Improving service qulity, customer satisfaction and loyalty solutions to the case of HD bank vung tau branch

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- DO THI THUONG IMPROVING SERVICE QUALITY, CUSTOMER SATISFACTION AND LOYALTY: SOLUTIONS TO THE CASE OF HD BA

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

DO THI THUONG

IMPROVING SERVICE QUALITY, CUSTOMER SATISFACTION AND LOYALTY: SOLUTIONS TO THE CASE OF HD BANK VUNG TAU BRANCH

ID: 22130075

SUPERVISOR: NGUYEN THI MAI TRANG

Ho Chi Minh City – Year 2015

ACKNOWLEDGEMENTS

It is my proud privilege to release the feeling of my gratitude to person who helped me directly or indirectly to conduct this research project work I express my heart full indebted and owe a deep sense of gratitude to my professor Mrs Nguyen Thi Mai Trang for her sincere guidance and inspiration in completing this project I am extremely thankful to the director, the staff and all faculties’ members of HD bank in Vung Tau city for their coordination and

cooperation and for their kind guidance and encouragement They have more or less

contributed to the preparation of this project report but I will be always indebted to them

The project has indeed helped me to explore more knowledgeable, related to my job and

I am sure it will help me in my future’s career

CONTENTS

1 Overview the HD bank Vung Tau branch 7

1.1 The background of the problem 10

1.2 HD bank Vung Tau branch and competitors 11

1.3 Business situation of HD bank Vung Tau branch and other competitors 14

2 Problem identification 16

2.1 Possible reasons of low customers satisfaction 20

2.2 The HD bank network of business points problem 22

2.3 The HD bank’s percentage support lending base on collateral values 25

2.4 The capacity of bank staff and the famers 27

3 The solution 29

3.1 The alternative 1 30

3.2 The alternative 2 33

4 Action plan 34

5 Supporting information 36

5.1 Research methodology 36

5.2 Guideline 38

5.3 Literature review 40

5.4 Transcript 43

PART 1: In-depth interview customers 43

PART 2: In-depth interview managers and bank staff 52

PART 3: Qualitative Research Report 57

LIST OF TABLES

Table 1 Branch network and business location of three banks in Vung Tau city 23

Table 2 The report about employees of HD bank-Vung Tau branch 31

Table 3 Expected cost of training bank staff in three days in HCM city 32

Table 4 Expected cost of three workshops for farmers in Vung Tau city 34

Table 5 The basic information of six current customers of HD bank Vung Tau brach 38

Table 6 Antecedents and outcomes of customer’s satisfaction 42

LIST OF FIGURES

Figure 1 The organizational structure of HD bank Vung Tau branch 10

Figure 2 Charter capital of HD bank, ACB and Techcom bank in 2015 13

Figure 3 The individual loan growth rate of three banks on Jun 30 th , 2015 15

Figure 4 The cause and effect diagram 21

EXCUTIVE SUMMARY

In today's competitive environment, a bank earns more interest and loyalty from

customers will become a leading bank This paper indicates that banks should focus on

improving the service quality for better and greater customer satisfaction and loyalty as well as improving their financial performance In particular, agriculture's knowledge of employees go a long way in demonstrating excellent customer service skills is a key factor affect farmers’ satisfaction and contribute to the agricultural loan profit of HD bank Vung Tau branch

This study based on desire to learn, explore and determine the actual level of customer satisfaction with bank loan services to famers in HD bank Vung Tau branch Based on

interview managers, tellers and famers, this paper explored factors that affect the quality of banking loan services provided by HD bank Vung Tau branch, through symptoms were

reflected in six months income at 30th, June 2015 In addition, this study also used statistical method for synthesized in order to more accurate conclusions about research problems The result of this study confirms the relationship between service quality, satisfaction and loyalty of customers using HD bank services in Vung Tau city This also indicates that farmers satisfied with HD bank Vung Tau loan services such as interest rate, transaction costs However,

farmers are not satisfied with the support of bank staff and fell the loan paper quite

complicated Author base on this result, the previous research, primary and secondary data found consequences and antecedences related to this problem Author also launched two

solutions to solve this problem The first solution through researches on information exchange among farmers, bank will coordinate with Farmer Associations and organize seminars to share experiences of farm produce as well as introduce loans and explain its’ conditions in bank’s forms The second solution based on the financial condition of the HD bank Vung Tau branch, suggest a training plan for staff and leadership related to agricultural lending Using the

literature and the market indicators, this paper also found that the first solution is the best

choice for HD bank branch Author hope this study will help HD bank Vung Tau branch’s managers provide better services for their customers

