Based on that common characteristic, the researcher identifies the characteristics of the agricultural value chain as follows:
Firstly, the value chain is affected by the characteristics of agricultural products. Agricultural products have characteristics such as seasonality, perishability, inconsistent quality, and food safety issues. Problems in the organization, operation and performance of the chain, thereby affecting the characteristics of the chain.
Second, seed production and cultivation play a key role in the chain with the participation of farmers, cooperatives and companies. The quality of input materials plays an important role in the operation of the value chain. Seeds that meet quality and food safety standards and are in sufficient quantity are the basis for good production.
Third , the selling price of agricultural products is more stable in the value chain. Small-scale producers, the main component in agricultural production, often grow/raise crops on their own premises. The selling price often depends on the seller, who is the collection agent. Due to the lack of information about the agricultural products they produce, farmers are often forced to sell at low prices. In addition, the lack of connection between farmers has led to unfair competition. Accordingly, they reduce the cost of their products to sell more goods. As a result, the selling price of agricultural products is unstable. The agricultural value chain helps to link producers together, provide transparent information, and help producers understand the value of the agricultural products they produce. The value chain helps to limit the complexity in the exchange process, specifically: ensuring supply, selling price and convenience in finding partners. On that basis, the pricing of products will be based on the needs of consumers and producers. The value chain helps to distinguish the advantages and disadvantages of production units and to find out how to connect production units with the final market to limit unhealthy competition on selling prices as well as the instability of agricultural product selling prices in the market.
Fourth, based on target customers, the agricultural value chain in Vietnam is distributed through 4 channels as follows:
(1) Channel 1: farmers → collectors → warehouse owners → domestic consumption;
(2) Channel 2: farmers → collectors → retailers → domestic consumption;
(3) Channel 3: farmers → processing companies → domestic consumption;
(4) Channel 4: farmers → processing companies → exports.
Depending on the consumer market, the length of the agricultural value chain is different. In which, the two main market channels are channel 2 and channel 4.
Fifth, food safety is a decisive factor in the operation and existence of the agricultural value chain. Food safety issues are related to most stages in the chain, from input materials to distribution. In traditional agricultural production, consumers find it difficult to control the content and type of pesticides, seeds, fertilizers, vaccines, etc. involved in the agricultural production process. Agriculture is a material production industry that includes many specific production stages with different characteristics. When the level of production forces is poor and there is no separation between production activities, the products will be of poor quality and reduced in quantity, only suitable for small retail markets. The value chain, with the supervision of internal and external actors, will specialize in production, improve product quality through requirements on standards in production and distribution of products. From there, the quality of the products will be affirmed.
In short, the performance of agricultural value chains depends on the linkages and synchronization of operational capacity of the actors in the chain.
1.1.4. Purpose of the agricultural value chain
In the context of globalization, the competitiveness of the economy does not stop at the competition of a unit but includes the level of cooperation between these units. A unit participating in the agricultural value chain aims to:
Firstly, it limits the complexity of the exchange process, specifically: ensuring supply, selling price and convenience in finding partners. In the agricultural value chain, the issue of contract compliance and product quality will be guaranteed. The value chain strengthens the linkage of actors in the chain, helping to ensure product supply, purchase and selling prices. In the process of cooperation, reputable operating units will attract the attention of other units.
Second, stabilize product quality and affirm the position of the product not only domestically but also worldwide. The agricultural sector is a material production sector that includes many specific and different stages of production. When the level of production forces is poor and there is no separation between production activities, the quality and quantity of products do not meet expectations, only suitable for small retail markets. Supervision by actors inside and outside the chain will specialize production, improve product quality through requirements for standards in production and distribution.
Third, improve professional and technological qualifications. Actors in the value chain will learn through the transfer of knowledge on technology, management skills, market access methods, research and development, etc.
Fourth, enhance competitiveness through information sharing and limit unfair competition. Unfair competition includes dumping, providing negative information contrary to reality that is disadvantageous to competitors. Control and exchange of information between units related to the chain will limit this problem.
1.2. BANK CREDIT ACCORDING TO THE AGRICULTURAL INDUSTRY VALUE CHAIN
1.2.1. Concept of bank credit, bank credit according to agricultural value chain
1.2.1.1. Bank credit
Credit relations have been around for a long time. According to the ancient Latin origin, credit is "credese", which means "trust" or "trust".
The content of credit is: "Money only leaves the hands of the owner for a period of time and is only temporarily transferred from the hands of the owner to the hands of the operating capitalist, so money is not used for payment, nor is it sold for lending, money is only transferred on the condition that it will return to its starting point after a certain period of time" (Karl Marx).
Credit is the realistic expectation that the lender is willing to lend and will be repaid in full as per the terms of the agreement between the lender and the borrower and credit risk is the possibility that it will occur (Jonothan Golin, 2010).
