The urgency of the topic
The Vietnamese and global economies are currently grappling with significant challenges due to the ongoing economic crisis and recession Domestic commercial banks are adversely impacted by various unfavorable factors that directly influence their business performance Furthermore, the competitive landscape is intensifying, as foreign banks with substantial resources and expertise increasingly penetrate the Vietnamese financial market.
Lending is a crucial yet risky activity for commercial banks, directly impacting their profitability To ensure stability and growth, both the government and banks prioritize the development of lending practices, which also supports capital supply for production and business, ultimately benefiting the overall economy Recently, lending to individual customers in the Science and Technology sector has gained significant attention, particularly at the Bank of Investment and Development of Vietnam (BIDV), which has identified science and technology lending as one of its ten strategic development goals for 2020.
The Joint Stock Commercial Bank of Investment and Development of Vietnam (BIDV), established on April 26, 1957, has historically concentrated its credit activities on corporate clients, with these accounts representing 80-90% of its total credit balance However, individual customer credit has been underdeveloped, accounting for less than 15% of total outstanding loans In response to this imbalance, BIDV shifted its strategy at the beginning of 2019 to prioritize the development of credit products for individual customers, particularly in the area of consumer loans.
However, the implementation still has many difficulties and challenges such as: the product system is not diversified, there are no competitive differences
BIDV faces significant challenges in developing its science and technology lending activities due to a shift in focus from wholesale to retail banking The continuous turnover of staff, who struggle to adapt to new job requirements, negatively impacts business performance Compounding this issue, established competitors like Sacombank, ACB, Techcombank, VIB, and SHB have long been engaged in retail banking with a high level of professionalism, making it increasingly difficult for BIDV, particularly BIDV Chuong Duong, to compete effectively in this sector.
Joint Stock Commercial Bank of Investment and Development of Vietnam - Chuong Duong Branch (BIDV Chuong Duong) was established on September 27,
In recent years, lending activities at BIDV Chuong Duong have seen significant achievements, particularly in a rapidly urbanizing area characterized by stable growth and a high concentration of economic organizations and individuals The favorable conditions for lending to individual customers have contributed to this success (Banking Journal, 2019) Despite the positive outcomes in science and technology lending, there are still limitations that need to be addressed for future development Recognizing the critical role of science and technology lending in both economic and political spheres, I have chosen to research "Developing Lending Activities for Individual Customers at Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong Branch." This study aims to assess the current state of consumer credit and personal lending at BIDV Chuong Duong and propose strategic solutions for enhancing operational development.
Overview of research
- A Burak Guner, 2007, “Bank Lending opportunities and credit standards”
This article investigates the hypothesis that credit-screening standards can initially increase and then decrease based on the quality of a bank's potential borrowers, which may fluctuate with the business cycle or across different lending market segments A significant finding is that banks targeting borrowers in the middle-quality range often experience better-performing loan portfolios compared to those focusing on either low-quality or high-quality loans By analyzing banks' secondary-market loan sales as an indicator of lending opportunity richness, the study reveals an inverse U-shaped relationship between loan portfolio performance and loan sales activity This pattern has important policy implications, particularly as regulators express concerns that countercyclical variations in credit standards could destabilize business cycles.
- Felicia Omowunmi Olokoyo, 2011, “Determinants of Commercial Banks”
This study utilizes a comprehensive bank-level dataset and the GMM estimator technique, as outlined by Arellano and Bover (1995), to examine the factors influencing the profitability of 10,165 commercial banks across 118 countries from 1998 to 2012 By categorizing countries into three income levels, the research reveals that the determinants of bank profitability significantly account for the variations observed among banks in low-, middle-, and high-income nations Furthermore, the analysis indicates that these profitability determinants differ markedly across income levels in terms of their significance, direction, and magnitude, highlighting the crucial role that income level plays in shaping the factors affecting bank profitability.
- Bogdan Florin, 2015, “The Quality of Bank loans within the Framework of Globallization”
This paper outlines the concept of “quality of bank loans,” and defines the
Non-performing loans (NPLs) serve as a direct indicator of loan quality and reflect the overall qualitative level of a bank's loan portfolio This article explores the interdependencies of NPLs, particularly in the context of globalization, and identifies the macroeconomic factors that influence their variations It also examines the feedback effects of NPLs on the economy The analysis utilizes econometric models tested on available data from Romania to provide insights into these relationships.
EU, the results confirming the validity of these models b Domestic Studies:
In his 2011 master's thesis at the University of Economics Ho Chi Minh City, Nguyen Ngoc Le explores the theoretical foundations of personal credit development within commercial banks, specifically focusing on the Joint Stock Commercial Bank for Foreign Trade of Vietnam The study evaluates the current state of personal credit development at the bank and offers strategic solutions aimed at enhancing its personal credit services.
Vuong Hong Ha's 2011 master's thesis, titled “Retail Credit Development at Bank of Investment and Development of Vietnam - Bac Giang Province Branch,” examines the retail credit activities of the bank from 2009 to 2011 The research highlights key aspects of retail credit operations and offers several strategic solutions aimed at enhancing retail credit development within the Bac Giang Branch of the Bank of Investment and Development of Vietnam.
Le Thi Ngoc Xuan's 2011 master's thesis, titled "Credit Development at the Bank for Agriculture and Rural Development, Bac Ha My District Branch," explores fundamental theoretical concepts related to credit development Conducted at the University of Da Nang, this research provides valuable insights into the mechanisms and strategies for enhancing credit services in rural banking.
5 commercial bank credit, proposed solutions to credit development at Bank for Agriculture and Development Bac Ha My District Branch Rural Development
Tran Thi Tuyet Lam's 2009 thesis titled "Solutions to Develop Retail Banking Services at Joint Stock Commercial Bank for Industry and Trade, Tra Vinh Province" examines successful retail banking strategies from international banks in Thailand, Singapore, and Japan The author emphasizes the importance of adapting these experiences to enhance the economic development orientation of the local branch in Tra Vinh.
Huynh Nguyen Duc Huy (2007) explores the enhancement of lending quality to individual customers at Non-State Commercial Joint Stock Bank in Ho Chi Minh City This research highlights various practical challenges that banks encounter, which contribute to potential credit risks Additionally, the study delves into the complexities of credit risks associated with lending activities to multiple customers, providing valuable insights for improving banking practices.
Nguyen Thi Dang Thuy's 2014 thesis explores the lending practices for individual customers at the Da Nang branch of Vietnam Prosperity Joint Stock Commercial Bank It offers a theoretical framework and analyzes the current state of individual customer loans, ultimately presenting assessments, solutions, and recommendations to enhance lending strategies at the bank.
In her 2015 thesis, Pham Thi Thuy examines the lending activities for individual customers at the Joint Stock Commercial Bank for Foreign Trade of Vietnam - Thanh Cong Branch The study offers a theoretical foundation for personal customer loans and utilizes both primary and secondary data to analyze the current state of individual customer loans at commercial banks Based on her findings, Thuy provides recommendations and solutions aimed at enhancing the development of individual customer loans at the bank.
