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Economic Development Orientation of Dong Nai Province to 2020 and Forecast of Banking Activities in Dong Nai Province


CHAPTER 3

SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT RISK MANAGEMENT OF THE COMMERCIAL BANKING SYSTEM

IN DONG NAI PROVINCE


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3.1. ORIENTATION FOR ECONOMIC DEVELOPMENT OF DONG NAI PROVINCE TO 2020 AND FORECAST OF BANKING ACTIVITIES IN DONG NAI PROVINCE

3.1.1 Economic development orientation of Dong Nai province to 2020

Economic Development Orientation of Dong Nai Province to 2020 and Forecast of Banking Activities in Dong Nai Province

Shifting the economic structure towards increasing the value of the commercial service sector and construction industry, in which agriculture is the spearhead and at the same time supports the development of other economic sectors.

Closely linking economic development with national defense and security protection, development with social order and safety, and ensuring the ecological environment in the region.

Mobilize investment capital, accelerate the construction of infrastructure and public works, especially prioritizing works serving production and daily life. Closely link development investment with production and business activities to improve production efficiency and rapidly increase the value of goods and products.

Ensure the implementation of the following main targets: Economic growth rate from now to 2015 reaches 14.5% - 15%; from 2016 to 2020 reaches 13.5% - 14%. GDP per capita (calculated at current prices) in 2012 reached 1,890 USD, in 2015 reached 3,270 USD and by 2020 reached 6,480 USD. Total development investment capital from now to 2013 reached about 101,000 billion VND, from 2014 to 2015 reached about 210,000 billion VND and from 2016 to 2020 reached about 101,000 billion VND.

386,000 billion VND. Population size: about 2.5 million people in 2012, about 2.7 million people in 2015 and about 2.8 - 2.9 million people in 2020.

3.1.1.1 Industrial development

Industry mainly focuses on the construction materials mining industry taking advantage of local conditions, while developing small-scale industry, combining Agriculture-Forestry-Industry.

Dong Nai will become a large, modern industrial and service center of the Southern region; strive to become an industrial province in the modern direction by 2012.


By 2015, it will become a basically industrialized and modernized province and by 2020, it will become an industrialized and modernized province with an economic structure of 51% industry, 46% service, and 3% agriculture.

Dong Nai's industry will develop in the direction of expanding scale, prioritizing investment attraction in key industries such as construction materials, ceramics, ready-made garments, agricultural machinery and equipment... By 2015, build and develop 34 industrial parks with a total area of ​​about 12,779 hectares. By 2020, build and develop 45-47 industrial parks and gradually convert qualified industrial clusters into industrial parks. By 2015 and 2020, high-tech and advanced products will account for over 75% and over 85% of production value.

To serve the cause of modernization and industrialization, Dong Nai will focus on building a new Dong Nai bridge and the Ho Chi Minh City-Long Thanh-Dau Giay expressway before 2015. Re-plan Thi Vai port and the port area on Dong Nai river to meet the demand for transportation and goods circulation, and at the same time build Long Thanh international airport with a design capacity of 100 million passengers/year.

Bien Hoa City is the economic and political center of Dong Nai, and at the same time an industrial center and an important communication hub of the Ho Chi Minh City region, the Southeast region and the Southern key economic region. By 2020, Nhon Nhach city will be built into a type II urban service and industrial center; Long Thanh and Long Khanh urban areas will become type III urban areas.

3.1.1.2. Development of agriculture, forestry and fishery sector

Focus on changing the crop structure to suit the land, terrain and general market trends. Gradually convert mixed garden areas and low-value crops to high-value crops, forming specialized production areas. Combine crop cultivation with livestock breeding to solve labor problems and increase income. In particular, build and apply a number of models: Mulberry cultivation and silkworm breeding, agroforestry models, crossbred cattle breeding, grafted orange growing models... Invest in building and upgrading the entire irrigation canal system for hamlets, in order to stabilize rice acreage.


Implement land and forest allocation to ensure greening of bare land and hills. Enhance public awareness of forest protection through improving living standards so that people are not too dependent on forests.

3.1.1.3. Development of trade, services and tourism

Take advantage of and exploit the advantages of the eco-tourism area, focusing on building infrastructure, supporting services for tourists, upgrading traffic routes, especially around the ferry terminal area, maintaining order and environmental sanitation. Coordinate the organization and exploitation of the Youth and Youth Camping Center well, organize good services for tourists.

