Developing financial services in Vietnam Posts and Telecommunications Group

With the above functions, the activities of the Liquidity Center include:

- Manage the collection and processing of customer call data of telecommunications operators in Vietnam with liquidity needs according to the liquidity service provision agreement between telecommunications operators and the Liquidity Center.

- Manage connection fee calculation: Based on collected data, analyze by service type and apply connection fee according to current guidelines of the State, the Group and according to connection agreement between telecommunications operators.

- Data reconciliation management: The Center performs a comprehensive reconciliation of all data or detailed data for use in calculating connection fees for each type of service. When the overall reconciliation ratio is greater than the agreed difference ratio, a detailed reconciliation is performed. The data used for detailed reconciliation is based on the agreement between the Liquidity Center and telecommunications operators.

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- Manage the minutes of confirming connection billing data and reconciliation between the Liquidity Center and telecommunications operators.

- Clearing connection fees and other shared fees between member units in the Group, between the Group and other domestic and foreign telecommunications operators and between other telecommunications operators.

- On behalf of telecommunications operators, complete procedures related to liquidity in connection negotiations, roaming negotiations between domestic mobile networks and other agreements...

3.2.3.2 Model selection

We believe that it is most appropriate to establish the Liquidity Center as a joint stock company because:

Firstly: The Liquidity Center will be formed on the basis of converting one of VNPT's financial institutions. Thanks to that, the Liquidity Center will inherit and promote valuable experience in financial and monetary business.

This financial institution's network of facilities, staff, and traditional relationships with customers.

Second: The form of a joint stock company brings economic efficiency, so the establishment of a Liquidity Center is consistent with the development trend of the market economy and the development strategy of VNPT, which is to develop towards becoming an economic group operating in multiple industries, multiple services, and implementing multiple ownership.

Third: In the capital structure of the Liquidity Center, VNPT and its member units will hold controlling shares. The founding shareholders will invite major telecommunications operators in the Vietnamese market, economic groups, and large enterprises to participate in the founding in order to gain capital, prestige, experience, and relationships with these organizations.

3.2.3.3 Appropriate steps

- Step 1: Separating Postal and Telecommunications, distinguishing business activities and public service activities, and moving towards accounting for each service to accurately determine the costs of the services.

- Step 2: Implement the conversion of financial institutions in VNPT as proposed in the project: Postal Savings Service Company into Postal Bank; Postal Finance Company into financial services joint stock company.

- Step 3: Prepare the conditions of facilities; staff; customer relationships on the basis of developing liquidity services from the current services that the liquidity center under VTN is doing.

- Step 4: Develop a project to establish a Liquidity Center converted from the current Liquidity Center under VTN.

3.2.4. Diversify types of financial services, develop new financial services provided by VNPT entities

As stated in the current status of financial service development of the Group, it shows that the financial services that the Group participates in providing are still very limited, focusing only on a number of services such as postal savings, credit services, financial consulting services, money transfer services and insurance services, while a number of other services

Services such as payment services and stock market services are almost undeveloped, some services are only in the testing phase, and some services have only just appeared on the legal document system.

Therefore, it is necessary to promote the development of diverse types of financial services on the basis of consolidating and perfecting existing financial services, forming and developing new financial services with great potential. Quickly summarize the types of financial services that are being tested such as payment cards, personal accounts, consumer credit, etc. to apply widely and have a plan to deploy these services on a large scale. At the same time, continue to build towards forming and developing new types of services to meet the diverse needs of customers in the economy such as cash asset trading services, commercial paper trading services, etc.

a) For banking services:

 Savings service:

Diversify capital mobilization forms to satisfy customers' deposit needs to the maximum. The current trend of diversifying capital mobilization forms is to renew existing products such as applying flexible interest and principal payment methods: interest can be paid in advance, term savings with partial withdrawal (withdraw principal many times, pay interest once upon settlement). In addition, to increase long-term capital mobilization, the Company can encourage customers by offering a certain interest rate (higher than non-term interest rate) if customers withdraw early but close to the maturity date. For terms of 3 years or more, the Company can apply the compound interest payment method (interest will be added to the principal at the end of each year) or floating interest rate (from the second year onwards, the interest rate changes over time).

