. Interest rates and interest rate risk management
Interest rates and interest rate risk management have been carried out quite well by Agribank throughout its operation. Agribank has always balanced input and output interest rates reasonably , ensuring effective business operations, harmonizing the interests of depositors, borrowers and the bank. Compared to other commercial banks, Agribank's input and output interest rates have always been stable and at a reasonable level depending on market fluctuations. Therefore, this factor has not negatively affected the bank's credit quality in the past .
.Bank infrastructure, engineering, technology
Agribank has invested in and operated a modern information technology system since 2003 and applied it throughout the system since 2009, which is considered one of the most modern information technology systems in the region. However, the exploitation of modernity and convenience for information forecasting, statistics, risk warning and credit analysis is still limited. There are cases where customers borrow capital from many different branches but are not detected, or customers have bad debt at this branch but go to another branch to borrow... leading to bank credit risks.
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. Qualifications and capacity of credit officers
The qualifications and capacity of credit officers are still inadequate, not keeping up with the changes and requirements of the new situation, the awareness of credit officers in credit work, management and customer care is still quite superficial. The survey results show that only 47.28% of enterprises evaluate that credit officers care about them, and only 20.08% of enterprises trust the advice of credit officers, surprisingly only 17.15% of enterprises believe that credit officers really understand the enterprise.
. Bank's capacity in credit analysis
The bank's capacity in credit analysis still has many limitations such as sketchy appraisal reports , not fully appraising the legal content of the project, the relationship with credit institutions, assets securing loans, incomplete analysis content , not fully assessing the current situation and effectiveness, and feasibility of the business plan of the enterprise.
In the guidance on skills and methods of project appraisal for enterprises of Agribank, in general, it is not really complete, there are still some issues about the financial situation of enterprises that are quite important but have not been analyzed by Agribank, such as: cash flow analysis; not fully assessing the reality.
The business's operating status and future; the appraisal staff often accepts the financial statements sent by the business, without reviewing and re-establishing and re-examining the business's financial statements to see the accuracy and truthfulness of the financial statements... In general, this is a factor that Agribank is still weak in, leading to ineffectiveness in the bank's credit analysis work.
. Credit information
Agribank is still quite passive in exploiting information for credit work, has not been able to store necessary data on industries, market information , business history of customers, warnings and risks that may adversely affect credit work, etc. In addition, the data used as a basis for appraisal is incomplete, inaccurate or not objective, increasing the risk of incorrect assessment of loan customers and the effectiveness of projects and plans.
. Internal inspection and monitoring
Internal inspection and supervision activities are not effective, inspection and supervision are not carried out regularly, some are performed perfunctorily, easily ignoring wrong implementation of regulations, leading to wrong implementation of procedures, improper compliance with regulations of the industry and the State, increasing credit risks.
Loan guarantee mechanism
Due to loose regulations and low specialization, this has become a prominent issue, indirectly causing credit capital loss of Agribank over the past time. According to Decision 1300/QD-HDB-TDHo, dated December 3, 2007 on loan security measures in the Agribank system, which is still being applied, the value of the collateral is agreed upon by the bank and the borrower based on market price.
Currently, Agribank does not have an independent valuation department , and credit officers must
concurrently in charge of determining asset value, due to lack of expertise, skills and experience in determining collateral value, on the other hand, the awareness of credit officers towards Agribank in general and credit officers in particular is still very limited for this very important job, leading to the situation of determining asset value that is too different from reality, or low liquidity of assets... causing losses for Agribank of thousands of billions of VND .
+ Factors related to SMEs
.Business capacity of SMEs
Because the business activities of SMEs are mostly family-based, spontaneous, and fragmented, the business capacity of SMEs is limited , along with outdated technology, or intentional fraud and misuse of capital ... leading to business difficulties, loss of liquidity, and negative impacts on the credit quality of banks. According to the leader of the Department of Planning and Investment of Ho Chi Minh City, it is estimated that in Ho Chi Minh City, out of 100% of newly established enterprises, only 2/3 are doing business healthily, while 1/3 are operating very chaotically, and many times the registration of new enterprises does not have a positive meaning to contribute to the socio-economy.
. Financial management capacity of SMEs
This is the core weakness of SMEs, affecting the use and coordination of business resources to maximize the strength of financial resources in weak business operations. This is the concern of banks when deciding to grant credit to SMEs, at the same time this factor greatly affects the effective use of bank credit capital, thereby affecting the credit quality of banks.
2.6.3. Assessing the scale and quality of credit for SMEs at branches of the Bank for Agriculture and Rural Development of Vietnam in Ho Chi Minh City through the SWOT model
2.6.3.1. Strengths
Firstly, Agribank is one of the earliest commercial banks in the history of the development of the banking industry in Vietnam. Therefore, Agribank branches in Ho Chi Minh City inherit the brand value, culture, experience in management activities and active support in all aspects of Agribank's operations, including credit activities.