An extensive review of studies and documents concerning individual customer loans in commercial banks has established a comprehensive theoretical framework This framework clearly defines the concept of lending to individual customers, outlines the development of personal customer loans, identifies key indicators for evaluating loan efficiency, and proposes solutions for enhancing personal customer loan offerings.
6 loans However, the indicators reflected in the studies are not yet strict, the solutions are general, not specific, not innovative and associated with reality
The thesis focuses on enhancing lending activities for individual customers at the Chuong Duong Branch of the Joint Stock Commercial Bank for Investment and Development of Vietnam It explores strategies to improve customer service and increase loan accessibility, aiming to boost overall lending performance The research highlights the importance of tailored financial products and efficient processes to meet the diverse needs of individual clients, ultimately contributing to the bank's growth and customer satisfaction.
The thesis examines the current state of individual customer loans at the Chuong Duong Branch of Vietnam Joint Stock Commercial Bank for Investment and Development It provides actionable recommendations that can enhance banking practices not only for this specific branch but also for commercial banks across Vietnam, ensuring its relevance and uniqueness compared to prior research.
Research objectives
This article examines the current lending activities for individual customers at the Chuong Duong Investment and Development Commercial Joint Stock Bank It aims to propose effective solutions to enhance lending operations for individual clients at BIDV Chuong Duong Branch.
- Contributing to systematizing and clarifying the theoretical and practical basis for the development of commercial banks' individual customer lending activities
This article evaluates the current state of individual customer lending activities at the Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch It aims to provide an authentic assessment of the results and limitations of these lending activities, while also identifying the underlying causes that hinder the development of individual customer lending at the branch.
- Proposing some solutions to develop lending activities for individual customers at Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch in the coming time
Research question
Research on this topic will focus on answering the following questions:
1 Scientific basis for developing lending activities for individual customers at commercial banks?
The current lending landscape for individual customers at the Joint Stock Commercial Bank for Investment and Development of Vietnam's Chuong Duong Branch reflects a focus on enhancing customer accessibility and satisfaction To further develop lending activities for individual clients, the bank is implementing strategies that include personalized loan products, streamlined application processes, and improved customer service These initiatives aim to attract more individual borrowers and foster long-term relationships, ultimately contributing to the bank's growth and competitiveness in the financial sector.
3 What is the level of customer satisfaction with personal lending activities at BIDV Chuong Duong?
Object and scope of the study
- Research object: Personal customer lending activities at Joint Stock
Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
+ Scope of space: Joint Stock Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
+ Scope of time: Studying business activities of Joint Stock Commercial Bank of Investment and Development of Vietnam - Chuong Duong Branch in the period from 2018 to 2020
This article explores the theoretical and practical dimensions of individual customer lending at BIDV Chuong Duong within Vietnam's socio-economic landscape and the global context By clarifying key theoretical concepts and evaluating the current lending situation, it aims to propose strategic solutions for enhancing lending activities for individual customers at BIDV Chuong Duong through 2025.
Research method
The author approaches the research object (Developing lending activities for individual customers at BIDV Chuong Duong) from clarifying theoretical issues to
8 identifying research objects and then to determining solutions to developing lending activities for individual customers of BIDV Chuong Duong
To achieve the set objectives, the thesis uses the following main methods:
To evaluate the evolving lending activities for individual customers at BIDV Chuong Duong, a statistical analysis method is employed, which aggregates and details data across various stages This approach ensures accurate comparisons and representations, supported by visual aids such as diagrams and tables.
The system analysis method is utilized to examine BIDV Chuong Duong's lending activities for individual customers, considering it as a distinct module within the broader commercial banking framework and its integration within the overall Vietnamese banking system.
(3) Survey method: Using customer survey to assess the quality of individual customer lending activities at BIDV Chuong Duong
(4) Forecasting method: Used in forecasting data indicators in lending activities to individual customers at BIDV Chuong Duong in the future
(5) Interpretive and inductive methods: Used to analyze and evaluate the current situation and propose solutions to developing lending activities for individual customers at BIDV Chuong Duong.
Proposed thesis structure
In addition to the introduction, conclusion, table of contents, references, a list of tables, a list of abbreviations, the thesis includes 3 chapters:
Chapter 1: Theoretical basis for the development of commercial banks' lending to individual customers
Chapter 2: Development situation of lending to individual customers of Joint Stock Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
Chapter 3: Solutions to develop lending activities for individual customers at Joint Stock Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
General overview of individual customer loans at commercial banks
The current legal framework lacks a specific definition for lending to individual customers; however, it can be inferred from the general definition of lending in the Law on Credit Institutions Lending to individual customers is essentially a form of credit extension, where a lender provides a specified amount of money to an individual for personal use, with an agreement on repayment of the principal and interest over a defined period.
Personal lending activities promote circulation of excess and idle capital in society, to meet the needs of using capital for business activities or consumption of individuals and households
Personal loans have been a long-standing focus for credit institutions globally, yet in Vietnam, they have not received significant attention until recently The emergence of various personal loan products has quickly captured the interest of consumers, highlighting their substantial growth potential With a large population primarily composed of working-age individuals, Vietnam's expanding income levels and rising spending needs create a favorable market environment for personal loans.
The trend of "buy now, pay later" is rapidly gaining popularity, particularly in urban areas, as consumers seek flexible spending solutions This growing demand for personal loans has captured the attention of banks, allowing them to confidently promote their credit offerings to meet customer needs.
Individuals and households often require capital to support their living expenses, consumption needs, or to enhance their production and business activities Unlike businesses and economic organizations, these individuals and households seek borrowing options tailored to their specific financial situations and goals.
11 customers have a large number, diverse loan needs, but they are not regular, not greatly affected by economic and cultural environmental factors - society
1.1.2.2 Small loan size, large number of loans
Compared with production and business loans, the value of personal loans is not large This is partly due to the moderate value of consumer goods and services
Many borrowers possess significant assets and seek bank loans primarily to enhance their personal consumption While individual loan amounts may be modest, the overall volume of personal loans at banks is substantial, driven by a high demand from numerous customers.
Personal loan interest rates are typically higher than those for commercial bank loans due to the elevated costs associated with lending to individual customers, along with the increased risk involved In Vietnam, the interest rates for personal loans are generally 1.2 to 1.5 times higher than those for business loans, reflecting the less sensitive nature of personal loan interest rates.
Commercial banks incur significant expenses in providing loans to individual customers, encompassing both human resources and operational costs Lending to individuals presents complexities due to varying financial situations, resulting in numerous loans that are generally of smaller size and value.
Loans to individual customers carry significant lending risks due to the fluctuating financial situations of borrowers, which can be influenced by their employment and health Many individuals and households lack strong management skills and experience, as well as advanced scientific and technical knowledge, resulting in limited market competitiveness Consequently, banks face potential risks such as borrower unemployment, accidents, or bankruptcy, highlighting the importance of thorough appraisal processes in lending practices.