1 Overview the HD bank Vung Tau branch

Joint Stock Commercial Bank for Housing Development Vung Tau city has

abbreviation: HD Bank - Vung Tau and its headquartered located at 07 Nguyen Thai Hoc Street, Ward 7 Vung Tau city HD Bank Vung Tau branch officially inaugurated and operated

on 23th Jully 2009 It is an extended arm of HD Bank system from Ho Chi Minh City to

neighboring provinces in network expansion strategy in order to offer services to its customers

HD Bank - Vung Tau branch including Ba Ria, Chau Duc and Phuoc Tinh province

transactions Appearing at Ba Ria - Vung Tau province during six years but with many efforts

to improve the quality of products and services Director of HD bank-Vung Tau-Nguyen Gia Hong stressed "HD Bank Vung Tau emphasis more on quality services This was determined the main factor to decide the success or failure of the bank Therefore, the policy of the board

of directors is constantly improving the manner of services in order to create their own

advantage It is also a key factor of the present success of HD Bank in general and HD Bank Vung Tau in particular" In order to provide the best service for customers, HD Bank focus on four specific action programs, which are credit effectiveness, safe operation, promoting service quality and cost control

HD Bank aims to provide premium, international standard financial products and

services that meet its clients' diverse needs There are bank transactions and financial services including all types of deposits in VND, USD, EUR and gold Like other financial institutions, the main objective of HD bank is gained profit based on the provision financial products to

including mobilizing capital, development capital, borrowing from other credit institutions, lending In addition, HD Bank - Vung Tau branch finances for all types of loans in every kind

of business organizations For example, it finances for small and medium enterprises, small business loans and personal loans It also finances for business purposes and agricultural

production including serving life, build or repair house, cultivated plants et cetera with

reasonable interest rates in order to serve the needs of business and customers

From 2011 to 2014, credit for agriculture and rural expansion has developed and

become a field of safe and effective compared with other economic sectors (Le & Pham 2015)

In 2015, under competitive pressure of other banks in the province, HD Bank-Vung Tau focus

on services related to the key economic sectors in the downtown area In addition, HD bank board of directors has launched incentive programs for some businesses in industries such as fisheries, scientific research and especially in agriculture In the rural areas, the bank focuses

on mobilize deposits from people and organizations and investment in agricultural and rural loans specifically in Chau Duc, Dat Do and Tan Thanh district In this research, the writer focuses on agricultural lending activities and customers who are famers to analyze and study about the problems that HD bank Vung Tau is facing

In order to attract customers come to the branch, HD bank not only focus on service quality but also develop a young, dynamic and enthusiastic staff HD Bank is building the human development strategy aims to encourage staff who dares to propose new directions, new ideas about products Like most banks branch, these departments include customer service, administrative & human resources department, management & support credit department,

accounting and technology and IT support department Customer service department often takes responsible of accessing customers and contact to them to collect their opinions about the services Support and manage credit department takes responsible for debt management,

support and control the credit and loans process and transaction processing management

Administrative offices takes account for manage administrative work such as maintenance branch's house, staff training plan, construction recruitment plan, human resource capital and labor contracts

These departments operate independently but have strong relationships, mutual support through regular meetings to implement the common targets of this bank Support and manage credit team finds new customers, communicates with them, guides and advises customers complete the necessary procedures It also takes responsible for evaluating customer's ability to pay original debt and interest This department prepares the evaluation report, makes credit contracts, tracks and profiles disbursement according to request of customers, checks the use of loans, monitors the repayments and interest, cooperates with the customer services team, etc Support and manage credit is also the function that was focused to analyze in this research for supporting problem solving

(Source: Administrative & human resource department of HD bank-Vung Tau)

1.1 The background of the problem

In order to understand about the problems HD bank Vung Tau branch is facing, author explores the survey data about Viet Nam banking sector From 2007, Viet Nam banking

industry split into two stages of development by the evaluation of banking experts The first stage from 2007 to 2011, HD bank and its’ competitors reached many achievement in asset as well as human resource capital

In general, the total asset size and operational capacity of the banking system in the

country continued to grow and develop After 5 years, total assets of credit institutions

increased by 2.65 times, loan portfolio increased by 2.3 times; network increased 2.1 times

compared to the end of 2007 The investment and the application of technology banking

increasingly promoted and developed Banks have invested and completed the core banking