Second , Agribank has the advantage of a retail bank with a large service distribution network, with many customers operating in many fields, most of whom have a need to use a variety of banking products, especially credit products. Therefore, deploying banking products to customers is easier.
With its large scale and extensive network, Agribank branches in Ho Chi Minh City have played an important role in providing credit, meeting the capital needs of all customers in general and SMEs in particular, contributing to economic development.
local society. Although Agribank's market share in capital mobilization and lending is decreasing, it is still one of the leading commercial banks in terms of market share in capital mobilization and lending, especially lending to SMEs in Ho Chi Minh City.
Third , to ensure sustainable development, in addition to maintaining growth targets, Agribank also pays great attention to risk management. In credit work, each loan, depending on the scale and level of risk, will be approved by the appraisal department/team or credit council. In addition, branches also strengthen direction , inspection, guidance in appraisal, lending, management, and monitoring of loans to collect debts, and periodically review collateral assets, thereby helping to improve credit quality for the bank.
Fourth , IT infrastructure is prioritized for significant investment and upgrading, with the completion of phase 2 of the IPCAS program, connecting modern IT systems nationwide, creating favorable conditions for the development of credit products and improving management and competitiveness. Creating favorable conditions for expanding scale and improving credit quality for Agribank.
Fifth , Agribank well implements the policies of the Government and the State Bank, and closely coordinates with local departments, branches, associations, and craft villages to implement socio-economic target programs, incentive programs to support production , remove difficulties, and create conditions for SMEs to access bank loans.
Sixth , as a leading State-owned commercial bank, with capital advantages, along with funding programs from the State and non-governmental organizations, Agribank always ensures credit capital for SMEs with preferential interest rates, and is always lower than the general level, this is a favorable condition for the bank's credit work for SMEs.
2.6.3.2. Weaknesses
- Exist
+ On the bank side
. The ratio of medium and long-term capital to medium and long-term debt has a tendency to decrease sharply (2008: 121.11%, 2012: 58.30%). In the period of 2008-2012, medium and long-term capital decreased, while medium and long-term debt increased. Thus, the development of long-term capital of Agribank is not commensurate with the growth of medium and long-term credit. If maintaining a large amount of medium and long-term loans, it will lead to an imbalance in terms of terms.
lending and balancing medium and long-term mobilized capital, thus posing interest rate risks and liquidity risks.
. Current regulations and policies of Agribank are applied to all customers , not segmented by large enterprises, SMEs, and individuals. Currently, Agribank has a general credit process and a credit process for individuals and households, but there is no appropriate credit process for enterprises in general and SMEs in particular.
. Currently and the policy of Agribank in Ho Chi Minh City in the coming time is to target SMEs, it can be said that this is the strategic customer segment of Agribank, but Agribank has not had any research and study about this customer segment, this is a huge disadvantage and also a very high risk when deciding to focus on investing in a certain customer segment without really understanding that customer.
. Agribank has not exploited and applied the advantages of marketing activities in terms of market segmentation, customer segmentation, customer strategy, distribution channels, etc. to serve credit activities in general and credit for SMEs in particular.
. Regarding the credit risk management model that Agribank is currently applying, it is a decentralized credit risk management model. In which, the credit department or business planning department (depending on the size of the branch) performs all stages in the credit process and credit risk management. Although it has the strength of being compact, the organizational structure is simple, suitable for small-scale management at Agribank branches, but the weakness is that there is no specialization, one place does all stages in the credit process, leading to very high risks, and in fact, this has been demonstrated in the past when a series of credit cases have occurred, causing losses of thousands of billions of VND for Agribank.
. The credit information system is not complete: The system for storing and processing information about customers as well as investment projects has not been updated quickly and accurately . The quality of credit information analysis and processing is not high, the ability of credit officers to forecast and appraise financial production and business projects is limited , the capacity of bank officers to appraise investment projects is weak, unprofessional , and not proactive in funding projects in a timely and effective manner. The ability of credit officers to advise customers in planning and choosing investment options is still limited.
In 2008, Agribank in Ho Chi Minh City expanded its branch network too hastily by upgrading 22 level 2 and level 3 branches to level 1, bringing the total number of level 1 branches in operation to 48 branches in 2008. With the policy of increasing credit growth to promote economic development and increase business profits, some branches increased lending without really paying attention to carefully assessing the effectiveness of projects, not anticipating socio-economic developments. Therefore, when the economy was unstable, businesses encountered many difficulties in implementing projects and consuming products, thus affecting customers' ability to repay debts. Bad debt increased from 2.2% in 2008 to 13.55% in 2012.
. Some branches have poor credit quality due to shortcomings in management and credit risk management. At some branches , due to the loose loan appraisal process and the economic difficulties, bad debts have been exposed. 24/40 branches (accounting for 60% of the total number of level 1 branches in Ho Chi Minh City) have bad debts of over 5%, of which 9/40 branches have bad debts of over 10%.