12 lending decision for individual customers is often incomplete, which is also one of the reasons leading to the risk of lending to individual customers
1.1.3 Methods of lending to individual customers of commercial banks
1.1.3.1 Based on the purpose of using the loan
Is a loan to meet the spending needs of individuals and households such as: building a house, repairing a house, buying a car, buying household equipment, studying abroad, getting medical treatment, etc
Loan for production and business
Loans designed to enhance capital for production, business, and personal investments are essential for individuals and households These loans can be utilized to supplement working capital, acquire fixed assets, and invest in facilities that support various business activities and investments.
1.1.3.2 Based on the loan method
Commercial banks offer a lending service that involves creating specific loan documents based on an agreed-upon loan amount between the bank and the borrower Each borrower must submit a loan application detailing the desired loan amount, interest rate, and payment term for every loan they seek.
The bank provides loans to customers to support seasonal production and business activities aligned with the annual production cycle The agreement allows the principal balance from the previous cycle to be utilized for the subsequent cycle, with the stipulation that this usage cannot extend beyond two consecutive production cycles.
A bank offers a written agreement for a loan method that allows customers to exceed their current account balance up to a predetermined credit limit within a specified timeframe This approach is typically utilized for short-term loans.
Loans according to the credit line
A lending method involves an agreement between the bank and the customer to establish a credit limit This limit is maintained from the moment it becomes effective until it expires or is replaced by a new loan limit.
1.1.3.3 Basing on loan security measures
A form of loan in which the Bank provides the condition that borrowers must mortgage assets, pledge or have a third party's guarantee as collateral in accordance with the bank's regulations
It is a form of lending where the bank does not require customers to have collateral A loan method where the loan limit depends on the creditworthiness of the customer
1.1.4 The role of personal loans in the economy
Contributing to creating dynamism for all economic sectors
Personal loans serve as a vital financial resource, enabling individuals to address various expenses, from essential needs to luxury items, ultimately enhancing their quality of life To meet the rising demands of consumers, all sectors of the economy must boost production, leading to job creation and fostering competitive advantages against both domestic and international rivals during the integration period.
Personal lending plays a crucial role in society by effectively utilizing idle capital resources It facilitates the smooth circulation of funds from areas with excess capital to those with shortages, enhancing overall economic efficiency and productivity.
Development of personal loans at commercial banks
1.2.1 Concept about development of lending to individual customers
The growth of lending to individual customers is characterized by a rise in both sales and outstanding loans within the overall lending structure This expansion is accompanied by an increase in the variety of services offered, enhanced operational networks, and improved product utilities, all aimed at elevating the quality of service provided to customers.
Regarding quality: The development of lending to individual customers is the best response to the requirements of customers (depositors and borrowers) in the credit
16 relationship, ensuring safety or limiting capital risks, increasing profits profitability of the bank, suitable and serving socio-economic development
Credit quality, from a bank's business perspective, refers to secured loans utilized appropriately in line with the bank's lending policies It emphasizes timely repayment of principal and interest, ultimately generating profits for the bank while minimizing operational costs This focus on credit quality enhances the bank's competitiveness in the market, strengthens economic relationships, and supports overall growth and development.
Quality credit options cater to customer needs by offering reasonable interest rates and flexible terms These lending procedures are designed to be simple and convenient, making them appealing to a wide range of customers while still adhering to essential credit principles.
1.2.2 Quantitative indicators to evaluate the development of lending to individual customers
Personal loan turnover is a key indicator that measures the total amount of loans disbursed by a bank within a specific timeframe, regardless of loan recovery status Typically assessed on a monthly, quarterly, or yearly basis, this metric showcases the volume of lending activities without being influenced by the duration of the loans.
Total outstanding personal loans serve as a key indicator of the bank's contribution to the economy, encompassing short-term, medium-term, and long-term loans A low total loan balance may indicate weak bank operations, limited expansion capabilities, ineffective marketing strategies, and insufficient staff qualifications However, a higher total loan balance does not necessarily equate to better credit quality, as it may also reflect underlying credit risks that the bank must manage.
Outstanding balance in the period = outstanding balance in the previous period + loan sales in the period - debt collection in the period
The number of individual customers is a key indicator of the bank's credit service usage A higher customer count signifies an expansion in the scale of personal loans and indicates a stronger focus from the bank on serving individual clients.
Growth in absolute number of customers:
Increase, decrease in the number of customers = Number of customers per year (t) - Number of customers per year (t-1)
This indicator enables banks to evaluate their growth in scale and customer base As demand for personal loans rises, particularly among young consumers, it drives the development and enhancement of the personal loan market.
* Personal loan debt collection ratio
Debt collection is the total amount that the bank has collected from its loans including the current period and the previous period
This indicator reflects a bank's effectiveness in collecting debts incurred both during the current period and from prior periods, offering insights into its debt collection capabilities for future periods.
Personal loan collection ratio Personal loan debt collection x 100%
The effectiveness of personal lending activities at the Bank is reflected in the high personal loan collection ratio, which significantly contributes to overall personal loan sales Additionally, the low levels of bad debts and overdue debts indicate a strong performance in managing personal loan portfolios.
- Personal loan delinquency rate Overdue balance of personal loans x 100% Total outstanding personal loans
The overdue debt ratio measures the unpaid principal and interest balance relative to the current outstanding loans, indicating the amount overdue for every 100 VND This key metric serves as an essential indicator of a bank's lending quality, where a high delinquency ratio signifies poor loan quality, and a low ratio reflects strong credit quality.
Banks closely monitor their overdue debt ratios, as these significantly impact their lending activities According to Decision No 493, a bank is deemed weak if its overdue debt ratio exceeds 7% Conversely, a bank with an overdue debt ratio below 5% is recognized for its strong credit performance and high credit quality.
- Personal loan bad debt ratio Bad loans for personal loans x 100% Total personal loan balance
The bad debt ratio, which represents the outstanding debt classified from group 3 to group 5 relative to total outstanding loans, is a key indicator of a bank's lending quality A lower bad debt ratio signifies better lending practices, and a ratio below 2% indicates that the bank maintains good credit quality.
* Credit turnover for personal loans
This is an indicator reflecting the frequency of capital use, assessing the ability to manage credit capital and credit quality in meeting customer needs
Credit turnover for personal loans Personal loan debt collection x 100% Average personal loan balance
The loan turnover rate of a bank indicates how effectively its capital is utilized for borrowing, with higher rates signifying greater engagement in production and circulation cycles This metric reflects the bank's credit management capabilities and assesses the efficiency of its science and technology lending activities However, it is crucial to consider the average loan balance; a low average may inflate turnover figures without indicating high credit quality, instead suggesting inadequate lending capacity.