Figure 1 The organizational structure of HD bank Vung Tau branch

Administrative

& Human Resource Department

Vice director

Accounting department

Management

& support credit department

Transaction offices &

business points system Vice director

General Director

system, to conduct online transactions online, centralized data management system, thereby promoting improved quality of banking services provided to customer The quality of human resource capital, banking managers have been gradually improving Banks were more

concerned about the recruitment and training of qualified human resource capital Some stock commercial banks developed the basic steps in the field of operations management, bank management, such as Asia; East Asia; Saigon Thuong Tin However, in the end of 2011, Viet Nam's banking system began face the difficulty from economic In this second stage, the

joint-banking system received consequences of bad debt

According to Nguyen (2015) after over four years of the State to implement the policy

of restructuring the economy, economic growth model developed rational innovation, improved the efficiency of the economy As Le (2014), Viet Nam banking industry still had faced many difficulties and challenges until 2014 Circular 02/2013 / TT-NHNN was the effort of the

government to change the picture of bad debt and banking system health When the actual number of bad debts was lifting the veil, the banks had launched strategies to cope with the potential loss of capital Therefore, in 2014, the banking industry continued to face difficulties

in the macroeconomic context, companies continued to have trouble in domestic consumption

of goods by weak demand

1.2 HD bank and competitors

Following the general trend of Viet Nam banking industry, HD Bank-one of the

pioneering joint stock commercial banks in Vietnam also had high profit indicators in 2011 and

2012 However, starting from the end of 2012 due to the impact of non-profit performing loan had a sharp decline In 2014, the good disposal policy and management bad debts, HD bank overcame the situation, increased profitability and recovered HD Bank also cannot avoid the fierce competition among the other banks After 24 years, HD continues to increase in both capital assets and resources In order to match the competitive environment, in June 2015, HD Bank achieved chartered capital of 8.100 billion VND, total assets were worth 100.000 billion VND It also developed a network of about 200 branches and transaction offices available in most the largest economic centers with a total staff of about 4.000 people HD Bank has set the strategy for 2015 such as continued effective and multi-functional operation, provided the best service for corporations, invested in retail banking and network development

Competitors of HD bank (HDB) include both Vietnamese and foreign banks at

Vietnamese market Customers have increasingly choices in finding solutions to their financial problems According to Maiyaki (2011), factors such as size of bank, total asset and availability

of large branch network have a great influence in customers’ choice of bank Base on the

chartered capital at the latest time, there are two banks that have the same level of capital with HDB including Asia commercial banks (ACB) and Techcom Bank These banks are classified in-group small and medium capital size group, that with a chartered capital from 5,000 to

20,000 billion VND They are as seen as banks with same size because their chartered capitals are in the rage from 8,000 to 9,400 billion VND These banks have the operating duration more than twenty years at Vietnamese market They have their own achievements and valuable prizes Base on branches and transaction system, in 2015, HD bank with ACB and Techcom

bank were in the top ten banks branch network throughout Vietnam, with large transaction system.

Figure 2 Charter capital of HD bank, ACB and Techcom bank in 2015

(Unit: Billion)

(Source: s.cafef.vn)

Three banks not only have the similar capital but also strong on retail banking services and focus on individual customers services Base on target customer, Asia commercial banks (ACB) and Techcom bank are strong in the field of lending business and personal services Target customers of two commercial banks are individuals with high and average income Customers that HD Bank primarily targeted are personal customers, retail service

As mentioned above, two main competitors of HD bank are Techcom bank and ACB Depending on nature, economic and social conditions of each province, each bank has

developed different policies in services therefore having different in business results In

8,100

9,377

8,878

7,0007,5008,0008,5009,0009,500

charter capital (2015)

HD Bank ACB Techcombank

addition, for more comprehensive evaluation activities of these banks, author analyzes their financial indicators in a specific geographical area and period According to an internal

financial report, in six months in 2015, the financial indicators of HD bank Vung tau branch has the lowest number For giving accurate and rational assessments about activities of these banks, author focus on analyzing the financial performance numbers of these banks in Ba Ria-Vung Tau province in six months in 2015 These business results of three banks will be

reflected through the figures in the next part

1.3 Business situation of HD bank Vung Tau branch and other competitors

According to the forecast of Vung Tau state bank and economic experts, 2015 will be the year that most of the banks will have a good start on profits as well as credit growth Thuy Vinh (June 2015) the customer’s need of capital gradually increased while the lending interest rate decreased The segment's traditional activities of banks have been significant changes Credit growth rate of the whole industry increased quite well, reaching 5% Base on the

summary report by Tuan Truong (2015) in “Banking highlight in 2015”, at the end of quarter 1/2015, total outstanding loans of eight listed banks increased 2,77%

