam's financial and banking market, offering nearly 65 diverse activities The bank's significant scale and total assets underscore its status as a leading and reputable financial institution in the country.

- In terms of scale, BIDV ranks 4th among Vietnamese banks- In terms of asset value, BIDV owns a huge asset second only to AgriBank.

- Always at the top in terms of revenue and number of annual transactions, contributing significantly to the national economy.

In addition, BIDV has also won many prestigious titles and awards from prestigious domestic and foreign organizations:

- The 7th "Best Retail Bank in Vietnam" award by The Asian Banker magazine-

"Outstanding Retail Bank" Award 5 times in a row from 2016 to 2020

- Award "Typical Digital Transformation Bank" for 2 consecutive years voted by VNBA and IDG.

- "The most innovative e-bank in Vietnam" in 2021 for BIDV iBank application was awarded by The Global Banking & Finance magazine;

- "Best SME Bank in Vietnam" for 4 consecutive years, awarded by 2 prestigious international magazines: Asian Banking and Finance and Alpha Southeast Asia.

BIDV brings the best benefits and utilities to customers, shareholders, employees and the social community.

As the leading financial institution in Southeast Asia, with the best digital platform in Vietnam, striving to be in the group of 100 largest banks in Asia.

As the leading financial institution in Southeast Asia, with the best digital platform in Vietnam, striving to be in the group of 100 largest banks in Asia.

3.2 Business results in recent years

In 2021, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) operated safely and effectively, exceeding its goals while preserving state capital and fulfilling obligations to the state budget, all amidst the challenges posed by the Covid-19 pandemic This success was driven by the dedication and unity of BIDV staff Demonstrating its commitment as a leading state-owned commercial bank, BIDV provided significant support to customers affected by the pandemic, reducing income by VND 7.900 billion The bank implemented measures such as restructuring debt repayment terms, exempting and reducing interest rates and transaction fees through e-banking, and actively pursuing solutions to help customers navigate the difficulties caused by the pandemic.

ST. billion, maintaining its position as the joint stock commercial bank in Vietnam with the largest asset scale With the percentage of profitable assets to total assets reaching

Table 3.1 Business results of BIDV in the period of 2018 - 2022

Target Total assets Source of capital mobilization Outstanding credit and investment balance

Earnings before interest and taxes

Total assets increased 13.5% between 2018 and 2019, reaching VND 1.490,105

The asset structure has improved significantly, reaching 97.6%, a 0.8% increase since 2018 The commercial banking system remains dominant in outstanding loans and capital mobilization, demonstrating a healthy growth rate Outstanding loans to the economy are expanding in alignment with the State Bank of Vietnam's (SBV) strategic focus on directing capital flows towards business and production, thereby supporting national economic development The total credit and investment balance has reached VND 1,325,667 billion, with the credit balance at VND 1,134,430 billion, reflecting a robust increase of 12.2%.

The joint stock representing 13.8% of the industry's credit market share Investment activities are concentrated on goods with high rates of profitability while ensuring operational safety.

In 2019, the total capital mobilized surged by 12.1% to reach VND 1,374,758 billion, up from VND 1,187,162 billion in 2018 Customer deposits represented 12.8% of the overall market share, effectively meeting capital demands Despite fierce competition among commercial banks, BIDV maintained its leadership in capital mobilization, thereby strengthening its brand reputation and consumer trust.

In alignment with the restructuring project and BIDV's development strategy, the operational structure has positively evolved, with the retail sector experiencing rapid growth and maintaining its leading market position Retail capital mobilization rose by 9.7%, contributing to 53.7% of total capital mobilization, while retail outstanding loans surged by 21.5% from 2018 to December 31, 2019, making up 34.1% of total outstanding loans Notably, retail banking accounted for 42% of the overall net income generated by the system.

As of 2021, BIDV reported a total credit and investment balance of VND 1,667,310 billion, reflecting a 16.6% increase from 2020 Individual credit outstanding reached VND 1,333,232 billion, marking an 11.77% rise, while the consolidated credit balance rose to VND 1,368,029 billion, up 11.2% since the beginning of the year This performance surpassed the 2020 implementation level of 8.5%, accounting for over 13% of the total credit balance Additionally, the market valuation for 2021 was VND 187.2 trillion (approximately USD 8.14 billion), positioning the Vietnamese stock market in sixth place globally.

In 2021, BIDV raised VND 20,958 billion through bond issuance to enhance its capital The bank strategically shifted its lending focus towards retail credit and small to medium-sized enterprises, while gradually decreasing reliance on large corporate clients This strategic approach resulted in a notable 25% increase in retail credit outstanding during the year.

By the end of 2022, BIDV's total assets exceeded VND 2.12 million, marking a 20.4% increase from the beginning of the year Customer loans rose by 12.4% to over VND 1,522 million billion, while customer deposits reached nearly VND 1.474 million billion, up 6.8% Additionally, SME and FDI credit balances saw significant growth, increasing by 15% and 21%, respectively, compared to 2020 However, the bank also experienced a more than 30% rise in non-performing loans.