3.1.2 Forecast of banking activities in the province

3.1.2.1 State management of the State Bank in the area

Continue and promote the role of the provincial State Bank branches in inspecting and supervising the business activities of the commercial banking system.

In the survey report on the causes of credit risks, over 27% of the survey respondents said that the reason comes from the weakness in the management and supervision of the State Bank at a level of 50%, and about 27% completely agreed that the reason comes from the weakness in the management of the State Bank in the area. Thus, based on the results of this survey, it can be said that the credit risks of the commercial banking system in the area are also partly the responsibility of the State Bank of Dong Nai province. Therefore, the management activities of the State Bank of Dong Nai province in the coming time need to focus on the inspection, examination and supervision of credit activities of the commercial banking system. In addition, it is necessary to coordinate with the competent authorities in the province to strictly control the competition and expand the transaction network of commercial banks in the area.

3.1.2.2 Business activities of the commercial banking system

Business activities of the commercial banking system in the area, closely following the general goals and directions of the State Bank of Vietnam, in each specific period.

+ Capital mobilization activities:

- Maintain stability in capital mobilization in the area, striving for an average growth rate of 26% per year.


- Increase the proportion of long-term capital mobilization (9 months, 12 months) in mobilized capital to create more stability in loan allocation and use.

+ Credit activities:

- Try to maintain the outstanding debt growth rate within the limits announced by the State Bank of Vietnam from time to time.

- Try to maintain the ratio of non-state loans

- Strengthen credit risk management of commercial banks in the area, rectify and strictly handle bank officers who have degraded business ethics and are negative in credit activities.

- The whole industry focuses on actively zoning and handling bad debt, trying to reduce the bad debt ratio to 4.2% in 2012; 3.6% in 2013; 3% in 2014 and by 2015 the bad debt ratio will be below 3%.

+ Other business activities: Developing and expanding service activities to support capital mobilization and credit activities.

3.2. SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT RISK MANAGEMENT OF THE COMMERCIAL BANKING SYSTEM IN DONG NAI

3.2.1. General solutions to improve the effectiveness of credit risk management of the commercial banking system in Dong Nai province

3.2.1.1 Identify credit risks

Credit risk identification is an important basis for providing appropriate solutions in managing and handling credit risks. Credit risk identification is demonstrated through signs of credit risk. There are two groups of signs to identify credit risks:

+ Group of signs from the customer side

The group of signs from the customer side includes: signs related to the relationship with the bank and signs related to the method of managing the financial situation and business production activities of the customer such as: The customer intentionally avoids when the credit officer mentions business issues; the effectiveness of using borrowed money; delays or causes difficulties in checking the periodic use of loan capital; the level of borrowing increases frequently; the need for large cash disbursements; use of


short-term capital to finance long-term investment activities; search for other bank competitors; late payment of interest and principal debts when due; changes in customers' financial indicators

+ Group of signs originating from the bank

The group of signs originating from the bank includes signs before, during and after lending; signs from collateral and signs from the ethics of bank staff.

In which, signs before lending such as: receiving and checking loan applications; appraising customer files including legal documents, financial documents, debt repayment ability.

Signs of lending include: lending to the wrong target; drafting credit contracts; entering loan information into the internal computer system; determining credit limits, loan terms and repayment terms; approving and disbursing loans; delivering and storing documents.

Signs after lending such as: adjusting, supplementing loan documents or signs in the process of checking, controlling loans; the process of collecting principal, interest and handling arising issues in credit transactions.

Signs of collateral such as: receiving loan security documents; valuation; notarization and registration of secured transactions; auction of secured assets; asset management; asset insurance and contract liquidation and release of collateral.

Thus, to manage credit risks well, commercial banks must identify signs of credit risks and analyze where those signs come from in order to have timely and effective handling measures.

3.2.1.2 Develop and perfect appropriate credit policies for each period.

Building a credit policy is the first basis for effective credit granting. Depending on each period, commercial banks can build a credit policy suitable to their existing resources. Credit policy is also the basis for credit staff to perform their duties and comply with credit granting procedures. A reasonable credit policy allows banks to determine


Identify important sectors and industries in each period, the proportion of medium and long-term loans, the proportion of loans for each customer and customer group. Therefore, a reasonable credit policy based on an analysis of actual market conditions is the basis for commercial banks to develop in the right direction, minimizing credit risks.