Expanding many forms of mobilizing savings deposits with many terms, many types of interest rates, many different deposit and payment methods, depositing in one place and receiving in many places; opening a savings book without needing an ID card. Expanding forms of capital mobilization through the issuance of deposit certificates and valuable papers. Mobilizing by receiving term deposits of 1 year or more for organizations.

organizations and individuals, borrowing from domestic and foreign credit institutions, international financial institutions in domestic and foreign currencies (for PTF company).

Continue to research and launch new capital mobilization products with high technology content and many benefits for customers such as: Accumulated savings products; ladder savings; insurance savings; bonus savings; capital mobilization for payment at home with the amount of 50 million VND or more. In which, focus on reducing capital mobilization costs, reforming banking transaction procedures to ensure speed, neatness, safety and efficiency.

Diversify retail banking services and modern banking services based on the development of information technology such as ATM cards, e-wallets, e-banking, Internet banking, phone banking, mobile banking, online shopping services... However, VNPT must build a strategy to diversify banking products and services in accordance with the actual situation and capabilities of VNPT as well as the advantages and disadvantages of each service to help the service get closer to customers, helping them use the banking services that VNPT provides in the best way.

 Credit services:

Expand lending by discounting and rediscounting to organizations and individuals in domestic and foreign currencies, pledging commercial papers, bonds and valuable papers.

Develop a number of new services such as factoring, consumer lending, overdraft, stock and securities loans, etc.

Participate in contributing capital and purchasing shares of units in the industry that are undergoing equitization. Expand credit activities to units outside the industry.

Developing consumer credit financial services such as home mortgage loans, unsecured loans, installment loans, credit card overdrafts, savings book mortgage loans, etc. requires a consistent customer policy to be able to centrally manage and segment customers according to each branch network.

Develop new credit products based on modern technology platforms such as: Personal accounts combined with value-added services such as salary payments, cards, and copies.

billing, paying service bills; investment products, asset management, automatic investment accounts, centralized capital management; developing new ATM card utilities, developing guaranteed loan services, mortgage loans, and pledges.

 Development of microfinance services:

According to the speech of Mr. Chris De Noose, Chairman of the World Savings Bankers Association (WSBI) at the conference on "retail banking strategy in the Asia-Pacific region" in July 2005 in Hanoi, the need for an effective distribution channel so that all classes of people as well as small and medium enterprises can access financial services is an important factor in the socio-economic development in Vietnam in particular and any country in the world in general. "Access to financial services is a global concept and is closely related to the policy of hunger eradication and poverty reduction... so it is not difficult to understand why the United Nations chose 2005 as the year of microfinance", Mr. Chris De Noose explained. In fact, a recent study by WSBI has shown some of the above necessity: In developed countries, up to 80% of the population has access to financial services, the remaining 20% of the population does not have the ability or cannot access them. However, in developing countries, including Vietnam, this ratio is the opposite. Therefore, the role of TKBĐ is very important in narrowing this gap and TKBĐ is not simply for profit but needs to aim at increasing people's access to financial services.

We analyze the microfinance market to see the role of TKBĐ in developing microfinance services in Vietnam. The structure of the microfinance market in Vietnam according to market segments includes 3 types: Formal, semi-formal and informal markets:

+ The formal microfinance market is provided by four main entities: Vietnam Bank for Agriculture and Rural Development (VBARD); Policy Credit Bank (VBP); People's Credit Fund (PCF); Rural Joint Stock Banks (RSHBs); serving 8.3 million farming households. Financial market

The formal sector provides about 70% of microfinance services. VBARD is the largest financial institution providing services to farmers through a nationwide network of about 1,900 outlets, with a market share of about 60% at the end of 2004 and providing services to 35% of low-income households. VBP is known as a bank serving poor households. PCF is a network of financial institutions and cooperatives with an active financial intermediation function. RSHBs are the result of the restructuring of rural credit cooperatives and have a 10% government share, but these Banks have a very small market share.