17,622 billion; thereby dragging the ratio of bad loans to outstanding loans increased from 1% at the beginning of the year to 1.16%.

Personal loan products at Bank for Investment and Development of Vietnam BIDV

Table 3.2 Business results of BIDV in the period of 2018 - 2022

- Competitive interest rates according to preferential credit packages from time to time- Maximum loan term up to 30 years

- Loan up to 100% of the value of the contract of sale/assignment/loan plan- Flexible principal and interest payment

(monthly/quarterly/semi- annual or annual)

- Special interest rate reduction when applying for loans via BIDV Home application and/or using other existing products of BIDV

- Competitive interest rates according to preferential credit packages from time to time

- Maximum loan term up to 84

- Loan application form loan repayment plan according to BIDV's form.

- Customer ID card, household registration book/temporary residence book.

- Marriage certificate or certificate of singleness.

- Documents proving the source of income to repay debts such as payroll, employment contract, salary statement

- Documents related to houses and residential land to be purchased, built or repaired: red book, house purchase contract

- Documents related to collateral: house to buy, car, passbook

- Loan application form loan repayment plan according to BIDV's form.

- Customer ID card, household registration book/temporary

Types of student loans months

- Loan amount up to 100% of the value of the purchased car

- Incentives for related fees according to programs in each period

- Competitive interest rate according to preferential credit packages from time to time

- Maximum loan term up to 10 years

- High loan amount up to 100% of the total cost of studying abroad

- Securing the loan with the borrower's or a third party's assets residence book.

- Marriage certificate or certificate of singleness.

- Documents proving the source of income for debt repayment: payroll, salary statement

- Documents related to the car to be purchased (invoices, receipts, car sales contracts, etc.)

- Documents related to collateral: cars, houses,

- Loan application form (according to BIDV form).

- ID card/Passport/Permanent residence/temporary residence of international students and their relatives (in case the borrower is an international student's relative).

- Documents proving the purpose of the loan such as: referral letters, promotional materials about courses

- Documents proving debt repayment sources such as pension book, payroll

- Documents related to collateral: red book, vehicle papers

- The maximum loan term is up to 84 months for item

- Loan application form loan repayment plan according to production and business loans, 12 months for credit limit/overdraft loans

- Loan amount up to 100% of the total capital demand of production and business plans/projects

- Competitive interest rates according to BIDV's preferential credit packages from time to time

- ID card of the customer (still valid), permanent residence/KT3.

- Business registration certificate in accordance with the provisions of law.

To ensure the ability to repay bank debts, it is essential to present documents that demonstrate a viable production and business plan Key documents include a statement of profitable business results, a balance sheet, and notes to financial statements, which collectively provide evidence of financial stability and operational effectiveness.

- Documents related to collateral such as factories, machinery, goods

Types of consumer loans with collateral

- Competitive interest rates according to preferential credit packages from time to time

- Maximum loan term up to

120 months with loan / 12 months with overdraft

- Loan level up to 100% of collateral valuation value after multiplying the coefficient according to the Bank's regulations (maximum VND

03 billion/customer, of which the maximum overdraft limit is VND 01 billion/customer)

- Loan application form cum loan repayment plan according to BIDV's form.

- Customer's ID card, household registration book/temporary residence book.

- Marriage certificate or certificate of singleness.

- Documents proving the source of income to repay the debt such as payroll, pay slips

- Documents related to spending to serve the needs of life and consumption: tours, contracts to buy motorbikes,

- Documents related to secured assets such as cars,

- Competitive interest rates according to preferential - Request for loan (under BIDV credit packages from time to form) Types of time - ID card/Passport/ and consumer

1 - Maximum loan term is up to Permanent/temporary oans

84 months (loan by item) and household registration without

12 months (overdraft loan) - Documents proving the source collateral

- There is no need of collateral | of income (labor contract,

- Flexible lending method (per | payroll, statement item /overdraft)

- Competitive interest rates - Loan application form cum according to preferential credit contract according to credit packages from time to BIDV's form. time (Contact for more - ID of the customer.

Types of details) - Documents related to loan mortgage

1 - Maximum loan amount is purposes such as car loans, oan

100% of total loan demand weddings, travel,

- Diverse lending methods - Documents related to

- Simple procedure, fast collateral assets such as processing time savings /deposit books

- Loan amount: VND or USD

Customers have a VND current Types of required if it meets BIDV's account at BIDV, meeting the

Overdraft criteria. criteria of financial situation Loan - Loan object: Working capital expenses for production and business and payment reputation.

Source: Source: Author's own compilation

3.4 Personal business process STEP 1: Make a credit profile

Implementing unit: Customer Management Department

- Marketing customers, receiving demand for BIDV's products and services from customers;

- Guide customers to provide and make credit dossiers according to regulations (make a dossier receipt form when receiving credit dossiers from customers).