Two competitors (ACB and Techcom bank) were respectively announced the positive results compared to their plan Meanwhile, the loan for individual customer of HD bank Vung Tau only reached 98% the plan Mrs Bui Thi Anh Tuyet-vice director said, “This result will make the board directors disappointed” However, whether the result is due to HD bank Vung Tau set too high targets for employees or it really facing a real problem in business Therefore,

the author continues to compare HD bank Vung Tau loan growth figures with its business rivals Base on the financial statement, each bank had different fugues of individual’s loans growth In six months in 2015, the chart above showed the loans growth rate of HD bank

slightly decreasing 2% Meanwhile, the figures from loans growth of ACB and Techcom bank had still increased (4.3% and 10.18%)

Unit: percent

(Source: the internal reports of three banks)

In summary, in competition with the average number of loans growth in banking

industry, HD bank had not a good number of loans growth rate This is understandable because

of customers have more choices to deal with bank has better service and response their need on time When client’s expectation was not responded correctly, they will feel dissatisfaction and underestimation the quality of service Resulting, they would change the frequency or even

-2.00

4.30

10.18

-4.00-2.000.002.004.006.008.0010.0012.00

personal loans growth rate

HD Bank ACB Techcombank

worse, they would stop using the banks services This is not a good sign for business status of

HD bank in the future when competitors cutthroat and lead the loans market

2 Problem identification

As mention above, HD bank Vung Tau low loan grow rate is one of the symptoms that

is so easy to recognize and it reflects a certain implicit problem There are many reasons that can lead to the low loan growth rate of HD bank Vung Tau city and origin from different

aspects like marketing, sales, customer care services, finance, human resource capital and etcetera In this research, with the limitation of size, ability of the writer and other conditions will focus on analyzing a specific service of HD bank Vung Tau branch According to Mrs.Anh Tuyet general director of HD bank Vung Tau branch, from the end of 2014, the State Bank of VietNam has circular to build up a new policy to support the famers Base on market research,

Le & Pham (2015) found that from 2011 to 2014, credit for agriculture and rural expansion has developed and become a field of safe and effective loan compared with other economic sectors Therefore, HD bank determines lending agricultural sector will contribute to the HD bank success in 2015 Consequence, at the beginning of 2015, HD bank has strategic plan focus on promoting and developing loan services to customers are farmers Therefore, in this study author focus on the agricultural loan service of HD bank Vung Tau branch There will be one problem that is focused because of having many clearly evidences at HD bank Vung Tau

branch for analyzing and finding solutions

The evidence of problem came from a survey customers in one month after HD bank Vung Tau branch launch the agriculture loan The branch conducted a survey about satisfaction

among respondents toward banking loan services in Chau Doc, Phuoc Tinh and Ba Ria

province transaction offices Based on summary report of 66 copies questionnaires completed and returned Ten questionnaires were found not to be correctly completed and therefore,

excluded from the analysis Hence, a response rate of 93% percent was attained Customer satisfaction was measured by consists of responses to a single question: “Overall, I am very satisfied with the bank’s services.” The result reflected 25% of customers did not agree with or were neutral toward this statement However, this figure was considered quite high when

compared to the average of banking industry, approximately 16.8% (Dinh & Pickler, 2012).Hence, the low loan growth rate was reduced due to lessen quantities of customers Customer satisfaction begins more and more importance to every organization especially in banking services It is one of the core factors determined the success of a bank Every bank, especially

HD bank Vung Tau branch must has a main objectives is satisfying their customers

Management and marketing theorists underscore the importance of customer satisfaction for a business’s success (McColl-Kennedy & Schneider, 2000; Reichheld & Sasser, 1990).In recent studies, businesses recognize that keeping current customers is more profitable than having to win new ones to replace those lost The cost of gaining a new customer is ten times greater than the cost of keeping a satisfied customer (Gitomer, 1998) Researches reveal that customer could defect at a rate of 10-30 per cent per year and meanwhile “a decrease of only 5 per cent in customer defection can increase profits up to 95 percent, depending on the industry” Keiningham et al., (2005) Satisfaction should always be a permanent goal for all businesses in

the purchase cycle In reality, there are many studies show that a bank could lose its

comparative advance by inefficient customers care policy

Firstly, customers who receive poor service will typically relate their dissatisfaction to between fifteen and twenty others (Anderson and Sullivan 1993).In addition, dissatisfaction was found to have a negative impact on repurchase intentions The critical factor to attaining customer loyalty is customer satisfaction If consistently providing low satisfaction leads to a lower repurchase intentions, then the expected number of times a buyer will repurchase should decrease accordingly Moreover, if acquisition costs for new customers are high, then such firms should be more inefficient in generating revenue