+ Semi-formal microfinance services are provided by three groups: government programs, social organizations, and international non-governmental organizations.

+ Informal microfinance service providers include moneylenders, relatives, traditional rural credit associations, and ROSCAs (Savings and Credit Associations)-like organizations

Microfinance is considered an important strategy in poverty reduction and economic development in Vietnam. Therefore, the State plays an important role in expanding financial services, forming the environment and conditions for providing these services. The imposition of the State in managing microfinance has hindered its development into a potential commercial industry. Policies with lasting effects include the customer lending interest rate policy, which is a subsidy policy, or non-commercial financing that does not pay attention to saving mobilization (requiring a low gap between deposit and lending interest rates).

The informal microfinance market remains very important in rural Vietnam. Interest rates in this market are two to three times higher than those of state-owned banks. State-owned banks mainly focus on lending to wealthy households, even at low interest rates. The majority of households in Vietnam have little or no access to formal credit institutions. There are many reasons why the poor

Vietnam's enterprises still have to continue to use the services of the informal loan market such as without collateral, due to being in remote areas, due to limited lending to expand production...

Although in the 90s of the last century, the State had a number of legal reform policies that had an impact on the microfinance market such as real interest rate policy, policy to create initiative for commercial banks in deciding to lend capital by mortgage and a number of other policies; the savings mobilization market in Vietnam is still lagging behind, less than half of microfinance institutions provide services to attract savings from households. Research by Global Finance Magazine in 1999 showed that there were about 6.1 million customers with a loan balance of 1.76 million USD and an average loan value of 150 USD, with about 2,700 transaction points; also according to research by this organization, the policy of maintaining low lending interest rates is the main reason why microfinance institutions do not want to provide savings mobilization services.

In general, NGOs are not interested in providing services to attract savings for the poor in Vietnam. Other government policies also limit the mobilization of savings, such as the regulation of minimum deposits at commercial banks. Deposits attracted by VBARD in urban areas far exceed those in rural areas. Another reason is the lack of savings products designed to mobilize capital from the population.

With the above context of the microfinance market in Vietnam, in our opinion, the VNPT Postal network and TKBĐ can fill the gap in the market and contribute to the process of transforming the informal to formal microfinance market in Vietnam.

To be able to design appropriate microfinance products in Vietnam, we analyze in depth the characteristics of poor households in Vietnam:

Households, especially poor households, need more savings products and services. Research results from a number of non-governmental organizations indicate that people

Poor people often seek to reduce their vulnerability to risk by expanding their savings opportunities. However, it is not easy to find any type of savings that can meet the savings needs of the poor in the formal financial sector. For the rural financial sector in general, interest rate controls have an impact on the incentives for formal financial institutions to attract savings. Subsidizing lending rates makes savings rates low, reducing the attractiveness of bank deposits compared to other forms of using excess cash. Experience from other countries shows that interest rates are only one of a series of factors that affect the demand for savings services. Other factors include: Safety, convenience, this is one of the points that TKBĐ should exploit to take advantage of.

Savings with positive real interest rates in financial institutions are beneficial to the poor as is the availability of loans at reasonable interest rates. It is not true that all poor households are incapable of saving. Therefore, the provision of savings facilities must be accompanied by credit investment in profitable activities, in which case the poor can accumulate capital from profitable activities and eventually cover the costs of subsequent investments. Since the initial savings are small, access to bank staff, as well as the ability to withdraw money easily and quickly, play an important role in deposit services.

Therefore, to develop savings services for the rural poor, VNPT needs to:

Establishing an environment and policies for the above services to develop. Areas that need special attention include issues related to the protection of savings deposits such as: low interest rates must be equal to the inflation rate; financial service providers must be well managed and regulated; depositors' responsibilities and rights must be clear.

VPSC should give greater autonomy to branches in the savings system in deciding on debt maturity structures and new savings products.