Customers must ensure that all dossiers and documents submitted are original or certified by the appropriate authorities Certain documents may be copied, provided that the customer manager has verified and compared them with the originals.

+) The credit profile provided by the customer includes:

(i) A credit application form according to BIDV's form enclosed with a declaration form of relevant person information (01 original);

+) ID card or passport number

+) Certificate of business registration of the customer

+) Local authority confirmation of local signatures and permanent residence/temporary residence for borrowers

+) Marriage certificate/certificate of singleness

(i) Records of the client's financial position:

+) Production and business plan for the period-

+) Contracts for sale and purchase of supplies, goods and products

(iv) Dossiers of projects and credit plans:

- For short-term credit grants:

+) Production and business plan; Loan plan;

+) The customer's application for credit;

+) In case the browser grants credit by item to perform each specific contract: The signed economic contract must be provided.

- For medium-long-term credit grade:

+) The project, loan plan or investment report if the project only needs to prepare an investment report;

+) Basic design and total estimate.

(v) Loan security documents/guarantee obligations

STEP 2: Credit analysis, appraisal, preparation of credit proposal report

The Customer Management Department conducts actual surveys of production and business activities of customers, collects relevant information to serve the purpose, evaluates and analyzes credit.

Based on the provided customer dossier and the information collected during customer appraisal, the Customer Management Department prepares a credit proposal report and analyzes and evaluates the following basic contents:

The evaluation process involves a thorough assessment of the client's historical activities, legal status, and organizational structure This includes analyzing their production and business performance, as well as examining future prospects Additionally, it is essential to understand the client's relationship with the bank to inform strategic decisions.

- About the financial situation of customers:

The Customer Management Department conducts thorough analyses of customers' financial situations by evaluating their production and business activities, while also directly gathering information on-site at customer locations.

- Customer credit scoring to apply credit granting policy

Follow the Guidelines of the Internal Credit Rating System to apply credit granting policies to corporate customers; Look up information from the Credit Information Center to evaluate customers.

The analysis and evaluation of production and business plans, along with investment projects, are crucial for assessing clients' capacity to implement these plans effectively Understanding customers' borrowing abilities allows for the determination of the most suitable credit granting methods, including working or short-term loans based on specific items or limits, as well as guarantees Additionally, in cases where clients seek project investment capital, applying for a project investment loan guarantee is essential for securing the necessary funding.

- Assessment of secured assets according to current regulations on secured transactions of BIDV.

Evaluating the credit relationships of customers at BIDV and other financial institutions is essential This includes analyzing the credit situations of related individuals and assessing the credit connections within relevant customer groups, if applicable.

- Comprehensive risk assessment and preventive measures, including: e Objective risks e Risks stemming from customers' subjectivity. e Risks arising from BIDV. e@ Measures to prevent risks of customers. e Risk prevention measures of banks.

- Conclusion and credit proposal: The proposer must clearly state the contents of the credit grant proposal and grant approval authority according to regulations.

Although in BIDV's regulations, it is noted:

When granting credit fully secured by passbooks, valuable papers, or deposits, the Credit Proposal Report should succinctly evaluate several key areas: a general assessment of the customer, an analysis of their financial situation, a risk assessment with preventive measures, and an overview of production and business plans.

A In the process of approving credit decisions

Case 1: For a credit that exceeds the decision authority of the branch

The credit approval officer prepares a credit proposal report, which is first reviewed by the Deputy Director of Personal Account Management for feedback After incorporating any comments, the report is submitted to the Branch Director for signature, allowing the credit proposal letter to be forwarded to the head office's Risk Management Board.

- If the approving authority does not agree to the credit proposal, the Customer Management Department shall notify the refusal to grant credit to the customer.

- If the authority is granted (here is the headquarters), the following paragraphs will be made:

Case 2: For credit in the jurisdiction and not through the Risk Management department

Credit proposal report submitted to credit approval level

- If the approving authority does not agree to the credit proposal, the Customer Management Department shall notify the refusal to grant credit to the customer.

- If authority is granted, the following paragraphs will be made:

Case 3: For credit in jurisdiction and required to go through the Risk Management department

At this point, the implementation department will be the Risk Management department:

- Receiving dossiers and making risk appraisal reports: e Receive credit proposal dossiers from the Customer Management

In cases where a department or branch exceeds its competencies, or when regulated by another proposing unit, it is essential to gather additional information based on the credit dossier This may involve requesting supplementary documents from the credit applicant, conducting a thorough risk assessment, and preparing a comprehensive risk appraisal report Finally, the completed risk appraisal report, along with the full credit dossier, should be submitted to the appropriate authority for approval.

- Approving the risk appraisal report: e The competent authority approving risks shall consider credit dossiers and risk appraisal reports and approve them on risk appraisal reports.