Credit is a relationship of borrowing capital from each other based on trust and that capital will be returned on a certain date in the future. It can be said that credit is a relationship of transferring an amount of value from one person to another to own it and after a certain period of time, it is recovered with an amount of value greater than the original value (Ngo Huong and To Kim Ngoc, 2001).
From the above concepts, the nature of credit is a type of asset transaction on the basis of repayment with the following characteristics:
- Two forms of transaction assets: lending and leasing.
- Made on the principle of refund.
- The repayment value is usually greater than the loan value.
1.2.1.2. Credit along the agricultural value chain
In the literature on value chain credit, the term “Agricultural value chain credit” is described through the operation of credit flows in the chain. Agricultural value chain credit is the flow of capital invested in different links in a specific chain (Miller and Jones, 2010).
Agricultural value chain credit is a paradigm shift from traditional lending with specialized segments and products to lending with separate functions, mainly financing members participating in the value chain.
chain through identifying the financial needs required to enhance the value chain, designing credit products that suit customer needs, reducing financial transaction costs, and using linkages and chain knowledge to minimize risks to the chain and its members (Miller, 2012).
The term “Agricultural value chain credit” refers to capital flows from units outside the value chain and between members within the value chain to address the financial needs of members in the value chain to ensure effective production, business and consumption and limit risks in value chain operations.
The objective of this lending model is not to simply establish a relationship between a customer and a bank, but to involve a group of people who come together to produce and distribute products in the agricultural sector. By developing strengths and relationships in the value chain, banks reduce lending risks, reduce operating costs, and expand their customer base (RIF II, 2015).
Figure 1.4: Example of value chain credit during the season
Echo
row
Money
Farming
people
Agricultural Money
Business
Source: RIF II CIS Learning Academy (2015)
Figure 1.4 illustrates an example of crop value chain finance, where the bank finances farmers for the purchase of inputs and finances a group of collectors/processors/manufacturers (usually businesses) to pay for the raw products grown by farmers. The relationship between the three parties is bound by a loan agreement, a sales contract, product conditions and payment terms. Value chain finance is considered effective when the bank meets the financial needs and other constraints of the value chain.
An agricultural value chain includes five basic stages as follows: raw material supply, farming, purchasing, processing/production and distribution. Each stage in the value chain will have a need for loans for different purposes and the scale of capital needs also depends largely on the scale of operations of each unit in the agricultural value chain, specifically shown in Table 1.1.
Table 1.1: Loan purposes of units in the agricultural value chain
Supply of raw materials | Farming | Purchase | Processing/production | Distribution | |
Characteristic | Small and medium scale | Small, medium, large scale | Small, medium, large scale | Medium and large scale | Small, medium, large scale |
Loan purpose | Working capital | Investing in farms and farming equipment | Purchase of agricultural raw materials and equipment for work purchase | Working capital and investment capital for machinery, equipment/buildings workshop | Working capital |
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Bank credit solutions for agricultural and rural development in Vinh Long province - 1 -
![Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branchs income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giangs profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project Restructuring the system of credit institutions in the period 2011-2015 approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services.
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giangs products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Ministers Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giangs treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giangs income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giangs corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giangs card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services".
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Investment Situation in Non-Credit Services at Saigon Commercial Joint Stock Bank in the Period of 2015-2019 -
Credit risk management at Vietnam International Commercial Joint Stock Bank - Hanoi Branch - 12 -
Development of non-credit services of the Bank for Investment and Development of Vietnam - 1
Source: Madu (2012)
To meet diverse financial needs, there are two forms of credit financing as follows:
a. Credit financing sources from within the value chain
This is a form of financing between actors in the value chain. These loans are usually short-term and based on mutual trust. The level of financing participation depends on the risk appetite, scale and operating situation of each actor in the chain, including:
- Financing from a unit in the value chain: is the amount of money/in-kind that one unit lends to another unit in the value chain to serve the production/business activities of the borrowing unit. The lender's benefit is the priority to buy agricultural products at a reduced price when the borrower's harvest season comes. These loans are often short-term and seasonal. The advantages of this form of borrowing are flexibility, high access to capital and low cost.
- Financing from suppliers in the value chain: is the amount of money/in-kind that suppliers in the chain borrow to ensure stable operations or suppliers perform short-term obligations for units in the chain. The lender's benefit is the repayment of interest and principal when due by the borrower.
- Financing through purchase orders/purchase contracts: this is a form of credit based on purchase orders/purchase contracts between the lender and the borrower. Accordingly, the lender will provide money/materials/technology to the borrower and the borrower is responsible for production/cultivation according to the standards and requirements set by the borrower. At harvest time, the borrower will repay the lender with the harvested agricultural products that meet the standards signed in the contract.
