Factors Affecting Consumer Lending Activities of Commercial Banks According to Nguyen Van Ha, Vu Ngoc Nhung, Ho Ngoc Can (2000), Borrowing Capital from Banks

- During disbursement, the lender evaluates the customer's business performance, capital usage plan, debt repayment ability, checks the loan purpose, loan security, and checks disbursement documents according to regulations.

- Implement disbursement and credit security measures (establish mortgage, pledge, guarantee...) for mortgaged loans. At the same time, establish loan monitoring records.

- In all cases where customers are found to be using capital for improper purposes or violating the terms of the loan agreement, the lender has the right and responsibility to stop disbursement for handling according to the signed loan agreement.

- Step 4: Check, monitor and handle debt

+ Inspection and supervision: The lending director is responsible for directing and organizing the implementation of management to ensure the safety of lending capital, regularly inspecting and supervising business operations, evaluating capital usage plans, collecting information, performing customer rating according to regulations, evaluating customers' ability to repay debts to promptly propose appropriate handling measures according to regulations. Determine the level of damage to the customer's capital usage plan when risks occur.

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+ Debt settlement: Depending on the level of violation of the customer, the lending bank has the right to consider suspending the loan or terminating the loan and recovering the debt before the due date when there is evidence to prove that the customer has violated the regulations of the lending place.

- File a lawsuit to denounce violations before the law when customers have overdue debts due to subjective reasons but have no feasible measures to repay the bank, customers intentionally avoid debt repayment obligations, customers commit acts of fraud, cheating and other violations according to the provisions of law.[8]

1.1.1.6. Factors affecting personal consumer lending activities of commercial banks According to Nguyen Van Ha, Vu Ngoc Nhung, Ho Ngoc Can (2000), borrowing capital from banks

goods - from theory to practice, Statistical Publishing House

a. Group of factors belonging to the bank

- Development orientation of the bank: Is a prerequisite for developing consumer lending activities. If in their development plan, banks do not care about this activity, customers who need consumer loans will not care either. On the contrary, if banks want to develop consumer lending activities, they will come up with specific strategies to attract those who need to come to them, then consumer lending will have the opportunity to develop.

- Financial capacity of the bank: The financial capacity of the bank is one of the factors that bank leaders consider when making decisions, including decisions on consumer lending activities. The financial capacity of the bank is determined based on a number of factors such as equity capital, the percentage of profit next year compared to the previous year, the proportion of overdue debt in total outstanding debt, value of liquid assets, etc. If the bank has large equity capital, the percentage of profit, debt is too low and the value of liquid assets is large, the ability to mobilize large capital in a short time can be considered financial strength. When a bank has financial strength, it can invest in portfolios that the bank is more interested in than in previous years, the ratio of overdue debt to total debt, value of liquid assets, etc. If the bank has equity, profit percentage, low overdue debt and large value of liquid assets, the ability to mobilize large capital in a short time, it can be considered financial strength. When a bank has great financial strength, the bank can invest in portfolios that the bank is more interested in, then consumer lending activities will have the opportunity to develop. On the contrary, if the bank does not have the necessary capital to finance priority activities, consumer lending activities will have less opportunity to expand.

- Bank credit policy: Is a system of policies, orientations, regulations, rules... governing credit activities issued by the Board of Directors to effectively use funding sources for businesses, households and individuals. Normally, credit policy has the following items: credit limit, types of loans that the bank implements, regulations on collateral, terms of credit, directions for handling credit exceeding the loan limit,

debt payment methods, interest rates and fees... Therefore, the factors in credit policy have a strong impact on the improvement of credit in general and consumer lending activities in particular. When a bank has diverse forms of consumer lending, flexible mechanisms, and good quality, development is easier and more favorable. Due to the increasingly fierce competition between banks, a reasonable and appropriate credit policy is an effective factor in attracting customers.

- The number, qualifications and professional ethics of credit officers also have a significant impact on the consumer lending activities of commercial banks. Whether consumer lending activities can be carried out or not depends on the staff of the bank. If the ethics of borrowers are ranked first among objective factors, the ethics of credit officers are ranked first among subjective factors. If credit officers do not have professional ethics, no matter how good they are, they are worthless. For personal gain, they are willing to harm the interests of the bank. However, ethics alone is not enough, credit officers must have high professional qualifications and broad knowledge to accurately assess customers and loan projects, thereby making the right decisions.