37 e After granting approval on the risk appraisal report, the Risk Management

The Division is responsible for submitting the credit grant request to the competent authority for approval, which includes the approved risk appraisal report and the complete credit dossier The submission to the Board of Directors, Risk Management Committee, or Central Credit Council must consist of the Approved Credit Proposal Report or Letter, the agreed-upon risk appraisal report, and any other relevant documents required for credit approval In cases where there is a discrepancy between the risk approval and the credit proposal approval, the competent authorities must communicate directly to resolve the issues If an agreement cannot be reached on significant matters such as the amount, duration of the credit grant, or collateral, the risk approval authority must escalate the matter to the higher competent authority for further consideration and decision-making.

The Deputy Director of Risk Management shall report to the Branch Director for consideration and decision.

The leader of the Credit Risk Management Board shall report to the Deputy General Director of Risk Management for consideration and decision.

The Deputy General Director of Risk Management shall report to the General Director for consideration and decision.

Once a final decision can be made, the next step will be:

- The Risk Management Department will have to draft credit approval documents in accordance with BIDV's regulations on credit approval decisions

- Customer Management Department negotiates and announces credit grant with customers:

In case of refusal to grant credit:

To refuse a credit application, prepare a formal written notice and submit it for approval to the appropriate authority before sending it to the customer The Customer Management Department is responsible for maintaining credit refusal records in accordance with established regulations.

In case of agreement to grant credit:

If a customer disagrees with BIDV's credit conditions, the Customer Management Department will evaluate the potential benefits to the bank and the acceptable risk levels associated with the credit relationship Based on this assessment, they may propose amendments to the credit terms for approval by the relevant authorities or issue a notice of refusal to the customer regarding the credit application.

- If the customer agrees with the credit conditions approved by the competent authority, he will draft the contract:

The Customer Management Department is responsible for drafting credit, guarantee, and security contracts using BIDV's templates, along with other necessary credit documents based on approved credit terms It is essential to review these contracts to ensure compliance with credit approvals and legal regulations, especially when engaging legal consultants for high-value contracts Additionally, the department may seek support and advice from the Legal Department regarding the formulation of contracts, adhering to BIDV's legal consultancy guidelines as needed.

The signing of contracts at BIDV must be executed by authorized representatives from both BIDV and the customer, adhering to the applicable laws and internal regulations This includes compliance with BIDV's specific guidelines for credit granting activities and the regulations governing guarantee contracts during each relevant period.

The BIDV representative responsible for signing the contract must thoroughly review its contents to ensure alignment with the credit approval details, adherence to BIDV's contractual regulations, and compliance with legal requirements.

- Complete credit conditions before disbursementImplementing unit: Customer Management Department

Negotiate with customers to complete credit grant conditions before disbursement/issuance of guarantees according to approved contents.

Carry out secured transaction procedures according to BIDV's regulations and secured transaction procedures in each period.

- Save records, enter information into SIBS System:

Implementing unit: Focal Credit Management Department, Customer Management Department, Risk Management Department, Coordinated Treasury

Handing over and keeping dossiers:

After the Contracts are signed, the Customer Management Department returns 01 original copy of the Contract to the customer and hands over the credit profile to the Credit Management Department.

The Credit Risk Management Board shall hand over to the Archives the credit center for the credit submitted to the Head Office according to regulations.

The Customer Management Department shall hand over the collateral dossier to the Treasury and Management Department in accordance with BIDV's secured transaction regulations from time to time.

Enter information into SIBS system according to the Regulations on using loan module.

Current situation of lending to individual customers at the Bank for Investment and

3.5.1 Sales situation of loans to individual customers Loan turnover is the total amount of money that the bank has actually disbursed over a period Loan sales reflect the results of the development and expansion of lending activities and the growth rate of bank credit In the period of 2018 - 2022, the sales situation of BIDV's individual customers is as follows:

Table 3.3 BIDV's personal loan sales in 2018 - 2022

Chart 3.1 Sales situation of personal loans BIDV

Total sales of personal loans vs Amount of money

Total sales of personal loans

Source: Author's own compilation and calculation

*Loan sales by purpose of use

Purpose-built loans encompass a variety of financial products tailored to specific needs, including asset-secured loans, mortgage loans, stock loans, and study abroad loans Other options include home loans for personal or business purposes, car loans, and loans designed for products and business ventures Additionally, there are consumer loans secured by real estate, unsecured consumer loans, and credit card financing, providing a comprehensive range of choices for borrowers.

Between 2018 and 2022, housing support loans represented over 70% of total loan sales, marking their dominance in the market However, in 2021 and 2022, despite a steady increase in disbursement revenue from VND 70.384 billion to over VND 100 billion, the demand for housing support loans significantly declined, dropping to just over 20% of personal loan needs In contrast, mortgage loans surged in popularity during the same period, constituting more than 60% of personal loan requirements, while consumer loans, including car loans, also gained traction.

Over the past five years, there has been a significant demand for secured consumer loans, particularly in real estate, as evidenced by steady loan sales The active stock market has also contributed to the rising demand for securities loans, which surged from VND 4.734 billion in 2018 to VND 8.472 billion in 2021 However, in 2022, this figure halved to VND 4.800 billion due to a deteriorating global economic context, including interest rate hikes by the U.S Federal Reserve aimed at combating inflation Consequently, domestic interest rates rose, creating exchange rate pressures that further decreased loan demand Similarly, consumer unsecured loans fell significantly in 2022, dropping by approximately VND 5.375 billion compared to previous years.