Secondly, customer satisfaction plays very important part in understanding financial performance in a banking service context Al-Hawari and Ward (2006) suggest that a positive direct relationship between customer satisfaction and financial performance The results

reported here suggest that customer satisfaction is also a mediating mechanism, through which automated service quality dimensions operate with respect to their impact on bank financial performance

Thirdly, according to Brady et al (2001), researchers and practitioners should identify customer satisfaction as a means of driving customer loyalty This implies that satisfied

customers are likely to engage in positive word –of- mouth and to continue doing business with the same bank This link is very strong, and it shows that if the bank managers want to make customers loyal, they should have some special strategies to satisfy the customer A satisfied

customer never takes the risk of moving to other competitors Customer satisfaction is

important to marketers because it is usually assumed a significant determinant of recurring sales, positive word-of-mouth, intention to repurchase, and customer loyalty When the author interviews customers and review financial data at bank, the evidence of these consequences of lack of satisfaction customer has been reveal

Firstly, HD bank Vung Tau branch has losing its loyalty customers They did not use more new services or looking for new bank services This evidence has support by Kotler and Keller (2006) They found that a customer who is highly satisfied will most likely exhibit the following characteristics : stays loyal longer, uses more new services and upgrades existing ones, talks favorably about the bank and its services, pays less attention to competing brands and advertising, and less sensitive to price and routinized transactions If bank truly gains the loyalty from their customers, it will cost less to serve them than the new customers will, because their transactions are routinized In case of HD bank Vung Tau branch, though the interview, most of customers denied to continue using HD bank services Moreover, they also recommendation for their friends and their relatives find others bank services

Secondly, the evidence of a lager effect had shown in HD bank Vung Tau branch’s’ financial statement In the results of operating reports, Mrs Bui Thi Anh Tuyet-vice director said the individuals’ loan only reached 98% the plan Lending activities did not meet the targets, lead to a decrease in 5% total profit before tax of the branch This would make the board directors involved to investigate the cause of the problem Below is the analyzing each

possible reason of low satisfaction among customer toward HD Vung Tau branch services to identify the reason for this problem

2.1 Possible reasons of low customers satisfaction

According to the result of in-depth interview, several reasons due to customer’s

dissatisfaction may be loan procedures made customers feel complicated, customers suppose that transaction costs interest rates too high, or loans amount, the payment and debt recovery plans is not fit with their capacity and the poor supporting services for customers In addition,

Mr Le Nguyen Tuan Hung-individual customer service and Ms Nguyen Thi Hoa Ly-tellers added “famers feel disappointed about the disbursement period slower from four to six days than the day that the bank staff promises”, so that they have difficulty in purchase the seed and fertilizer on time Some customers argue that loan files many procedures, complicated, require more records than other banks such as: require detailed proof loan purpose, repayment

Long time process the loan file

Customers complain about the loan services

of HD bank branch

Lack of knowledge about the

staff, this research offering a cause and effect diagram

These main reasons were identified by these opinions of the bank employees, managers and farmers However, in this case, HD bank Vung Tau branch do not have authority to change the loan process as well as the interest rate because it related to the head quarter permission

Every branch has must follow the general loan interest rate and process of the HD bank system

People/ staff (poor support)

Complicate process Inefficient policy

The percentage support lending on collateral value

Payment and debt recovery plan not reasonable

Place difficult to access

Figure 4 The cause and effect diagram

High interest rate Not kept

promise

Hence, in this study, author will focus on investigate issues which are belong to the authority of

a branch and can apply in short-term plan

In order to narrow down the range of the problem and better satisfy the clients, author continued to interview target customers of HD bank Vung Tau Through the answers of most of customers, they had problem related to the place of the branch, the bank staff and the loan policy More specific, the first problem was the location of the branch quite far from their house The second was the low percentage support lending policy base on collateral values of

HD bank’s Vung Tau branch The third issue was they felt that the loan paper quite hard to understand The last one was the bank staff did not keep their promises and understand about agriculture field