Information technology: By 2009, Agribank had synchronously deployed IPCAS at all branches as a foundation for deploying modern, highly competitive products and services, improving management and competitiveness. However, compared to other banks , it took a long time (from 2003 to 2008) for Agribank to have all the conditions to deploy modern banking operations. However, up to now, it has not met the requirements, has not fully exploited the advanced features of IPCAS in management and risk prevention, the development of utilities for customers is still slow, and has not provided good support for reporting information.
Internal inspection and control activities in many units have not been implemented regularly, the quality is not good, there are overlaps causing waste; error handling is not resolute ; risk warning and forecasting work has not been done well.
. Training in many new units focuses on immediate needs, not on in-depth training in management and operations. Staff qualifications are not uniform , so they cannot meet job requirements and keep up with integration trends.
. The products and services are mainly traditional, the quality is not high, the competitiveness is limited. The stability and consistency of each product is not high, the same product but the branches implement differently. For example, the credit product group has the same content but the way of handling the business is not consistent... In terms of
In general, compared to other banks, the quality of Agribank 's products and services has not created a competitive advantage.
. The centralized credit process reveals many limitations. Among them, the biggest limitation is
is a credit officer who performs all the major steps in the lending process :
Firstly , the data used as a basis for appraisal is incomplete, inaccurate or not objective, increasing the risk of incorrect assessment of borrowers and the effectiveness of projects and plans . Banks are still limited in collecting and storing information about customers as well as other necessary economic and social information for the appraisal process . A useful channel for information reference is the State Bank's Credit Information Center CIC, but the information is not regularly updated or is incomplete, especially for customers with first-time credit relationships .
On the other hand, during the appraisal process, financial reports and technical and economic arguments are prepared and provided by customers, so the accuracy and objectivity of these documents are difficult to verify. The appraisal is often based on subjective information provided by customers. Except in cases of real necessity, banks do not always have the conditions to invite specialized organizations to re-appraise to determine the accuracy of these documents.
Second , the credit process is still limited in decentralizing responsibilities.
Officers, that is, credit officers perform all the main steps in the lending process such as: customer guidance and management, credit analysis and loan proposal , disbursement and debt collection. Giving credit officers too much power is an opportunity for many credit officers with poor professional ethics to take advantage of it for personal gain, increasing credit risks.
. The arrangement of credit appraisal officers and credit management officers at many branches of Agribank does not really ensure job requirements, many officers are not experienced, have weak skills , are not solid in their profession, are sometimes too rigid, sometimes too flexible, too superficial... leading to poor quality of credit analysis work, which can easily lead to mistakes in proposing credit granting decisions, increasing credit risks. Credit operations are the most difficult operations compared to other operations, it changes continuously according to each customer, each situation, each market situation, and requires understanding of many other complementary skills...
. In the guidance on skills and methods of project appraisal for businesses of Agribank, in general, it is not really complete, there are still some issues about
The financial situation of the enterprise is quite important but has not been analyzed by Agribank, for example:
Cash flow analysis: this is an extremely effective tool in calculating
accounting for the structure of cash flows, affecting the fate of the business; Not affected by accounting principles; No way to hide cash flows from credit analysts (unless the business intentionally commits fraud).
Credit analysts often accept financial statements submitted by a business without reviewing and without re-establishing and verifying the financial statements of the business to determine their accuracy and fairness. Analysts tasked with credit analysis must equip themselves with the tools and skills to properly estimate the resources (assets and liabilities ) and equity of the borrower. Past financial statements, if properly analyzed, provide information about the business and management capabilities of the borrower, credit discipline, capital situation, and other perceptions of the borrower's readiness for business development.
Banks still focus too much on collateral rather than on project efficiency, plans and financial capacity of the business.
. Finally, the loan guarantee mechanism and the valuation of collateral assets in the loan application appraisal process play a very important role, but the review, assessment of assets, management of collateral assets, and asset standards that Vietnam Joint Stock Commercial Bank in general and Agribank in particular are applying are still not strict . Awareness of the right to choose collateral assets of bank staff is still inadequate. Valuation is sometimes done in a perfunctory and procedural manner, in some cases , credit officers may intentionally collude with customers to inflate the value of collateral assets for personal gain.
+ On the business side
. The proportion of equity capital of SMEs to the total operating capital of the enterprise is low, the enterprise operates mainly with bank loans , so business efficiency is low.
. The backward production and business technology of SMEs, limited competitiveness of products in the market, and unaudited financial reports are obstacles to the appraisal and lending decisions of banks.
Subjective limitations of SMEs are the cause of difficulties in accessing credit: Actual capital is always much lower than registered capital; lack of transparency in records and books; unclear property relations.