* Income from personal lending activities
The profitability of personal lending activities is indicated by this metric, which also evaluates the appeal of CVCN in comparison to other loan types Furthermore, this ratio assists the bank in formulating a strategic direction for enhancing its personal lending operations.
Rate of income from personal loans Income from personal loans x 100% Total income from loans
1.2.3 Qualitative criteria to evaluate the development of lending to individual customers
The bank effectively addresses the diverse loan needs of individual customers, ensuring satisfaction with its loan products Additionally, customers benefit from supplementary services such as accounts, Internet Banking, insurance, and various digital technology offerings By doing so, the bank fully accommodates the growing demands of its clientele.
* Prestige and position of the Bank in the country and internationally:
Personal loan development experience of several Vietnamese commercial
1.4.1 Experience in science and technology loan development in some commercial bank branches a Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
Vietcombank offers a wide range of convenient financial products tailored for individual customers, with a particular strength in credit card loans As the only bank in Vietnam to accept all types of credit card applications, Vietcombank stands out in the competitive banking sector.
Explore the seven most popular bank card brands globally, including Visa, MasterCard, JCB, American Express, UnionPay, Diners Club, and Discover These brands offer over 20 domestic card products, catering to a diverse range of customers both locally and internationally.
Vietcombank is dedicated to developing science and technology loan products tailored to meet the specific needs of its customers By clearly identifying target customers, Vietcombank designs valuable and meaningful loan offerings that adhere to standardized pricing policies This approach ensures that the loan products are not only synchronized with customer interests but also effectively address their unique requirements, making them highly suitable for those seeking financial support in the science and technology sectors.
Vietcombank leverages a state-of-the-art technology infrastructure to enhance its automatic processing of science and technology loan services, significantly improving customer service capabilities This advanced approach ensures that customers benefit from fast, secure, and efficient services tailored to their needs in the science and technology sector.
Vietcombank actively implements sales emulation programs to enhance sales performance across its network, motivating and encouraging staff at all levels Employees who excel in sales are recognized and rewarded, with top performers given opportunities to attend training programs or participate in international surveys Similarly, the Joint Stock Commercial Bank for Industry and Trade of Vietnam - Hanoi Branch (Vietinbank Hanoi) also emphasizes the importance of sales excellence within its operations.
Vietinbank Hanoi, situated at 6 Ngo Quyen, Hoan Kiem District, is a consistently recognized branch within the Vietinbank system for its exceptional performance Focusing on both large and traditional customers, the branch has effectively integrated science and technology into its services while establishing tailored preferential policies for various customer segments By regularly updating its offerings and incentives, Vietinbank Hanoi aims to enhance and develop its customer relationships, ensuring a high level of service and satisfaction.
30 relationship between the branch and customers Thanks to that, the branch has a large and stable loyal customer base
The branch prioritizes ongoing staff training to enhance customer service Each location features a dedicated department responsible for disseminating new documents and guiding staff on their implementation This department organizes immediate professional training following the release of new materials and conducts regular re-training sessions to ensure all branch personnel consistently meet job requirements.
1.4.2 Lessons learned about personal loan development for Vietnam Joint Stock Commercial Bank of Investment and Development - Chuong Duong Branch
To stand out in a competitive market, banks must differentiate their loan products by offering unique benefits that surpass those of their competitors BIDV's housing loan products are highly regarded for delivering practical advantages that resonate with customers Additionally, the BIDV - Chuong Duong branch excels in the market by providing card products and services that offer exceptional convenience, making them a preferred choice among customers compared to other banks.
Expanding the transaction network is crucial for advancing science and technology lending To effectively meet the loan demands in this sector, banks should strategically increase their branch presence in both domestic provinces and international locations Additionally, establishing more transaction offices in key economic regions and emerging urban areas will optimize the growth potential for science and technology loans, ensuring better access and service for borrowers.
Banks should develop tailored loan products that cater to the unique needs of different customer groups, as each group has distinct production, business, financial, income, and loan objectives By focusing on specific characteristics that align with their operational goals, banks can create attractive and relevant loan offerings This approach not only maximizes customer satisfaction but also helps banks achieve their growth targets effectively.
To enhance operational efficiency, banks must modernize and integrate advanced technology across all functions This shift enables better control and expedited processing of transactions If banks continue to rely on outdated technology, they risk falling behind in the evolving landscape of banking modernization It is crucial that any technological upgrades align with the bank's internal capabilities and the broader economic context Striking the right balance is essential, as excessively modern or outdated technology can negatively impact the quality of the interbank payment system.
To enhance product and service quality, banks should actively engage with customers through regular interactions Establishing a dedicated social network center, similar to BIDV, allows for real-time communication and feedback collection Additionally, organizing customer meetings and promotional events can strengthen relationships, introduce new offerings, and gather valuable insights from customers, ultimately leading to improved services and products.
To ensure survival and growth, banks must implement preferential policies for large and traditional customers, as these clients are essential to their success By fostering loyalty through tailored incentives, banks can maintain outstanding loans from existing customers while also attracting new clients through referrals from their traditional customer base.
To enhance sales performance, banks must implement motivational strategies for their sales staff, including sales emulation programs tailored for each employee Recognizing and rewarding high-performing employees is essential, as it fosters enthusiasm and determination, leading to successful task completion.
Professional training for employees is crucial as they are the primary link between the bank's products and its customers Consistent training and professional development enhance staff qualifications, ensuring they possess the necessary knowledge to effectively serve clients The training curriculum should prioritize real-world business scenarios, particularly those related to marketing loan products and addressing customer loan requirements.
An overview of the formation and development process and the business
of Vietnam - Chuong Duong Branch
2.1.1 An overview of the Joint Stock Commercial Bank of Investment and Development of Vietnam - Chuong Duong Branch
2.1.1.1 The process of formation and development
BIDV Chuong Duong, a newly established branch of the Joint Stock Commercial Bank of Investment and Development of Vietnam in Hanoi, originated from the Laos-Vietnam Joint Venture Bank, which was founded in 1999 Over its 14 years of operation, it has effectively facilitated projects between the two governments and financed significant investments by Vietnamese enterprises in Laos, achieving an impressive average growth rate of 40% per year By September 30, 2013, the bank's total assets reached nearly $550 million, with a charter capital of $70 million, making it the second-largest bank in Laos BIDV Chuong Duong has maintained profitable operations and developed a robust network, including its head office in Vientiane and seven branches in key economic areas, one of which is located in Hanoi The bank's contributions have significantly strengthened the traditional friendship and cooperation between Vietnam and Laos, earning recognition from the leaders of both nations.
To enhance its strategic development and solidify its presence in the Laos market, LVB has decided to transfer the operations of its Vietnam branch to BIDV, as agreed upon by its parent banks.
With the approval of the governments of Laos and Vietnam, the Central Bank of Laos and the State Bank of Vietnam have facilitated the transfer of LVB's branch operations in southern Vietnam to BIDV, with BIDV - BECL coordinating the necessary procedures for this transition.