2.2 The HD bank network of business points problem

Through the information collected from six current HD bank’s customers, the first

problem related to the bank branch located This requirement of customers was understandable The same opinion was found in Junior’s study Junior, et al (2013) identified factors affected customers’ choice of retail banking on Ghana Customers wanted to choose a bank whose location from their homes and workplace is within a walking distance or if it would involve transportation, it will be at a lower cost and at a minimum risk It meant on proximity and convenience, customers preferred banks that are near their workplace or homes or banks

located at point where vehicular movement is frequent

To solve this problem, author analyzed the information, the data regarding to the

network of business points of HD bank branch In Ba ria Vung Tau province, Techcom bank had six branches and seventeen ATM spots operating in nine wards ACB with the advantage

of the early time join the Ba Ria-Vung Tau market has extended the largest network of

transaction office with eight branches and six transaction offices However, the information below, most banks still focus on the development of traditional branches Unfortunately, the traditional bank distribution channel always cost more money for operating

Table 1 Branch network and business location of three banks in Vung Tau city

Join Ba Ria-Vung Tau province market on 23/7/2009 26/9/2012 28/6/2005

(Source: hdbank.com.vn; techcombank.com.vn; acb.com.vn)

Every bank also wants to extend their network in order to provide the best service

However, according to the branch vice director, starting from 2012, the State Bank required banks must plan a detail business development when established a new branch In addition, an important condition required the non-performing loans ratio of the bank at the end of year does not exceed 3% of total loans If banks had a higher percentage, would have the approval of the Governor of the State Bank

After recovery period, HD bank Vung Tau also faced many difficulties in network

expansion It is difficult to decrease the non-performing loans ratio lower than 3% but still increase the loan growth rate Hence, in the current circumstances, with limited resources, how

banks to expanding networks but ensured compliance with government regulations, as well as cost savings The solution learned from the developed countries, more specific Australia The solution that Australian banks applied is to rationalize the banking system, minimize costs as well asuse many kinds of alternative distribution channels

According to Nguyen Van Thang the evaluation report by Mckinsey, (Network CN) From 1993 to 2001, Australian banking system has suffered big losses from real estate

Australian banks need to resist the downward trend of revenues and profits Australia's banking system has used many kinds of alternative distribution channels services, such as ATM,

EFTPOS (EPTPOS terminals), Phone banking and Internet banking Moreover, many banks have been opening more bank branches located in the store, some of them linked to the postal system, in cooperation with the major retailers and pharmacies The rural trading centers were also set up to support people in rural areas (transaction Rural Centres - RTCs) The RTCs offer basic banking, postal services, medical services, telephone and internet These services meet the needs of people in remote areas have the educational level is not high After applied this solution, electronic distribution was a positive alternative to branch banking with lower

investment costs Consequently, customers have more opportunities to choice the form of bank distribution, be served 24/7 These were outstanding advantages of electronic distribution channels Australian banks encourage customers to use electronic transaction channels through fee policy It contributed to shift from the traditional bank branch into a more modern trade channel

This model banking channel has the benefit was the reduction in the number of bank branches to bring tremendous benefits to the banks (cut down the staff working in banks,

closure of bank branches which was inefficiencies operating, save wage costs, costs of

equipment, operating costs ) However, it also had the cost are reduction in the number of bank branches to bring tremendous cost to the banks In addition, the bank must invest in technology advances

Therefore, to combine the advantages of the Australian banking system, in year 2016,

HD bank will modernize the banking system in Vung Tau city Allow customers to more active

in trading on phone and computers Thereby, reducing its branches in Vung Tau city and

expand the transactions to the surrounding areas like Xuyen Moc, Dat Do To summary, this problem was belonged to the strategic plan of HD bank Vung Tau branch board directors This problem would be in the long-term plan of HD bank Vung Tau branch Therefore, in this study author will focus to investigate another problem

2.3 The HD bank’s percentage support lending base on collateral values

According to the result of interview, customer gave their personal point of view about the loan amount They argued that it did not fit their family’s financial demand HD bank policy has support loan amount by only 40% -50% of the value of collateral This low

percentage loan support is also common problems of many banks

The first reason was HD Bank is a commercial bank All banking activities were for

was limiting the risk that the bank cannot collect the debt In the case, the collateral decreased

in value, the bank had still recollected the loan capital The third reason was because by the low value of agricultural land Because of their low value collateral, farmers almost face plenty of difficulties to access the bank capital to develop their production ability The higher percentage support lending bank offer, the bigger amount of loan those farmers could get The higher value

of loan collateral leads to the easier bank loan being approval This mean the farmer would be happier This requirement also found in researches by Mirko Bendig et al (2009), Zeller (1994), Pham Bao Duong and Yoichi Izumida (2002) They found that land areas that affect and

positively correlated with farmer's ability to borrow Nguyen, Tran, (2015), also found that agricultural lending households are affected by factors such as value of collateral, seniority, average income, social relation… In these elements, the value of collateral is a prerequisite, important condition for farmers to be able to get a loan

