The operation of lending to small and medium enterprises in VietinBank Sam Som Branch

PROFESSIONAL BACHELOR OF BAKING AND FINANCECOURSE 2012-2015 VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE Sam Son Branch INTERNSHIP REPORT “The operation of lending to small

PROFESSIONAL BACHELOR OF BAKING AND FINANCE

COURSE 2012-2015

VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE

Sam Son Branch

INTERNSHIP REPORT

“The operation of lending to small and medium enterprises in

VietinBank Sam Som Branch”

Mr La Tien Dung

Topic: “The operation of lending to small and medium enterprises in

VietinBank Sam Som Branch”

PART II: PROJECT IMPLEMENTATION (WORK PLACEMENT TARGETS)

I Overview of the individual project

II Data analysis

A.Reading loan records of customers

B Data from bank

1 The performance of the bank

2 Overview of lending operation to small and medium enterprises

3 Total loan disbursement

4 Total loan collection

5 Gross loans

6 Overdue loan status

PART III: ADVANTAGES, CHALLENGES, AND POSSIBLE SOLUTIONS (EVALUATION

OF LENDING OPERATION)

I Advantages

II Challenges

III Solutions to improve credit quality for small and medium enterprises

1 Improving capital mobilization

2 Expanding credit service for small and medium enterprises

a Diversifying lending forms and entities

b Developing strategies to meet customer demand

II Solutions to improve the quality of credit services to small and medium enterprises

1 Improving the quality of project appraisal

2 Developing employee skills and capabilities

3 Enhancing supervision on credit accounts

4 Forming project appraisal group

PART IV: CONCLUSION

REFERENCES

On the completion of this project, I wish to express my deepest gratitude to my

supervisor, Mr Nguyen Hoang and Mr Dung who gave me benefit of his wisdom and his expert knowledge as well as his constant encouragement in my work placement period Without his critical comments and valuable suggestions, this project could not have been completed

I take this opportunity to express my sincere thank to all lecturers, the management and officers at VietinBank Sam Son Branch for their useful lectures and assistance during my study and work placement

Finally, let my gratitude go to my family and friends, whose encouragement and

assistance are of extreme importance during the course of my writing

Vietnam officially became a member of the World Trade Organization on 11 July 2006 With more open market policies, this major event created a lot of new advantages for the

development of Vietnam national economy as well as the banking sector in particular

In banking operation, lending activity is one of the businesses which bring not only huge revenues but also great risks to the banks Therefore improving the quality and ensuring safety oflending operation will reduce risks in business Then finding suitable solutions is an important goal for the executive board

Improving the quality of lending and decreasing risks will bring high benefits for both banks and customers This is a current pressing issue for banking industry in general and

VietinBank -Sam Son Branch in particular The quality of lending is one of the decisive factors

of the development of banking in the context of integration and the fierce competition for marketnow

That is why I chose the topic: "The operation of lending to small and medium enterprises

in VietinBank -Sam Son Branch" for my personal practice report.

Topic: “The operation of lending to small and medium enterprises in VietinBank Sam Son

- VietinBank has developed an operations network comprising of 01 Main Operation Center, 150branches, over transaction offices/saving offices It has established correspondent relationship with 900 banks and financial institutions of more than 90 countries and territories all over the world

- It established 07 independent financial subsidiaries including VietinBank leasing

Company,VietinBank Securities company, VietinBank Asset Management Company,

VietinBank Gold and Jewellery company, VietinBank Global Money Transfer company and 03 non – profit units: VietinBank Information Technology center, VietinBank Card Center and VietinBank Training Center

- VietinBank is also the founder of the following financial credit institution:

+ Saigon Bank for Commerce and Industry

+ Indovina Bank (the first joint – venture bank in Vietnam)

+ Vietnam International Leasing company – VILC (the first financial leasing company in Vietnam)

+ VietinBank Insurance Company Ltd

- VietinBank is the official member of:

+ Vietnam’s banker association

+ Asian banker’s association

+ Society for worldwide interbank financial telecommunications (SWIFT)

+ Visa international Service association

- It is the first bank in Vietnam to apply modern technology and e-commerce in its banking operations

• Aiming for perfection: With internal strength and resources, VietinBank management and staff always work hard to steadily reform towards perfection