On October 1, 2013, a transfer and reception ceremony was held in Hanoi, marking the official handover of the Laos-Vietnam Joint Venture Bank (LVB) branch to the Joint Stock Commercial Bank of Investment and Development of Vietnam (BIDV) This event announced the opening of the BIDV Chuong Duong branch, which operates based on the assets, liabilities, and legal rights of the former LVB Hanoi branch, in compliance with current laws and State Bank regulations As BIDV's 119th level 1 branch, BIDV Chuong Duong serves as the legal representative of BIDV, possessing its own seal and asset summary, and is integrated into the accounting system of BIDV.
+ Full name in Vietnamese: Joint Stock Commercial Bank of Investment and Development of Vietnam, Chuong Duong Branch
+ Vietnamese abbreviation: Branch of Chuong Duong Investment and Development Commercial Joint Stock Bank
+ Full English name: Joint Stock Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
+ English abbreviation: BIDV Chuong Duong
+ Head office address: No 41, Hai Ba Trung, Tran Hung Dao ward, Hoan Kiem district, Hanoi city
Operation registration certificate: No 0100150619-128 issued by the Department of Planning and Investment of Hanoi on September 21, 2013
2.1.1.2 Organizational structure of Chuong Duong branch a Function and misson
The BIDV Bank Chuong Duong branch specializes in offering banking services and related business activities aimed at generating profit It engages in monetary transactions and direct credit operations while fulfilling tasks assigned by the General Director of the Bank of Investment and Development of Vietnam.
* The tasks assigned by BIDV Bank, Chuong Duong branch are:
- Mobilizing capital and saving deposits:
Capital mobilization through savings deposits involves attracting funds from individuals, organizations, and businesses in various forms, including term deposits, demand deposits, and other deposit types, both domestically and internationally, in Vietnamese Dong or foreign currencies.
+ Issue really valuable and verified certificates of deposit to raise capital + Receiving capital from government and local organizations, domestic and foreign individuals and organizations
- Implementation of credit activities: Providing short, medium and long term loans to meet the borrowing needs of individuals and organizations for business and production
+ Foreign exchange business: lending and buying and selling foreign currencies, mobilizing capital, performing international payment activities, performing guarantees, discounting, rediscounting, etc
+ Business banking services: ATM services, receiving preservation, guarantee, storing assets and valuable papers, collecting and distributing cash, performing payment services, receiving entrustment
Guarantee services: Provide guarantee for loan and payment services, contract guarantee, bid guarantee, product quality guarantee, payment guarantee, reciprocal guarantee, b Organizational structure
Currently, the Joint Stock Commercial Bank of Investment and Development of Vietnam, Chuong Duong branch, has over 50 employees, the Board of Directors
35 consists of 1 director and 3 full-time deputy directors On the basis of the business organization model according to the banking modernization project of the Joint
Stock Commercial Bank of Investment and Development of Vietnam, the Joint
Stock Commercial Bank of Investment and Development - Chuong Duong Branch has decentralized distribution Specific rights to the arrangement of professional departments are as follows:
Figure 2.1: Organizational structure of BIDV, Chuong Duong branch
(Source: BIDV Bank, Chuong Duong branch, 2020)
BIDV Chuong Duong is organized in a centralized model, headed by the
Board of Directors The Board of Directors is responsible for directing and proposing strategic solutions to develop business activities at the Branch Under the
Board of Directors are 4 blocks: Customer Relations Division; Risk Management
Division; Operational block; Internal management block The customer relations department consists of 2 departments: Corporate Customer Relations Department,
The Personal Customer Relations Department focuses on lending activities and delivering retail services at the branch level Additionally, the risk management unit plays a crucial role in reviewing suspicious transactions to ensure security The operational division encompasses various departments, including the Personal Customer Service Department, dedicated to enhancing customer experiences.
The treasury management and service department, along with the credit administration and corporate customer service departments, plays a vital role in offering products and services to customers Additionally, the internal management block comprises the finance and accounting department, integrated planning department, and organization and administration Furthermore, the risk management exchange is overseen by the dedicated Risk Management Department, ensuring effective oversight and control of potential risks.
2.1.2 Business performance of Joint Stock Commercial Bank of Investment and Development of Vietnam – Chuong Duong Branch
Table 2.1: Business results of BIDV Chuong Duong Branch period 2018-2020
(Source: BIDV Chuong Duong year-end summary report 2018-2020)
The BIDV Bank Chuong Duong branch has demonstrated significant growth, as evidenced by its steadily increasing performance indicators over the years Notably, the growth rates from 2018 to 2019 were impressive, with total revenue soaring by 143.31%, total expenditure rising by 113.50%, and profit skyrocketing by an astonishing 612.06% This remarkable progress highlights the branch's successful financial trajectory.
In 2020, BIDV's Chuong Duong branch reported a total revenue increase of 16.18%, with expenditures rising by 13.17% and profits soaring by 38.54% These figures reflect a strong average growth rate for the bank, highlighting the effectiveness of its investment strategies and the ability to manage investment capital and business operations This performance is a positive indicator of the bank's management and operational capabilities over the past three years.
Figure 2.2: Business results of BIDV Chuong Duongperiod 2018-2020
(Source: Credit department report of BIDV Chuong Duong Bank from 2018-2020)
At the end of 2018, the branch's financial performance was modest, with total revenue of 209,817 million VND and a profit of 8,508 million VND However, in 2019 and 2020, the branch experienced significant growth, achieving revenue of 510,513 million VND and a profit of 60,582 million VND in 2019, followed by revenue of 593,132 million VND and a profit of 83,931 million VND in 2020 Despite this growth, the rate of increase has begun to decline due to competitive pressures and rising costs associated with settling bad debts Consequently, it is essential for the branch to implement strategies that enhance capital mobilization while ensuring safe and effective capital utilization.
2.1.2 Business performance of Joint Stock Commercial Bank of Investment and Development of Vietnam - Chuong Duong Branch
Personal lending situation at Joint Stock Commercial Bank of Investment and
2.2.1 Legal basis and personal loan conditions at Joint Stock Commercial Bank of Investment and Development - Chuong Duong Branch
Prior to 1998, commercial banks lacked a legal framework to support personal lending activities effectively However, with the implementation of the Law on Credit Institutions on October 1, 1998, and subsequent regulations from the Governor of the State Bank regarding credit lending, a structured environment for personal loans was established.
The introduction of Decision No 32411998QD - NHHH, later replaced by Decision 178/1999/ND - CP on December 19, 1999, marked a pivotal shift in personal lending for commercial banks, establishing loan guarantees for credit institutions This decision, alongside subsequent circulars and regulations, initiated a new era in the lending landscape, enhancing access to credit for customers.