- Financing through inventory certificates: with inventory certificates, borrowers can receive financial support from lenders in the value chain. This loan is secured by inventory certificates. When the borrower fails to repay the loan, the lender can sell the inventory, minus the storage and insurance costs to collect the debt (Miller and Jones, 2010).
b. Credit financing sources outside the value chain
This is a form of financial support for actors in the value chain from units outside the value chain, including: Government, credit funds, banks, etc. Depending on the scale and efficiency of operations, the funding objects will be different. Compared to financial sources within the value chain, this source of funding has higher costs and is less flexible in solving loan needs. However, the advantages of this form of funding are information transparency, limited credit risk and large capital sources to ensure medium and long-term loans (Miller and Jones, 2010).
In this thesis, the credit source that the author mentioned is credit capital from banks. Bank credit according to the value chain for the agricultural sector is understood as credit according to the agricultural value chain.
The bank's linkage with a value chain is reflected in the relationship of credit flows to each actor in the value chain through the form of accessing information and providing credit products/services to actors in the value chain, specifically shown in diagram 1.5.
Figure 1.5: Bank's relationship with units in the value chain
TCTD
TCTD
Cultivation Unit
Chain Representative Unit/Association
Production and processing unit
Distribution unit
Input supplier
Source: AgriFin VFC Bootcamp (2014)
Banks provide loans to customers based on sales contracts signed between members in the chain and access to reliable information about borrowers through members in the chain - those who understand their customers. At the same time, the benefits that banks and members in the value chain gain when closely linked will be the foundation for the most effective investment credit capital, specifically: the buyer does not need capital to pay the seller/manufacturer immediately when purchasing goods; the producer can access loans without having to mortgage collateral in the traditional lending method; the bank can save costs and limit credit risks thanks to access to customer information and control of cash flow (Milder, 2008). The link between the bank and a representative unit in the chain through disbursement is necessary to facilitate the bank in controlling the loan (Bankers, 2014). This model is a comprehensive approach that includes direct borrower analysis, analysis and forecasting of each specific period in the value chain to select loans according to stages and steps in the value chain.
Credit in the agricultural value chain has a close connection between customers and banks through banking products and services. Appendix 3 shows the flow of credit capital in an agricultural value chain. The flow of money is provided by financial institutions and members in the chain. The flow of credit capital in the value chain runs in two directions, depending on the specific value chain, the region, the size of the enterprise and the entities participating in the value chain. A member in the chain can receive financial support from two different members as financial providers (Fries, 2007).
For the flow of goods, the bank needs to understand the product quality requirements of the target customers through the product path from raw materials to finished products. An efficient value chain is when the final product meets the requirements of the target customers. On that basis, financing a value chain is only effective when the value chain operates efficiently.
For cash flow, banks are interested in the payment timing and payment terms of the actors in the value chain. Banks can understand the movement of cash flow in the value chain to determine the financial needs of each actor in the value chain, specifically: the time when the borrower pays the supplier, the time when the borrower receives payment from the customer.
Inheriting the results of the above studies, within the scope of the thesis, credit according to the agricultural value chain is understood as: " Bank credit according to the agricultural value chain is a form of transferring the right to use a certain amount of value from the lender, which is the bank, to one or more capital users, which are
members in the agricultural value chain for purposes consistent with their activities
production and business of borrowers in the value chain within a certain period of time .
1.2.1.3. Conditions for implementing credit according to the agricultural value chain Development orientation
Based on the bank's development goals in the credit sector in general and credit in the rural agricultural sector in particular, the bank determines its orientation in implementing credit according to the agricultural value chain through criteria such as: Support from authorities at all levels, political requirements, target industry groups, target value chains, credit scale, credit structure, risk appetite.
The bank's orientation towards developing credit according to the value chain is shown through the bank's interest in implementing guidelines, incentives to encourage customers to participate such as interest rates, loan conditions, support..., strengthening measures such as communication, marketing to approach the value chain as well as customers, capital source plans to serve this credit model and risk reserve funds for bad debts.
Understanding the value chain
Agricultural value chain credit is a unified, flexible system, not a set pattern. Lending involves a systematic analysis of the entire value chain and the relationships between actors. Understanding the value chain is a prerequisite for banks to assess the performance and development prospects of that value chain.
On the bank side, the requirement is to have a deep understanding of the value chains that the bank intends to invest in such as: chain operations, operations of members in the chain, goods and currency circulation processes, and industry characteristics. Therefore, it is necessary to improve the qualifications of staff through training and self-training, coaching on credit operations according to the agricultural value chain.
Representative entities in the value chain
The representative entity of the value chain is an entity with sufficient capacity in terms of production scale, capacity, reputation, and understanding of the members in the chain to represent the chain in signing loan agreements with the bank. This entity is usually the unit at the end of the value chain such as production and distribution. Through the representative entity, the bank can access information about the chain and its members more easily. At the same time, by disbursing loans through the representative entity, the bank will reduce lending costs. The representative entity will disburse loans to members in the chain on behalf of the bank.