Currently, the agricultural sector has been more stable, but Viet Nam is an agricultural country with small production scale, investment in perennial plant and animal still has many potential risks Recently, the government has the supporting policy for farmers Mr Vo Thanh Tuan- staff of Management and credit support department said “starting on 07/25/2015, the decree 55/2015 /ND-CP will be applied According to this decree of the government, the new credit policy will allow individuals and families who invested in crop, livestock and fisheries can access a bank loans from 50 million to 2 billion without collateral The policy was expected

to remove the knot of capital for agriculture and rural development has been already existed a long time.”

In addition, the current economic data shows that agriculture filed is considered have a stable growth Hence, insurance companies offer a numerous of mortgages insurance in the agricultural sector Therefore, the risk of irrecoverable loans also has decreased HD Bank is also preparing to promulgate a new policy raising the capital support up to 70% -80% to suit the needs of farmers and increase competitiveness for the bank loan services

Therefore banking leaders would consider adjusting the loan maturity problems, Mr Vo Thanh Tuan also added “on the market, more and more competitive banks so customers have more choices to borrow and prefer to deal with bank has better service, response their need on time Therefore, at the beginning of each quarter, staff of Management and credit support department will coordinate with Product development department in order to assess and review the loan policy and product features HD bank Vung Tau branch will periodically report to the headquarters about the feature of the product need to be changed in order to meet customers’ expectations.” Regarding this problem, the HD bank managers already have prepared the new policy for agricultural bank loan Hence, in this study, the author will investigate the third reason for HD bank Vung Tau branch problem

2.4 The capacity of bank staff and the famers

Three possible reasons analyzed above might lead to the low loans growth rate of HD bank However, we eliminated these factors are the HD bank loan services policy, the HD bank network of business points The remaining factors are employees do not have in depth

understanding about agriculture field and farmers feel the loan form quite hard to understand

The first factor is understandable and quite similar with some research Heskett et al (1997) provide a link satisfaction with the productive employees Moreover, satisfaction is largely influenced by the value of services provided to customers In addition, this value is created by loyal and productive employees This similar idea has provide in the research of McKinsey& Company (2014) bank staff play a key role in mediating between the driving force

of systems and the need to retain customer loyalty by providing a good quality personal service across the counter

Two evidences found by the author reinforce the limit understanding of bank staff The first evidence came from the result of customer’s interview Most of customers comment about the bank staff was lack of knowledge about the agricultural production Moreover, they also did not keep promises These opinions of farmers also similar to the result of Dinh & Pickler research in 2012 They identified that (bank staff should do as promised) reliability and (bank staff need to understand customer’s specific needs) empathy were the most important factors in Viet Nam banking industry The second evidence came from the feedback of managers Vung Tau bank branch always had a training plan for every year However, for some sectors such as agriculture is quite peculiar because products- income of farmers depend on many factors In addition, each province has differences type of land and many kind of plants and livestock cause more difficult for evaluating Unfortunately, the bank staff recruiting description did not required the candidates have knowledge about agriculture field

The second problem related to loan process quite hard to change because of the

education background of customers’ themselves It also strictly sticks with the HD bank system

regulations The author finds these evidences of this second problem The first evidence was through the result of the depth-interview The second one was from rural household survey in

12 provinces of Viet Nam of Tarp, F in 2010 In order to improve this situation, the author continues to find a reasonable solution for HD bank Vung Tau branch problem

3 The solution

For increasing the capacity of bank staff, many solutions can apply in reality There is may be a plan to recruit additional staff They have knowledge related to agricultural activities However, all this can increase business-operating costs of the branch every month Because of the branch must pay the salaries for these employees Another solution that is organizing some workshops in order to help employees update their knowledge and share the work experiences with others Because of the importance of this training solution was stressed in McKinsey& Company research in 2014 They suggest that among staff projects, training was the most

important It means staff issues were being tackled mainly by providing intensive staff training