The demand for production and business loans among individual customers is relatively low compared to other borrowing purposes This indicates that borrowers are not significantly seeking funds for production and business activities Therefore, BIDV should concentrate on enhancing credit offerings for personal loans aimed at supporting production and business initiatives.

Loan sales data reveals that personal consumption demand remains predominant, highlighting BIDV's role as a trusted bank for customers and solidifying its position in the financial market.

3.5.2 Outstanding loans to individual customers Loan balance is the amount of money that the borrower owes to the bank Loan balance reflects the current status of the bank's credit activities at a certain time Outstanding loans are also a stage to assess the scale of credit growth of banks The situation of personal debt of BIDV in the period of 2018 - 2022 is as follows:

Table 3.4 Outstanding loans to individual customers of BIDV in the period of 2018 - 2022

Total outstanding balance of loan;

Loan secured with other assets 0,76%

Home loans (for business purpose)

Loans for product and business 0,0011%

Consumer loans secured by real estate

Chart 3.2 Total outstanding balance of loans to individual customers

Total outstanding balance of loans to individual customers

Source: Author's own compilation and calculation

From 2018 to 2022, the outstanding loans of individual customers at BIDV exhibited a steady increase, driven by the bank's strategy of lowering interest rates to stimulate borrowing However, in 2022, there was a notable decline in outstanding loans, dropping from VND 248,750 billion in 2021 to VND 178,060 billion, a decrease of over VND 70 billion (28%), attributed to rising interest rates amid global inflation challenges Despite this dip in 2022, BIDV's overall credit growth remained stable over the five-year period.

Outstanding loans to individual customers are categorized based on their purpose, including secured loans with other assets, mortgage loans, study abroad loans, home loans, car loans, and various consumer loans Notably, housing support loans represent the largest segment, consistently meeting over 60% of customer demand compared to other loan purposes This trend underscores the significant reliance on home financing among individual borrowers.

The demand for housing loans has seen a slight decline as banks increase interest rates in response to global inflation However, outstanding housing support loans remain a key profit driver for banks in personal credit operations Additionally, consumer borrowing through mortgage loans secured by valuable assets and credit card usage has significantly boosted BIDV's profits, with credit growth steadily rising from 2018 to 2022, reaching VND 2.335 trillion.

BIDV has observed a steady increase in loans for products and business, particularly home loans intended for business purposes However, these loans have not received significant attention, resulting in minimal profitability and representing only a small fraction of the overall loan portfolio.

Since the pandemic, BIDV has been navigating a recovery phase, facing significant challenges in its credit activities due to the effects of Covid-19 and the global economic climate The pandemic has led to a decline in customer demand for loans, further intensified by the recent interest rate hikes from the State Bank of Vietnam Additionally, BIDV's emphasis on home loans for business purposes has restricted its profitability from other loan types, such as education and business development loans To overcome these obstacles and sustain its leadership position in Vietnam's banking sector, BIDV must diversify its loan portfolio and explore new avenues for growth.

3.5.3 Situation of overdue debts and bad debts

Table 3.5 BIDV's bad debt ratio in the period of 2018 - 2022

Source: Report of the Executive Board BIDV

BIDV's NPL ratio has been strictly controlled over the years, so this ratio has gradually decreased in the period from 2018 to 2022

In terms of credit quality, the consolidated bad debt ratio decreased from 1.93% in 2018 to 1.78% in 2019 The NPL ratio of subsidiaries also tends to decrease.

In 2020, the bad debt ratio was effectively managed at 1.54%, meeting the targets set by the shareholders' meeting, while the Group 2 debt ratio improved to 1.58% compared to the end of 2019 Looking ahead to 2021, the bad debt ratio is projected to decrease to 0.81% under Circular 11/2021, reflecting a reduction of 0.73 percentage points from 2020 Additionally, the Group 5 debt ratio, indicating debts at risk of capital loss, fell to 0.42%, a decrease of 0.82 percentage points from the previous year.

Following a focused restructuring phase, BIDV has significantly reduced its bad debt while enhancing its bad debt coverage ratio By the end of 2022, the non-performing loan (NPL) ratio, in accordance with BIDV's Circular 11/2021/TT-NHNN, was effectively managed at 0.9% This rigorous control over credit quality has led to a substantial improvement in BIDV's profitability, resulting in a notable increase in profits compared to 2021.

BIDV effectively manages its non-performing loan (NPL) ratio, ensuring high credit quality that is consistently recognized in the banking sector As a result, BIDV ranks among the top banks in profitability, particularly in retail and personal loan services.