Bank of Investment and Development of Vietnam - Chuong Duong Branch makes personal loans to all individuals and households that satisfy the following conditions:
- The individual or householder has full civil legal capacity, civil act capacity and takes civil responsibility in accordance with Vietnamese law
- The purpose of using the loan is completely legal
To ensure timely debt repayment, borrowers must demonstrate financial capability, with short-term loans requiring at least 10% of the total committed capital as personal funds, while medium and long-term loans necessitate a minimum of 15% Additionally, a stable source of income is essential for customers to meet their repayment obligations to the bank.
- No bad debts or overdue for more than 6 months at other credit institutions
- Strictly comply with regulations on loan guarantee
2.2.2 Individual loan forms and products at Vietnam Joint Stock Commercial Bank of Investment and Development - Chuong Duong Branch
Consumer loans are designed to fulfill the financial needs of individuals and households, covering expenses such as home construction and repairs, purchasing household items, acquiring vehicles, funding education abroad, and covering medical treatments.
Loans for production and business are designed to provide individuals and households with essential capital for various purposes, including working capital, machinery and equipment purchases, and infrastructure investments These loans support activities related to production, business operations, and investments in securities and gold.
2.2.2.2 Based on the loan method
+ Lending in installments: Is a lending method where each time the customer and the bank carry out the necessary loan procedures and sign a credit contract
Installment loans involve an agreement between banks and borrowers to repay a specific principal amount along with interest, divided into manageable payments over a set period.
An overdraft limit loan is a financial agreement in which a bank permits a customer to withdraw more money than they have in their account, adhering to the regulations set by the Government and the State Bank of Vietnam regarding payment activities through authorized service providers.
For businesses seeking additional loans to support their production and operational activities, the credit line lending method is often utilized This approach involves the bank and the customer agreeing on a maximum loan balance that can be maintained over a specified period, providing a flexible financing solution tailored to the company's needs.
Loan security measures are an important factor in the bank's loan approval for customers Currently, banks consider lending to customers based on two forms: secured loans, unsecured loans (unsecured)
2.2.2.3 Based on loan security measures
A type of loan where the bank offers the condition that the borrower must mortgage the property, pledge it or have a guarantee from a third party
A collateral-free loan relies solely on the borrower's reputation rather than requiring any guarantees or pledges from third parties This lending method is primarily utilized for traditional, long-term customers with established credibility.
2.2.2.4 The most effective form of lending at BIDV Chuong Duong Branch
The author discovered that individual customer business loans at BIDV Chuong Duong branch are the most effective financial solution during the research process.
Hanoi City boasts a diverse and abundant customer base, with a significant number of individuals and households registering for business activities each year This presents a substantial opportunity for lending activities in the manufacturing sector, highlighting the city's potential as a lucrative market for business growth.
The loan amount remains stable with an annual increase, reflecting the growth and expansion of individual and household business activities Unlike consumer or installment loans, which involve multiple borrowing instances, customers typically take out a single loan and repay it over time, resulting in a decreasing outstanding balance.
- The loan procedure is simple, the loan disbursement process is transparent, the Bank transfers payment to the input partner in the customer's business operation
Business lending activities yield higher profits compared to other loan types, primarily due to their typically short loan terms of less than 12 months and the significant difference between the cost and interest rates associated with these loans.
Lending for production and business at BIDV Chuong Duong presents low risks, as business cash flow is efficiently managed through bank accounts This approach facilitates regular customer transactions, while the extensive borrower base helps maintain a low percentage of overdue and bad debts, thereby ensuring high credit quality.
2.2.3 Personal loan process at Joint Stock Commercial Bank of Investment and Development of Vietnam - Chuong Duong Branch
The lending process for individual customers of Bank of Investment and Development of Vietnam - Chuong Duong Branch includes 12 steps, specifically as follows:
Step 1: Guide, receive and check loan documents
- Department involved in the process: customer room at the branch, customers Customer service staff receive customers' needs, advise customers on suitable products, guide customers to provide sufficient legal documents
For first-time loan customers, the credit officer will assist in registering customer information, outlining loan conditions, and providing guidance on the loan application process.
For customers who have had many loans with the Bank, the credit officer will check the loan conditions, loan documents, and guide the customer to complete the loan application
- Check the completeness, reasonableness and legitimacy of the documents provided by the customer, transfer all the documents provided by the customer to the risk management department
Step 2: Appraisal, loan proposal, collateral appraisal
Department involved in the process: customer department, branch leader (if the loan exceeds the judgment of the customer department), customers
Personal loan development at Vietnam Bank of Investment and Development
2.3.1 Personal loan development in terms of scale
Table 2.2: Number of customers at BIDV – Chuong Duong Branch period
Amout Amout Amout Up/Dow n (%) Up/Do wn (%)
(Source: BIDV Chuong Duong Sales Department)
The number of individual customers accounts for a very large proportion, over 90% over the years 2018, 2019, 2020 and tends to grow steadily, over 10% In
In 2018, the bank served 411 customers, with 370 being individual clients, representing 90.02% of the total By 2020, both the overall customer base and the number of individual clients are expected to continue growing steadily, with their proportions remaining relatively stable This indicates that the bank has effectively extended loans to both individual and corporate customers.
Loan turnover refers to the total sum of loans disbursed to customers within a specific timeframe, reflecting the total money borrowed by customers from the bank during that period.
Lending sales indicate the growth and expansion of a bank's lending activities, closely tied to its credit growth rate A higher loan turnover signifies successful expansion in lending, while a decline in loan sales suggests underperformance in the bank's lending operations.
Table 2.3: Sales of personal loans at BIDV – Chuong Duong Branch period
Amout Amout Amout Up/Dow e % Up/Dow n %
(Source: BIDV Chuong Duong Sales Department)
At BIDV - Chuong Duong Branch, personal loan sales have historically represented a small fraction of the total loan balance, with figures of 3.98% in 2018, 4.04% in 2019, and 4.11% in 2020 Despite this low proportion, personal loan sales have demonstrated impressive growth, achieving increases of 14.18% in 2019 and 20.92% in 2020 This trend indicates the Branch's commitment to expanding personal lending activities, which is further fueled by the rising living standards and corresponding demand for personal loans and business expansion.
The personal loan balance serves as a key indicator of the total amount that a bank is still lending at a specific point in time It reflects the sum that the bank needs to recover from its customers, representing the total outstanding loans that must be collected by the end of the calculation period.
Table 2.4: Outstanding personal loans at BIDV – Chuong Duong Branch period 2018-2020
2019/2018 2020/2019 Amout Amout Số tiền Up/Down % Up/Down %
Outstanding short-term industrial loans
Outstanding long-term industrial loans
(Source: BIDV Chuong Duong Sales Department)
Between 2018 and 2020, the branch's personal loan balance showed a consistent upward trend, rising from VND 171 billion in 2019, which represented an 11.76% increase from the previous year, to VND 218 billion in 2020, marking a significant 27.49% growth This translated to an increase of VND 18 billion in 2019 and VND 46 billion in 2020.