- The level of science and technology and the management ability of the bank are also important factors affecting the development of operations. With modern supporting technologies, the handling of bank procedures is quick, accurate, and reduces cumbersome procedures for customers.

b. Customer factor group

- The customer's borrowing capacity is shown through factors such as the customer's income, cultural level, habits, ethics... of the customer. The income of the consumer loan customer determines their borrowing needs and the decision to lend to the bank. Because, when lending to consumers, the bank will base on the current and future income of the customer, which is the source of debt repayment. Therefore, income has a great influence on the customer's consumer borrowing needs, the size of the loan and the development of consumer lending by the bank. Customers need to have a stable income to ensure the ability to repay the bank and especially need to have the goodwill to repay the debt on time and in full. If

If the customer is a person with good morals and a sense of debt repayment, the risk of consumer lending is low, creating favorable conditions for banks to expand consumer lending activities and lending regulations will not be too strict. On the contrary, if the customer does not repay the debt, and has a lot of overdue debt, it will inevitably hinder consumer lending activities.

- The customer's ability to meet the loan conditions is the customer's ability to meet the bank's regulations such as: Financial capacity, asset value, documents proving ownership and legal use of assets...

c. Group of environmental factors

- Macroeconomic situation : Macroeconomic stability will create opportunities for effective credit expansion. Macroeconomic stability, especially monetary stability, price stability, interest rates, exchange rates, inflation... will make resource institutions feel secure in lending, borrowers will have more jobs, increase income, and at the same time create conditions to maintain and develop sustainable two-way relationships in borrowing and debt repayment. On the contrary, when the economy is in crisis or slow development, it will affect and limit the provision of consumer credit by financial intermediaries. Loans are affected by unstable fluctuations in the financial market, which can lead to credit defaults. Positive changes in the macroeconomy that occur too quickly also cause certain disruptions. For example, inflation and interest rates falling too quickly can also lead to defaults on loans with interest rates based on previously high inflation rates. Inflexible exchange rates, which do not reflect macroeconomic fluctuations, distort external price signals and directly affect the income of customers and credit institutions, reducing consumer loans.

- Government and state policies : The Government's view on the role of domestic consumption in economic development and growth is important for the development of consumer credit activities. When the government implements an economic development strategy that emphasizes exports (foreign consumption), the domestic consumption sector will receive less attention. However, practical experience in other countries shows that this strategy also faces the problem that economic growth will depend greatly on the external environment. Therefore, many countries have shifted to

to a more stable and sustainable economic development strategy than relying on exports. With that perspective, the Government's positive policies will create a favorable environment to boost consumer spending (such as tax policy, income policy, trade policy, tourism, health, education) which is an important opportunity to expand consumer credit.

- Legal environment: A complete system is the basis for protecting the development of a safe and stable financial market, promoting financial institutions to improve their capacity to provide high-quality financial services to the population, protecting the sustainable development of equal cooperation between banks and customers for the benefit of both parties.

- Cultural and social environment: Factors related to social culture such as habits of using banking products, savings rates, educational level, tastes, etc. have a great influence on the decision to choose the form of consumer lending. For example, in the US, society is considered a consumer society, with a savings rate of only about 10% of total income and shopping habits will be a very large market for expanding consumer lending. Familiar or unfamiliar concepts of banking, safe or unsafe cash payment habits among the population are factors that have a great impact on the services that banks provide, including consumer lending activities.[9]

1.1.1.7. Indicators for analyzing the efficiency of personal consumer lending activities

a. Indicators reflecting the scale of personal consumer loans

- Consumer lending scale: Indicates the development of personal consumer lending in breadth, reflected through criteria such as: Loan sales, debt collection sales and outstanding consumer lending activities.

- Consumer loan turnover: The amount of money that a bank has lent for consumption in a certain period, usually a month, quarter, or year. It includes both the amount of capital that has been recovered and not yet recovered by the bank in that period. An increase in CVTD turnover does not mean good and vice versa, a decrease in this loan turnover is not always a bad number, but it also depends on many factors such as the bank's potential and the economic conditions in a certain period.

- Consumer loan debt collection turnover: Reflects the amount of capital that customers repay to the bank in a certain period. Debt collection turnover reflects the ability to repay debt.

on-time customer debt, reflecting the bank's increased collection of overdue debt, early recovery due to signs of unhealthy financial situation of customers.

- Consumer loan balance: This balance is calculated in absolute numbers, it reflects the amount of money that customers still owe the bank up to a certain point in time. A high total balance shows that the bank lends a lot, the bank's reputation is relatively good, and it has the ability to attract customers. On the contrary, when the total balance is low, it shows that the bank is not able to expand and develop loans, thereby showing that the bank's reputation is not high, it is not able to attract customers, the marketing ability is poor, affecting the bank's business activities. However, we cannot rely on this indicator alone to evaluate, depending on each time, this indicator will reflect different situations. Therefore, when evaluating, we must put it in relation to the capital source, the specific conditions of the customer and the customer.