Assessing the current situation oflending to individual customers

Table 3.6 Criteria for assessing the status of personal loans

Personal balance/Total outstanding 15,27% 16,63% 16,06% 18,18% 11,66% balance

Source: Author s own compilation and calculation

This statistic reflects the bank's efficiency in utilizing the capital it has raised An excessively high or low figure is undesirable, as it indicates potential issues in the bank's financial management.

If the raised capital is less than the loan amount, it will be considered a loss; however, if the raised capital exceeds the loan amount, the bank will seek to acquire capital at a lower cost.

However, if all loans are effective, the closer to 1 is the better for banking activities because then the bank effectively uses the mobilized capital

The growth of BIDV's total outstanding loans/capital mobilization sources from

From 2018 to 2020, BIDV's capital mobilization activities remained relatively stable; however, a slight decline was observed in 2021 and 2022 In particular, 2022 saw significant fundraising efforts amidst rising inflation, which prompted banks, including BIDV, to increase interest rates This scenario resulted in BIDV experiencing its lowest lending percentage in the past five years, recorded at just 78.33%.

In general, although BIDV faced difficulties in this activity in 2022, with an average ratio of Total Outstanding Loans/Mobilized Capital of 82.87%, BIDV's capital mobilization was relatively good.

This is an index that evaluates the appraisal of loan purposes and repayment sources of credit officers, reflecting the bank's ability to recover capital

Over the past five years, the personal delinquency index and personal debt balance have shown significant fluctuations, rising from 2018 to 2020 before experiencing a notable decline in 2021 This decline indicates effective loan risk management by BIDV, which successfully controlled bad debts during that year However, in 2022, the index rose again from 1.95% to 2.52%, highlighting that BIDV's capital recovery efforts have not been entirely effective.

Personal balance/Total outstanding balance

BIDV's low index indicates that its credit income is primarily derived from sources other than individual customer loans, which constitute over 15% of total outstanding loans To enhance profitability, BIDV should prioritize the development of personal loan offerings.

BIDV has made significant strides in personal credit activities, achieving stable capital mobilization that enhances profitability and expands business operations This has resulted in increased lending capacity and a rise in customer outstanding loans, contributing to robust profits Despite the challenges posed by the COVID-19 pandemic, BIDV has experienced steady growth in loan sales and individual customer balances, with a reported customer loan total exceeding VND 1,328 trillion by September 30, 2021, marking a 9.4% increase from the beginning of the year This growth aligns with government priorities, particularly in the manufacturing sector, and reflects a strong performance in retail customer segments Notably, loans for housing and land remain a significant portion of total sales, underscoring BIDV's reputation and customer trust However, potential borrowers should conduct thorough research and self-assessment, as investment and borrowing carry inherent risks.

BIDV has demonstrated significant growth in personal credit, with its outstanding balance for individual customers rising to over 414 trillion VND in 2021, marking an 11% increase from the previous year This growth solidifies BIDV's position as a leader in the personal credit market, holding approximately 10.7% of the market share The bank's retail banking segment has been pivotal, contributing to 35.7% of the total credit balance in 2020 and reinforcing its market dominance With nearly 12 million individual customers, representing 11.9% of Vietnam's population, BIDV adds around 1.3 million new customers annually, including nearly 6.5 million users of e-banking services Retail profits reached 6,200 billion VND, accounting for 65% of the bank's total revenue.

BIDV's pre-tax profit reflects its commitment to stable capital mobilization, which is essential for delivering financial products and services to customers Additionally, the bank effectively manages bad debt risk to sustain this achievement.

BIDV demonstrates a strong capability in managing personal credit, evidenced by its low bad debt ratio of 1.38% in 2021, which is below the banking industry's average This reflects BIDV's effective risk management system and proactive measures to mitigate potential bad debts The bank implements a risk provisioning plan that allocates profits to cover late debts, ensuring a robust bad debt coverage ratio consistently exceeding the bad debt ratio In 2021, despite economic challenges, BIDV achieved a non-debt coverage ratio of 235%, the highest in recent years These metrics highlight BIDV's reliability as a banking partner for customers seeking personal loans, showcasing its commitment to minimizing non-performing loans through strategic risk management practices.

BIDV has achieved significant milestones, demonstrating strong capital mobilization that enhances profitability and expands business operations while increasing lending capacity and attracting customers The bank's loan sales and outstanding loans have shown steady growth, particularly in housing and land support With a personal credit market share of approximately 10.7%, BIDV effectively manages its bad debt ratio, consistently maintaining it below regulatory thresholds through prudent risk provisions Overall, BIDV's financial and business performance indicators in personal credit reflect a stable and developing institution.

Although BIDV always leads banks in lending activities and creates trust for customers when choosing a place to fulfill their consumption needs, BIDV's credit activities still face some shortcomings:

BIDV, a leading bank in lending, enjoys strong customer trust but faces significant challenges in its credit activities The Covid-19 pandemic severely impacted its lending operations, as global lockdowns reduced the number of customers seeking loans Consequently, in 2022, both outstanding loans and personal loan sales saw a notable decline compared to 2021, adversely affecting the bank's profitability.