However, high competition among banks, the training should be in accordance with own characteristics of Ba Ria-Vung Tau province as well as capture the unique needs of each

individual customer "To maintain market share and strengthen customer loyalty, leading banks are implementing strategic pricing and delivering a better customer experience Customer

relationships: to deliver the ultimate customer experience, banks are striving to connect with customers on a personal level." (Garvey et al., 2011, p.16) Recently, in order to improve the competitiveness and cost savings, according to the survey of commercial banks in the US, the trend of Western banks are taking advantage of social media channel such as YouTube, face

book, twitter A regional Midwestern bank used YouTube to spread brand awareness by

producing a series of financial education videos aimed at college students In 2010, a global financial services firm used Face book for its philanthropic effort to promote its community giving campaign, gaining 2.5 million fans in the process In summary, the advantages of

information channels banks can learn more about the individual needs of customers as well as raise comments, customer satisfaction Thereby, cooperative relationship between the bank and the customer, the bank staff understands and better meet the individual needs of their

advantages and disadvantaged when applied these two solutions in the reality solution of HD bank Vung Tau branch This part below focus on building a training plan for staff and

leadership and issues related to it

3.1 The alternative 1

For cost saving and increasing the feasibility, author desired to create a plan that is suitable for the bank employees and characteristics of HD bank Vung Tau branch Therefore,

author collected more detail number about the employees of HD bank Vung Tau based on work positions According to the report of Administrative and Human resources department of HD bank branch in Vung Tau city, the total number of bank branch is 87 persons Through this table above, not all the bank employees, just the board directors, head of department and tellers were need to join the training course

Table 2 The report about employees of HD bank-Vung Tau branch

Head deputy & transactions’ directors 12 19% 12 14% 12 14%

(Source: Administrative and HR department-HD bank Vung Tau branch)

The advantage of this solution not only enhances experience exchange among

employees but also for education During the training session, branch staff can learn common knowledge about typical agricultural products especially in Ba Ria-Vung Tau province

Through learning session, bank staff has a chance to communicate with others, sharing

knowledge and difficulties as well as improve their own banking skills

In addition, this solution also has advantage in decreasing the cost when the branch organizes the course in Ho Chi Minh City Because of the cost of renting a hall, was shared

The cost of the course has split in smaller number for each learner There was a Training

Center of the HD bank head quarter When necessary, the HD bank headquarter organizes a meeting or training course not only for one branch but also for all the bank system Hence, it can save a part of cost for branch because of the rent the hall was decreased

However, this solution also has disadvantage due to hard to choose the time to start the course This becomes more and more difficult because of the busy schedule of the bank

managers Because it requires most of bank staff and managers arrange a common schedule to come to Ho Chi Minh City to attend the class

Table 3 Expected cost of training bank staff in three days in HCM city

Unit: VND

Invited lecture (3 days) 10,000,000 10,000,000 The meal cost 3 times /day (x 3 days x 18 persons ) 100.000/per day 5,400,000 The hotel cost (about 9 rooms x 3 days) 380,000/room/day 10,260,000 The transports cost (rent a 30 seats car x 2 times) 6,000,000/time 12,000,000 The learning materials ( x18 persons x 3 days) 30, 000/person/day 1,620,000

(Source: Information on Administrative & human resource departments department)

In addition, other disadvantage of this solution was the retraining cost If one of these staff quit the job, the bank must retrain for the new employees In that case, the bank cost more time and money to invite the lecturers The information above was all about advantages and

disadvantages of the first solution In the next part, author will consider to the second

alternative

3.2 The alternative 2

Because most of farmer being a member of Farmer Associations They joint this profit organization for economic benefit and knowledge (Tarp, F, 2011) It means Farmer Associations play an importance role in providing information for household, their relatives, and friends.Banks will coordinate with Farmer Associations and organize workshop

non-conference to update employees’ knowledge Through this activity, famers can share their experiences and familiar with loan paper This solution has advantage in attract most of famers

in Ba Ria Vung Tau province

In addition, other advantage of this solution is though the Farmer Associations, bank can easy get more information about the potential customers Because of every member must provide information about their address, age and numbers of family members…This is a

different information for bank can use for products development plan

Moreover, other advantage of this solution is cost saving for less of promotion activities, farmers become familiar with the loan procedure, and loan papers It will help farmer and the bank staff easy to understanding others However, the disadvantage of this solution is the bank must depend on the Farmer Associations arrange the time, because the program also adjust by Farmer Associations In addition, the schedule for arrange meeting depend on farmers and their plants season