• Dynamic, creative, professional & modern: We understand that our continued success as a financial services organization is dependent on the innovative, dedicated services we provide

We always put our relationships with the clients and partners first in everything we do

• Integrity, Honesty & Transparency: We have solid foundation of openness and accountability

We ensure each and every transaction is transparent and available for public viewing

• Respect: Fair dealing is basis of our business, treating every individual with respect and

dignity

• Brand protection and development: VietinBank staff and management are proud to be

responsible for the reputation of our brand name and always carry it with honour and dignity

• Sustainable development and social responsibility: Our motivation is driven by constant reformand creativity with clear objective of strong growth, prudent business & sustainable

development It is an honour to give our staff the opportunity to participate in various volunteer programmes and to allow them to reach out further to the community and take responsibility for the society and fellow citizens

Business philosophy

• Safe, effective and sustainable

• Loyal, dedicated, passionate & committed, wise and principled

• The prosperity of VietinBank customers is our ultimate success

Slogan: improving the values of life

II Overview of Sam Son Branch of VietinBank

1.History

In accordance with the Resolution of 3rd Conference and Decree No.53/HDBT dated 26 March

1988 of Ministers Council (now the Government) on the reform of the financial system and the introduction of commercial banks in Vietnam On 1 July 1988, Bank for Trade and Industry of Vietnam Sam Son Branch was established after being separated from the State Bank of Vietnam.Its head office located at 02 Doan Thi Diem Road, Truong Son District, Sam Son Town,

In order to satisfy the capital demand of customers, Sam Son Branch has set up a wide-spreadingnetwork of branches and transaction offices including department of corporate banking, retail banking, monetary and funding, etc VietinBank Sam Son Branch has always built new working morale, trained staff for stronger specialization and made up e-payment network for the whole system, ATM system, as well as participated in international payment network through Swift for quick circulation of capital in the economy and meet customer demand

2 Organizational Structure

The organizational structure of VietinBank Sam Son Branch includes

- Executive Board consists of 1 Director and 02 Vice Directors

- Departments:

Executive Board

of VietinBank Sam Son Branch

Transaction Offices Departments

Accou nting

Monet ary and Budge t

Nghi Son Trans action Offic e

Truon

g Son Trans action Office

Number 1

Numb

er 7

Numb

er 5 Numb

er 2

- Transaction offices: 07

3.Main activities

+ Director is in charge of the performance of the branch according to the functions,

responsibilities and scope of the bank branch

+ Vice Directors: deal with the arising issues in the business operations of the branch as

assigned by the director

Functions and duties of departments:

+ Department of Corporate Banking grants loans to customers, inspects the use of loans,

draw up statistic report, builds up capital plans for the branch and makes plans for credit

operations

+ Department of Accounting carries out operations relating to payment including collecting

money under customer order (standing order), opening accounts for customers, settling daily accounts to identify operational capital of the bank, transferring accounts from the bank to the central bank, clear cheques for customers if requested

+ Department of Retail Banking mobilizes capital under deposits of citizens and current

accounts of enterprises, bill of exchange

+ Department of Budget makes cash payment and receipt as requested With the

confirmation of Department of Accounting, the department will give out or collect money from customers’ accounts

+ Department of import and export payment trades foreign currencies, grants loans in

foreign currencies, makes international payment

+ Transaction offices carries out functions like main operation center such as credit, capital

mobilization, payment, etc

II Operation of lending to small and medium enterprises in Vietnam

1 Advantages for small and medium enterprises

+ Flexibility in business, quick response to the market

+ Capability to supply highly customized services

+ Ease to adjust operations

 Enterprises can quickly expand their scale to make use of the advantages to increase theirprofit

2 Challenges to small and medium enterprises

+ Limited technological application

+ Poor business management skills

+ Problematic business and production strategies

PART II: PROJECT IMPLEMENTATION

I Overview of the individual project

 Description

- I came to the bank early and appeared with formal dress on the first day of my work

placement at Vietinbank at samson branch because I realized the importance of my first

impression in my dream bank A professional appearance can help me to show my respect for a valuable opportunity of the work placement My feeling was strange and I felt a bit nervous