In 2022, the Federal Reserve raised interest rates eight times in response to global inflation, prompting the State Bank of Vietnam to follow suit with two consecutive increases in operating interest rates Consequently, commercial banks raised deposit rates by 0.5%-1.0%, which has led to higher lending costs for businesses already struggling from the impacts of the Covid-19 pandemic This increase in interest rates poses additional challenges for business recovery and affects loan sales and outstanding loans at BIDV, as it diminishes the ability of enterprises to secure capital and attract foreign direct investment Furthermore, individual borrowers are also impacted, as the cost of loans for homes, cars, and education rises, making borrowing significantly more expensive.

BIDV, despite its strong profitability and long-standing presence in the banking sector, faces significant competition in personal lending from smaller banks Its loan products, such as card offerings and personal loan packages, lack diversification In 2016, Techcombank set a precedent by introducing free transfer transactions, which attracted customers to its accounts and online payment channels This trend has been followed by other private banks like VIB, MBbank, TPBank, VPBank, VietCapitalBank, MSB, and HDBank, all of which have aggressively pursued free services In response, BIDV announced that starting January 1, 2022, it would waive all fees for transactions on its BIDV SmartBanking digital banking application, including both internal and external money transfers.

BIDV's service maintenance fees and account management costs indicate a lag in adapting to customer needs compared to other commercial banks (Tuan Dung, 2022) The bank's focus on housing loans has limited the promotion of its personal loan products, while competitors like TPBank and VPBank are innovating with targeted offerings For instance, TPBank's Fico credit card for students features a low interest rate of 1.32% and simplified application processes, while VPBank's Shopee Platinum credit card caters to online shoppers In contrast, BIDV has yet to fully explore and diversify its personal credit products and credit card services.

BIDV has primarily concentrated on housing loans, neglecting to actively promote other loan options like study abroad or business loans As a result, the bank's overall loan turnover and outstanding loans remain relatively low.

SOLUTION AND RECOMMENDATIONS ON THE CURRENT SITUATION OF

Orientation for the development of individual customer lending activities in the near 0051111 ố .d<

Credit activities are vital for banks, providing essential financial support to both businesses and individuals Recently, however, these operations have faced challenges due to intensified competition among banks and rising inflation, which has led to increased interest rates As a result, personal credit activities have become more challenging and less favorable.

BIDV should prioritize its core tasks to boost credit activities and improve competitiveness by focusing on small and medium enterprises, individuals, and business households This growing market presents significant potential, as these customers require financial support for their business endeavors By offering preferential programs and a range of diversified financial services, BIDV can effectively meet the needs of this audience and foster their development.

BIDV must prioritize investments in information technology and infrastructure to align with global development trends This strategic focus will enable the bank to optimize operations and enhance the functionality of its financial products and services Additionally, BIDV should refine its existing offerings while leveraging new software capabilities to create innovative products and services that cater to customer needs.

BIDV must prioritize rapid growth while maintaining high credit quality for individual customers To achieve this, the bank should implement stringent standards and regulations for customer evaluation and provide customized solutions Establishing an effective credit risk management process is essential to reduce lending risks and build customer trust Additionally, BIDV should offer a variety of flexible lending products to cater to diverse customer needs, ensuring both customer satisfaction and the bank's financial stability.

BIDV should focus on creating a diverse range of lending products tailored for individual customers, while proactively offering comprehensive financial solutions This strategy will enable BIDV to attract a wider customer base and expand its market presence Additionally, implementing promotional offers, interest rate reductions, or incentives can effectively draw customers to utilize the bank's financial products.

BIDV should prioritize building strong customer relationships by delivering exceptional service and support throughout financial procedures and after-sales interactions Creating a professional and friendly environment tailored to customer needs will foster long-term loyalty and trust, ultimately contributing to the bank's sustainable development.

To enhance credit activities and boost competitiveness, BIDV should prioritize key initiatives such as attracting new customers, investing in information technology, ensuring rapid growth while maintaining credit quality, and developing a diverse range of financial products tailored for individual clients Strengthening customer relationships is also essential By implementing these strategies, BIDV can effectively promote its credit activities and succeed in the financial market.

Some solutions to improve and improve the efficiency of lending to individual customers

In order to improve goodwill and improve the efficiency of lending to individual customers at BIDV, there are a number of effective solutions that BIDV can apply.

To enhance its lending capacity, BIDV must prioritize increasing capital mobilization by diversifying funding sources This approach will allow the bank to offer more competitive interest rates and flexible lending terms Additionally, BIDV should focus on attracting customer deposits through the development of new savings products Strengthening partnerships with international financial institutions, multilateral donor organizations, and investors is also essential for securing the necessary capital to fulfill customer lending needs.

To attract more customers to borrow money, BIDV must enhance its brand image through effective communication and advertising campaigns By focusing on branding initiatives, the bank can improve its visibility and appeal Additionally, investing in staff training is essential to elevate service quality, ensuring that customers receive exceptional support and a positive banking experience.