3.2.1.3 Diversify loan products, develop service products

Credit risk is an objective risk and is unavoidable. To minimize the risk that may occur while achieving profit goals, one of the most basic principles is “don’t put too many eggs in one basket”, which means diversifying credit and spreading risks, as shown below:

Diversify lending methods : Diversify lending such as one-time lending, limit lending, overdraft lending, installment lending, co-financing lending, etc.

Customer diversification: Expand lending to all economic sectors.

Diversifying investment fields : Currently, income from the credit sector still accounts for a large proportion of total income from banking activities, which is a risk if commercial banks do not diversify their investment fields to avoid focusing too much on the credit sector. Diversifying investment helps banks spread credit risks, and bank capital is invested in many different fields and industries.

Diversify other banking products and services : In addition to traditional credit products, commercial banks need to develop new product and service segments such as money transfer services, card services, international payment services, and remittance services.

3.2.1.4 Improve the quality of credit checks (checks before, during and after lending)

To limit credit risk, pre-lending appraisal is the most important. Credit officers need to carefully appraise the loan plan, the customer's financial situation, the legality and liquidity of the collateral.


… to make a lending decision. When deciding to lend, credit officers must ask themselves and answer the question “should I lend my own money?”. By answering the above question, credit officers have limited most of the credit risk.

In fact, pre-checking (appraisal) has not been given due attention, is still superficial and formal. Disbursement records are rarely reviewed unless there is an inspection designation from the internal control inspection department. Post-loan inspection is very cursory, mainly to complete the records, even the post-checking minutes are signed forged right after disbursing a few copies, when necessary, the credit officer only fills in the date and content briefly. Therefore, in fact, post-loan inspection has not brought into play its positive aspects. Many loan records have up to five or six post-checking minutes concluding that the customer used the loan for the right purpose, the production and business situation is stable, but when overdue debt arises, it is discovered that the credit officer has not visited the customer's home since the appraisal date, so he has forgotten about the customer's home.

Therefore, post-lending inspection is one of the important responsibilities of credit officers in monitoring the activities of borrowers to comply with the terms set forth in the credit contract between the customer and the bank to detect potential risks or new business opportunities to minimize the risk of customers' inability to pay.

3.2.1.5 Strengthen internal control

Internal control in credit activities is an extremely important tool. Through control activities, errors in the process of performing credit operations can be detected, prevented and corrected. In addition, control activities also detect and prevent ethical risks caused by credit officers.

To enhance the role of control to limit credit risks, the following measures should be taken:

+ Increase qualified staff with experience in credit operations to supplement the inspection and control department.


+ Regularly train and improve professional and legal qualifications for inspection and control department staff.

+ It is necessary to define responsibilities for inspection and control officers, and have a reward and punishment system to enhance the sense of responsibility in inspection and control activities.

+ Continuously improve and innovate inspection methods, increase frequency, and flexibly apply inspection and control measures. Depending on each time, each object and purpose of the inspection, apply appropriate inspection and control methods.

3.2.1.6 Perfecting the lending process

The lending and credit management process is a process issued with the purpose of helping the lending process take place in a unified and scientific manner to limit risks, prevent risks and improve credit quality. Therefore, completing the lending process must identify the person performing the work and the responsibilities of the relevant staff in the process, specifying the lending steps in credit granting activities. The lending process needs to be reviewed regularly to ensure that it is consistent with the actual situation of each period, ensuring that all work is handled fully, accurately, promptly and within the right authority.

3.2.1.7 Perfecting and innovating banking technology

Building modern banking technology, ensuring internal management requirements of the bank, meeting the requirements for developing increasingly diverse business transactions, credit risk management requirements, liquidity risk management, and the ability to connect with other banks. Vietnamese commercial banks are implementing projects to modernize banking technology and payment systems. Through the above system, commercial banks and branches in the same system can inform each other about the customer's business situation and credit relationships in the system in the fastest way. Banks can coordinate to lend and manage loans for a customer, avoiding the situation where many banks lend at the same time.

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