- I entered the room, greeted and introduced myself to all employees of the department of corporate banking where I spent the whole time of the work placement I tried to get acquainted with them because, in my opinion, learning knowledge and experience from predecessors is one

of the best ways during my work placement

- Being accustomed to a new environment also meant learning how to use a scanner,

photocopier, fax machine, and light system

- I took advantage of tea break or free time to start conversation with staff

- I was active to ask them how I can help and was willing to help them

- Another way to attract people is to always smile at them whenever I can

- Make written report into informative and effective oral presentation

2 Objectives of the project

- To gather information

- To review the performance of VietinBank Sam Son Branch over the year

- To find out advantages and challenges to the operation of lending to small and medium enterprises

- To suggest solutions to improve the quality of lending to small and medium enterprises at VietinBank Sam Son Branch

RESEARCH QUESTIONS

- What are the challenges to small and medium enterprises in borrowing from banks?

- What are the difficulties of the bank in lending small and medium enterprises?

- What are the advantages and challenges to small and medium enterprises in Sam Son?

- What are the lending policies to small and medium enterprises of the bank?

- How is the situation of lending to small and medium enterprises of the bank?

- How is the bank’s credit performance to small and medium enterprises?

- What are the solutions to develop credit operation to small and medium enterprises?

Total Parking Expense: 360.000vnd

* Printing and Reproduction (copying) Expenses :

+ Third draft: 92.000

+ Final draft: 450.000

 Total Printing and reproduction expense: 764.000 vnd

 Telecommuting Expenses :1.424.000 vnd

5 Project detailed plan

(1) Brainstorm and select target banks and banking –related problems

(2) Contact the bank and receive their signed agreement documents

(3) Identify topics and look for general supporting data

(4) Choose a bank to work at and brainstorm main topics/problems for that specific bank(5) Submit project profile sheet

(6) Determine the importance of topics by survey and/ or interviews

(7) Gather and analyse information received from different sources

(8) Submit intermediate report

(9) Find out solutions to the problem and any other potential difficulties

(10) Connect all materials and compose main report

(11) Review and revise, repeat if necessary

(12)Prepare oral presentation and practise

II Data analysis

A.Reading loan records of customers

a.Legal files

 Business registration authorization: She mainly sells a wide range of watermelons

 Her identity number is 28.01.156.059, made on 2, March, 2014

 Report: from February 2012 to 2, March, 2014 Mrs Lien only borrowed money at

Vietinbank, Sam son branch with the outstanding loan of 750.000.000 VND and she had no bad debt history

 Personal ideas

 Mrs Lien is now 49 years old, her age is lower than maximum age - 60 years old In

addition; an identity card has 16 years of expire date thus her identity card is valid until 2024

 Her address in the household record book is the same as the address of the bank This is a basic loan requirement for a bank loan

b Loan application files

 Loan application form

 Total capital demand for the business plan: 3.000.000.000 VND (Total Loans limit : )

 Owner equity involved: 1.750.000.000 VND

 Proposed loan amount: 1.250.000.000 VND with

 Loan duration: 12 months

 Business plan

 Business purpose: Invest fixed assets

 She has many regular customers in Thanhhoa market and other market

 Business location: Business in thanhhoa city

 Debt equity rate (DER) shows the rate between debt and equity in the financial structure HerDER =

000 1.750.000.

000 1.250.000.

= 0.71The rate is equal with the standard rate of Vietinbank If the rate is high, it might cause risks for the bank in debt collection

c Reimbursement files

 Credit contract :

 Loan amount: 1.250.000.000 VND

 Credit contract takes effect from 2, March, 2014 to 2, March 2015

 Interest rate: 11 %/year

 Penalty interest rate for overdue debt

 The method which Vietinbank extents credit to its customers is paying directly to sellers of its customers based on purchasing receipts between sellers and its

customers

 Difficulties encountered

- Each document in loan records was the results of Mrs Ha‘s work Thus when reading these documents, I had a lot of questions For example: which basis to evaluate value of collaterals, how credit staff identified loan amount for each customer or where did CIC report come from

- At the beginning of the week that I did this mission, I was confused about the content of these documents and felt hard to remember its order

 Solutions

- I took note and asked Mrs Ha Luckily, she gave me clear explanations, even she illustrated

by actions For instance, in order to explain the nature of CIC report, she visited www.cic.org.vn,which is a website of the State bank of Vietnam, entered required information of a customer and inquired a report of debt history of the customer