CVTD outstanding debt ratio (%) = CVTD outstanding debt/ Total outstanding loans

This indicator reflects the ratio of outstanding CVTD debt to the total outstanding loans of the bank. Through this indicator, we can compare the scale of CVTD with the total scale of bank loans. The higher this ratio of outstanding debt, the better the CVTD activities of the bank are meeting the lending needs of customers.

b. Criteria for evaluating the quality of personal CVTD services

Along with expanding the scale of CVTD, banks must also pay attention to the quality of loans. To accurately assess quality, it is necessary to consider many different indicators. From a bank's perspective, the quality of CVTD can be assessed through the following indicators:

- Overdue debt: Debt whose principal and interest due (in whole or in part) are not fully paid, or the bank does not approve debt restructuring (including debt repayment term management or debt extension).

CVTD overdue debt ratio (%) = CVTD overdue debt / total outstanding CVTD debt

This low index shows that the branch's business situation is good, indicating that the branch's consumer lending is profitable and recoverable. On the contrary, if this index is high, the bank's consumer lending activities are not operating effectively. The bank needs to find the cause and take measures to handle it.

as well as to develop appropriate credit policies to improve the efficiency of consumer lending. Overdue debt for credit activities in general and consumer lending activities in particular for banks is inevitable. However, banks need to find measures to reduce this ratio.

- Bad debt includes high-risk debts, which are loans that are assessed to have the possibility of partial or total loss. Bad debt includes overdue debt and bad debt is debt that depends on groups 3,4,5.

CVTD bad debt ratio (%) = CVTD bad debt/ total outstanding CVTD debt

The higher this ratio is, the more bad debt accounts for a large proportion of total outstanding debt, poor lending efficiency and a great impact on business efficiency as well as the survival of the bank. Banks must find ways to reduce this indicator to the lowest possible level. Any amount that is truly unrecoverable must be accounted for in the bank's operating costs and compensated by the risk reserve fund. The ratio of overdue debt and bad debt in the total outstanding debt of a bank will basically reflect the quality of lending activities in general and consumer lending in particular at the bank and indicate the efficiency and risk of developing the scale of lending.

Bank lending activities always come with risks such as loss of capital and failure to collect interest. To ensure stable operations when risks occur, banks have used risk reserve measures by setting aside funds to compensate for losses. Normally, risk reserve must be calculated at a certain percentage based on the debts determined to be risky. Accordingly, debts are divided into risky debt groups in different debt groups. Corresponding to each debt group, the bank establishes a reserve ratio, the riskier the debt, the higher the reserve ratio.[6]

1.2. Practical basis

1.2.1. Current status of personal consumer lending activities at Vietnamese commercial banks

CVTD is one of the important activities of banks, the activity that brings the greatest profit to banks, has a great influence on the development of banks.

Nowadays, Vietnam's economy is developing rapidly in all aspects, people's income is increasing, people's living standards are also increasing, leading to the demand for consumer activities of individual and household customers. Therefore, banks have many opportunities for personal consumer lending activities, but on the other hand, they also face many difficulties because the competition between banks is extremely fierce, banks have to compete with each other and have to compete with many credit companies and foreign banks that are increasingly entering Vietnam. Commercial banks need to have many new products and services to meet customer needs, create more values, differences to retain current customers and attract more personal consumer loan customers effectively.

In the context of Vietnam increasingly integrating deeply and widely, signing many free trade agreements with Southeast Asia, Asia, Europe, America and Australia, the competition has also become much fiercer. Commercial banks that want to be able to compete with foreign banks in the integration period need to constantly research, develop, and improve the efficiency of many products and services in both quantity and quality.

In recent times, along with the country's socio-economic development and innovation, personal consumer lending activities of banks have also continuously developed and grown steadily in terms of scale, network, quantity and quality of products and services. However, Vietnamese commercial banks have also revealed limitations, not really meeting the requirements of the international economic integration period, not creating an impressive brand, low service quality, weak marketing activities, weak competitiveness...

Personal CVTD activities of banks in recent times have had many positive changes, service quality is increasingly improved. Banks provide credit to customers in many ways and methods such as installment loans, issuing credit cards for cash loans, many joint activities are taking place such as linking with stores, supermarkets, linking with e-wallets such as momo, zalopay, bankplus, Ipay, vimo... Free opening of personal accounts, free issuance of domestic debit cards, credit cards, expanding and developing online services

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