The table above also shows that, in personal lending, medium and long-term loans account for the majority of the proportion Specifically, always around 80% over 3 years
2.3.2 Personal loan development in terms of quality
Overdue debts are also divided into debt groups by the bank to have a suitable debt settlement plan Currently, regulations of the Bank of Vietnam divide debts into 5 groups, including:
2 Debts that need attention (10-29 days)
5 Debts likely to lose capital (over 180 days)
To assess the quality of lending activities, particularly in personal loans, banks focus on the ratios of overdue and bad debt Maintaining these ratios at low levels is crucial for ensuring loan safety, minimizing debt collection costs, and preparing for potential risks The overdue debt ratio serves as a key indicator for banks to determine whether to prioritize the expansion of lending activities or to enhance the quality of their loans.
Table 2.5: Bad debts and overdue loans in personal loans at BIDV Chuong
Debts that have dealt with risks 3,55 3,44 3,66
Debts that have dealt with risks 2.32 2.01 1.68
(Source: BIDV Chuong Duong Sales Department)
Total overdue loans in general have not changed much over the years Overdue loans reached 16.28 billion in 2018, slightly decreased to 15.99 billion in
2019 and increased slightly to 16.31 billion in 2020 The bad debt ratio was similar, around 4.5 billion the years 2018, 2019, 2020
In 2019, the ratio of overdue and bad debt in personal loans decreased, with overdue debt falling to 9.35%, a decline of 1.29% from 2018's rate of 10.64% Despite the overall levels of total overdue and bad debt remaining relatively stable, this trend indicates an improvement in debt management within the personal loan sector.
In 2020, the overdue debt rate stood at just 7.48%, continuing its downward trend and remaining below the prescribed level of 3% each year This improvement is attributed to banks tightening lending conditions and implementing effective debt restructuring measures, highlighting their commitment to maintaining the quality of personal loans.
Table 2.6: Credit turnover for personal loans in the period of 2018 - 2020
Credit turnover for personal loans 1,19 1,16 1,13
(Source: BIDV Chuong Duong Sales Department)
The credit turnover ratio, calculated annually by banks, evaluates an organization's ability to manage credit capital and quality to meet customer needs A higher credit turnover indicates that bank loans are circulating rapidly, allowing participation in multiple production and circulation cycles This efficient turnover enables banks to satisfy individual capital needs while freeing up resources for further investments Consequently, a higher credit turnover ratio signifies a healthier loan organization and improved loan quality.
Between 2018 and 2020, the branch experienced a steady increase in credit turnover, with values of 1.13, 1.16, and 1.19, respectively This upward trend indicates an enhancement in the quality of the bank's personal lending services, demonstrating a consistent ability to meet customer loan demands effectively.
Table 2.7: Income from personal lending activities over the years 2018– 2020
Amout Amout Amout Up/Down % Up/Dow n %
Income from personal loan activity 0,383 0,446 0,552 0,063 16,41 0,106 23,61 Proportion/total revenue import (%) 5,48 5,56 5,73 0,08 1,46 0,17 3,06 Personal loan balance/total outstanding balance
(Source: BIDV Chuong Duong Sales Department)
Evaluating the quality of personal loans involves considering the income generated from this activity, which significantly contributes to the bank's overall revenue Although consumer lending at branches represents a small fraction of total lending income, it surpasses the proportion of personal loans in total outstanding loans due to typically higher interest rates compared to business loans Currently, income from personal lending remains low at under 6%, yet it is on an upward trajectory, with a notable increase of 1.46% in 2019 and an impressive rise of 3.06% in 2020 This trend indicates that the BIDV Chuong Duong branch is increasingly focusing on the development of personal loans.
Evaluation of personal loan development at the Joint Stock Commercial
Survey data: The author of the study has exploited the data of the program
BIDV Chuong Duong conducts quarterly and annual surveys to gauge customer satisfaction regarding their products, services, regulatory processes, and staff performance These assessments help evaluate service quality and inform necessary adjustments, ensuring that customer needs are effectively met.
The results of measuring customer satisfaction for individual customer lending activities at BIDV Chuong Duong in 2020 are specific in a number of criteria as follows:
(Survey data on 500 customers, at 5 rating levels: 1-Very dissatisfied, 2- Dissatisfied, 3-Normal, 4-Satisfied, 5-Very satisfied)
Table 2.8: Survey results on credit policy at BIDV Chuong Duong
Criteria Degree evaluation The average value
Competitive lending rates compared to other banks 0 0 52 242 206 4.31
Loan limit to meet customer needs 0 0 186 145 169 3.97
BIDV Chuong Duong's credit policy demonstrates a competitive edge, particularly with its lending interest rate, which received an impressive average score of 4.31 The straightforward lending procedure also garnered positive feedback, scoring 4.01 However, customer satisfaction fell short regarding the lending limit and loan review time, with average scores of 3.97 and 3.87, respectively To enhance customer experience in the coming years, BIDV Chuong Duong should focus on improving these areas.
54 improve the process to shorten the approval time and increase the loan limit to better meet the needs of customers
2.4.2 Evaluate about: Loan products for individual customers
Table 2.9: Survey results on personal loan products at BIDV Chuong Duong
Degree evaluation The average value
Rich and diversified loan products 0 0 32 298 170 4.28
Loan products tailored to customer needs 0 0 15 242 243 4.46 Competitive lending products compared to other banks 0 0 34 357 109 4.15
Loan products are increasingly developed 0 0 54 267 179 4.25
BIDV offers a diverse range of competitive lending products that effectively meet the needs of a wide customer base As customer demands continue to evolve, BIDV is committed to enhancing the quality of its loan offerings and developing new products to keep pace with these changing requirements This ongoing innovation presents both an opportunity and a challenge for BIDV in the dynamic banking landscape.
2.4.3 Evaluate about: Facilities and staff
Table 2.10: Survey results on facilities and staff at BIDV Chuong Duong
Degree evaluation The average value
The Bank's facilities are spacious and modern 0 0 0 253 247 4.49
Comfortable and convenient transaction space 0 0 0 354 146 4.29Highly professional customer service staff 0 0 13 357 130 4.23Professional service style, polite attitude 0 0 0 302 198 4.40
BIDV boasts well-invested facilities, including a synchronized office and transaction space that creates a friendly and cozy atmosphere for customers The bank employs a carefully recruited staff with high expertise, who not only provide banking products and services but also offer financial advice to clients While the quality of facilities and personnel is highly recognized and appreciated by customers, there are some shortcomings, including instances where staff have not fulfilled their duties, which can affect BIDV's reputation and highlight the need for further training and development.