Third, considering customers as the core value of BIDV is another important solution to improve the efficiency of lending to individual customers BIDV needs to

To foster an effective working environment, BIDV should prioritize creating conditions that enable employees to concentrate on delivering exceptional customer service Additionally, enhancing communication with customers is essential for understanding their needs and offering tailored financial solutions.

To enhance lending activities, it is crucial for BIDV to continuously improve the quality of customer signals by accurately assessing and verifying customer information This approach not only mitigates risk for the bank but also ensures that loans align with customers' financial capabilities Implementing modern policies, processes, and technologies will promote transparency and accuracy in customer assessments Furthermore, raising customer awareness about the importance of providing complete and accurate information during the loan application process is essential By consistently updating and applying international standards in customer signal assessment, particularly in personal lending, BIDV can strengthen its credibility and foster greater trust among customers in the competitive international financial market.

To enhance BIDV's personal loan market and boost the efficiency and reliability of its lending activities, the bank must demonstrate unwavering commitment and effort Additionally, fostering strong support and collaboration from customers, partners, and the community is essential With these elements in place, BIDV can achieve sustainable growth and development in the long run.

Some recommendations to improve and enhance the efficiency of lending to individual

individual customers at Joint Stock Commercial Bank for Investment and

BIDV should enhance its lending policy for individual customers by aligning internal regulations with straightforward, secure, and efficient transaction procedures that benefit both the bank and its clients This includes clearly defined lending procedures, conditions, security forms, payment methods, interest rates, and loan terms Simplifying transaction processes will expedite loan application handling, making it more accessible for customers Additionally, BIDV must prioritize customer safety by safeguarding personal information to mitigate risks.

BIDV can enhance customer attraction and build trust by prioritizing customer satisfaction as its core value Recognizing that customers are vital for the bank's growth, BIDV should focus on delivering comprehensive financial solutions, optimizing service processes, and ensuring prompt and professional customer care By placing customers' interests first, BIDV can maintain and increase sales effectively.

To enhance its offerings, BIDV should prioritize researching contemporary loan products and innovating exceptional solutions In today's digital landscape, leveraging advanced technologies and internet support is crucial for standing out in a competitive market Additionally, BIDV must focus on strengthening its brand and image to foster customer trust and appreciation, as this will encourage clients to choose the bank's products and services.

BIDV should form a specialized team focused on capital mobilization, which is crucial for the bank's operational stability and growth To maximize effectiveness, fundraising efforts must be strategically directed towards appropriate channels This dedicated team will enhance BIDV's control over capital while improving the overall efficiency of its mobilization strategies.

BIDV should establish realistic credit growth targets for its employees to enhance performance while minimizing pressure that could lead to negligence in the appraisal process Setting achievable credit sales targets for credit officers is crucial for driving growth; however, it is essential to develop these targets in alignment with actual market conditions to prevent an increase in overdue debts that could negatively impact the bank's overall performance To improve lending efficiency to individual customers, BIDV must implement comprehensive training programs for credit officers, focusing on loan products, services, and credit risk assessment skills Additionally, the bank should reinforce policies regarding high-risk lending products to ensure the feasibility and sustainability of loans for its customers.

BIDV should leverage advanced technology to streamline application processing and minimize loan approval times, thereby improving customer satisfaction and lowering operational costs Additionally, the bank ought to enhance its online banking services by integrating lending facilities and account management into mobile applications, targeting young customers and catering to the growing demand for digital banking solutions.

To enhance goodwill and boost lending efficiency for individual customers, BIDV should implement a multifaceted strategy that includes refining lending policies, strengthening its brand image, and recognizing customers as essential assets Additionally, prioritizing capital mobilization, investing in research to improve loan products, and developing comprehensive training programs, alongside the adoption of advanced technology, will be crucial for achieving these goals.

In the context of economic development, the demand for improved quality of life has led to increased opportunities for credit and individual lending The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) aims to build trust and a strong position with its customers However, to navigate the competitive financial market, BIDV must enhance service quality to cater to diverse customer needs Key focus areas include improving lending efficiency, minimizing credit risks, boosting capital mobilization, and strengthening the bank's brand image To achieve effective capital mobilization, BIDV can implement various strategies, such as issuing bonds and expanding its customer network, while also promoting online channels to attract global investors and ensure a long-term commitment to brand development.

To enhance its brand image and customer perception, BIDV must prioritize exceptional service quality This involves implementing innovative staff training programs to boost expertise and knowledge of the bank's financial products Additionally, BIDV should focus on strengthening brand promotion and establishing a long-term relationship with customers to ensure sustained growth and loyalty.

The topic of "Lending to Individual Customers at Joint Stock Commercial Bank for Investment and Development of Vietnam" is both relevant and expansive This analysis of BIDV's personal credit services aims to provide insights and recommendations for enhancing service quality However, due to constraints in experience and time, the findings may contain inaccuracies These limitations, nonetheless, could serve as a foundation for future research endeavors.

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