2.4.4 Evaluate about: Lending activities for individual customers
Table 2.11: Survey results on lending activities for individual customers at
Degree evaluation The average value
Customers continue to have a long-term relationship with the Bank 0 0 9 250 241 4.46
Customers are satisfied with the Bank's lending activities for individual customers 0 0 5 315 180 4.35 Customers will refer others to transact with the
BIDV Chuong Duong has received high praise for its lending activities aimed at individual customers, with nearly all clients expressing a desire for a long-term relationship with the bank Customer satisfaction with BIDV's lending services is notably high, leading many to recommend the bank to friends, family, and business associates This positive feedback highlights the effectiveness of BIDV Chuong Duong's lending programs, indicating the need for continued maintenance and further development of these services in the future.
Evaluation of lending activities for individual customers at Joint Stock
- Credit policy has focused on developing lending activities for individual customers at the bank
- The branch's lending quality to individual customers is at a stable level Bad debt ratio is always below 3% as directed by Head Office
- Income from lending activities for individual customers has increased in sales over the years, contributing to an increase in income for the entire Branch
- The branch is always actively developing and perfecting its network of operations to improve its ability to serve customers
- Young and professional customer relations staff
BIDV Chuong Duong offers a comprehensive range of personal loan products tailored to market needs, including housing loans, car loans, unsecured consumer loans, account overdrafts, study abroad loans, and loans secured by valuable assets Additionally, they provide services such as discounting valuable papers, personal loans for business households, securities advance loans, and loans for officials to purchase shares in newly equitized state-owned enterprises.
BIDV Chuong Duong offers competitive unsecured consumer loan products compared to other banks, featuring attractive loan levels, interest rates, and conditions The maximum loan limit for a single customer at BIDV is 500 million VND, which matches that of Vietinbank and Asia Commercial Bank (ACB), while exceeding limits set by banks like Vietcombank (300 million VND), Sacombank (300 million VND), and VP Bank (250 million VND).
BIDV Chuong Duong is a leading commercial bank that adheres to the State's financial and credit policies, ensuring its interest rates and lending fees for individual customers align with regulations established by the State Bank As a result, BIDV Chuong Duong offers some of the most competitive interest rates and fees in the commercial banking sector.
- The growth of lending to individual customers is high, but not stable
- Outstanding loans to individual customers account for a low proportion of total outstanding loans
- The proportion of income from lending to individual customers is still very low
- The quality of lending activities for individual customers dropped sharply, reflecting an increase in bad debts
BIDV's financial products lack the flexibility and adaptability found in some joint stock and foreign banks, making them less suitable for a diverse range of customers In contrast, Vietinbank offers specific guidelines for assessing income for civil servants and state employees, while Sacombank tailors its working seniority requirements based on the unique circumstances of employees, self-employed individuals, and business owners.
- BIDV's products also do not have many promotions and sales promotion programs to customers like other banks
The current product deployment programs lack diversity, offering no comprehensive product packages or tailored loan options for specific customer segments, resulting in individual customer loan products that fail to capture interest.
2.5.3.1 Objective reasons a The political, economic, and socio-economic environment
Vietnam, with a population exceeding 90 million and an emerging financial market, presents significant opportunities for retail banking, especially in individual lending Moody's analysts highlight the untapped potential in Vietnam's retail lending market, forecasting growth rates of 30-40% annually Despite many commercial banks prioritizing retail banking strategies and expanding their lending to individuals in recent years, challenges remain due to the generally low education levels and borrowing habits among the population.
58 of storing and using Using cash, the fear of borrowing has been deeply imprinted on people, which is a big challenge for modern banking services
Between 2018 and 2020, both the global economy and Vietnam's economy faced significant challenges, particularly due to the impact of the Covid-19 pandemic Economic growth slowed, production faced stagnation, and thousands of businesses went bankrupt, severely affecting people's incomes and leading to a decline in purchasing power as consumers tightened their spending amidst a lack of clear economic recovery In Chuong Duong province, the real estate market remained bleak, with housing loans being the primary lending products offered by local banks These factors present considerable difficulties and challenges for lending activities aimed at individual customers in the near future.
BIDV Chuong Duong faces significant challenges due to intense competition in the banking sector, particularly in lending for science and technology from 2018 to 2020 This competitive landscape has led banks to adopt proactive marketing strategies, moving away from traditional methods that relied on customers seeking them out Instead, banks now engage in diverse promotional activities, collaborating with trade unions, businesses, and community organizations to streamline processes for customers, including partnerships with car dealers and housing project owners.
Between 2018 and 2020, financial companies significantly increased their involvement in consumer credit, offering installment loans for purchasing homes, motorcycles, and cars As banks restricted consumer loan availability, these financial and insurance companies launched aggressive marketing strategies to capture market share The outlook suggests continued growth in the credit market for individual and household customers in the near future.
Vietnam will continue to develop strongly and compete with excitement, with the large participation of most commercial banks and financial institutions non- banking financial institutions
2.5.3.2 Subjective reasons a Limitations of the bank's credit policy
Lending activities for individual customers demand swift service and straightforward procedures; however, the current retail lending process remains burdened by excessive documentation and rigid requirements The cumbersome nature of personal loan procedures, along with prolonged disbursement times, deters customers from seeking bank loans Specifically, BIDV Chuong Duong lacks competitive retail credit products that offer the quick processing times seen at institutions like ACB, Sacombank, and VP Bank Additionally, the slow and complicated collateral handling mechanism negatively impacts the relationship between individual customers and their loan officers, potentially increasing the risk of bad debt due to customer dissatisfaction.
The lending activities for individual customers are primarily focused at the Branch and are limited in transaction offices, with many not offering credit services except for mortgage loans on valuable papers In contrast, numerous commercial banks effectively utilize their transaction office networks to enhance credit sales, highlighting a significant restriction in the range of products and services available at these locations.
The diversification of lending products in response to market demand is a key indicator of a bank's focus on personal credit development and its competitiveness By adapting their credit product structures to align with development goals, banks can better meet customer needs and expand their market share Furthermore, banks enhance their competitive edge by actively cross-selling related credit support products.
60 as credit insurance, real estate services (legal procedures for name registration, ) to help banks gain more more profit while also avoiding business risks
BIDV Chuong Duong's personal loan offerings remain conventional and lack tailored products for distinct customer segments, unlike competitors who provide diverse retail credit portfolios For instance, Viettinbank features 23 product options, ACB offers 20, and Sacombank categorizes its products into four groups: startups, newlyweds, new members, and large families This absence of unique and competitive offerings hinders BIDV from establishing a strong brand identity in the market.
The product development process lacks a systematic and thorough market analysis, including assessments of market demand and competitor offerings Additionally, there are no established methods or tools in place to gauge customer satisfaction with the product Furthermore, the income and costs associated with each product have not been delineated, hindering the evaluation of product effectiveness, which is crucial for making informed decisions about product enhancement, improvement, or discontinuation.
BIDV Chuong Duong's loan conditions, collateral requirements, and equity participation regulations prioritize the bank's safety assurance but overlook the needs of customers and fail to adapt to the country's economic development Additionally, the distribution channel system poses challenges that need addressing.