Factors Affecting Credit Activities for Business

Lending to intermediary organizations to provide capital to production households

The intermediary organizations in this case are agricultural processing companies. The lending method is as follows: banks lend to intermediary companies, and these companies advance capital to production households (HSX).

to the harvest season, intermediary companies buy products from HSX, at the same time

collection time of debts advanced from the beginning of the production season.

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Figure 1.4: Lending model by lending group

(4)

(1)

(2)

3)

Bank

Agricultural processing company or trading company

Farmer's household

(

(1) Banks lend to commercial processing companies

(2) Company providing capital for HSX

agricultural product or company

household

(3) After harvesting, HSX will pay the debt to the company.

(4) The company pays off the debt to the bank.

1.1.4. Factors affecting credit activities for business

1.1.4.1. Objective factors

Legal environment

This is the foundation and framework for banks to deploy their operations.

credit activities. If the legal system is complete and synchronous, banks will easily deploy and develop their activities. On the contrary, with a system of cumbersome legal documents, not close to reality and lacking synchronization, it will be difficult for borrowers and lenders, depositors and recipients.

money. Legal system related to banking credit activities

(TDNH) in the agricultural and rural areas is very diverse and is issued and regulated by many entities. From credit operation laws to regulations on

civil law capacity, from the provisions on plants, animals, and raising

planting, production to industry orientation, development planning of agricultural and rural areas. If these regulations are not consistent and synchronous, it will be very difficult for banks to implement credit activities. Therefore, the stricter and more specific the legal environment will create favorable conditions.

for banks to promote their initiative in business,

especially in handling the relationship between banks and businesses and production households, and loan cooperatives.

Natural environment. This is an indirect factor affecting bank credit activities in particular and the economy in general.

Vietnam is a country with a tropical monsoon climate, with frequent natural disasters and epidemics. Climatic conditions have a great impact on a number of industries, especially those related to agriculture, aquaculture and maritime. Therefore, the investment of the Vietnam Bank for Agriculture and Rural Development in these industries may lead to risks caused by the natural environment, adversely affecting the efficiency and business results of the bank. Of course, the natural environment affects the production and business of household economies and banks in both positive and negative ways. Fertile land, favorable weather and climate, favorable winds and rains are ideal conditions for agricultural production to have bumper crops, high productivity and output, increasing income for household economies, and enabling farmers to repay bank loans on time. On the contrary, barren land, frequent floods and droughts will cause many difficulties for agricultural production, crop failures, many farming households are at risk of hunger and are unable to repay bank loans. This also means that bank credit activities are difficult and risky. Therefore, to minimize risks in

bank credit loans for household economy, in addition to improving the quality

the volume of operations of credit institutions, requiring coordination

Ministry, closely and responsibly between sectors and related organizations in

implementation of credit contracts using borrowed capital for production purposes

production and business for each region, each locality and each household.

People's awareness of bank credit

In essence, bank credit is a loan to household economies to develop production according to the principle that the borrower must repay both principal and interest.

for banks. But in reality, some people are aware of

This loan is not sufficient so do not dare to access credit

use because of fear of high interest rates or consider bank credit as a loan

support

Non-refundable resulting in use

misuse of capital

Poor production and business efficiency affects both the lives of households and the operations of banks.

Mechanisms and policies of the State and the banking sector: Mechanisms and policies of the State have a great influence on the agricultural and rural areas. It is the driving force to promote production and business development, motivate and encourage farmers to feel secure and excited about production, invest resources to create many products for society. In the conditions

Currently, the mechanisms and policies of the State and the banking industry on

Credit activities for household economy must be open and convenient.

for people to access capital sources anytime, anywhere.

Only then can we meet the production and business needs of household economies, especially for households with production capacity and experience but lacking capital.

capital. Therefore, mechanisms and policies play an important role in production.

business in general and for bank credit activities in particular.

1.1.4.2. Subjective factors

As a subject in the transaction relationship with customers, the internal factors of the bank play a very important role in expanding credit activities in the agricultural and rural areas.

Our country's economy is in a transitional period, so mechanisms and policies are also in the process of changing and perfecting. Credit policy in recent times has had fundamental innovations according to the market mechanism, so it has made an important contribution to the implementation of the credit policy of the Party and the State, contributing to promoting economic growth and effectively controlling inflation.

result. It has a decisive meaning to the success or failure of a

Commercial banks. A correct credit policy will attract many customers, ensure the ability to generate profits from credit activities on the basis of risk dispersion, comply with the law, policies and guidelines of the State and ensure social justice. That also means that the quality of credit activities depends on whether the credit policy is properly built or not. Any commercial bank that wants to have good credit activities must have a clear and appropriate credit policy of its own. The business of a bank is to earn profits and mainly from credit activities, so a good credit policy will be an important factor affecting the business efficiency of the bank.

A system of bank branches that is reasonably distributed according to population density will create favorable conditions for people to access banking services. It will be difficult for people to transact if the bank is too far from their living and production areas. However, to be able to open a branch, the bank has to spend a lot of money. Therefore, the bank needs to establish a balance between costs and benefits.

Factors about

human resources. This is the factor

most important

determines the success or failure, expansion or contraction of a bank's operations in general. With a team of employees with good moral qualities

With a well-trained, well-versed and flexible application of credit procedures, understanding of the production sector, psychology and customs of the people, credit activities will have the opportunity to develop and risks will be controlled. With a spirit of cooperation and a dedicated, thoughtful service attitude, all for the customer, the employees will contribute to creating a good image of the bank in the hearts of customers, most of whom have negative thoughts about the bank. On the contrary, if the staff has weak professional qualifications, a lack of positive working spirit, poor labor discipline, and slow work processing

tardy

and no ethics

credit activities

Not only will it face many difficulties and even collapse, but it will also limit the ability to expand credit.

Although it is a bank serving the agricultural and rural areas, the role of banking technology in the prospect of expanding credit activities cannot be denied. With a system of modern equipment and technology, operations and processes will be shortened, creating conditions to increasingly better satisfy customer needs, thereby minimizing operating costs.

banking. Technology also helps with reporting and transferring

Capital surplus or shortage among branches in the system becomes more favorable, contributing to the expansion of credit activities.

Banking technology is more broadly understood in terms of flexibility and diversity of credit products. Product parameters regarding terms, loans, deposit methods, payments, etc., if designed to suit customer needs, will contribute to determining the impact on customer demand for services, thereby creating conditions for expanding the bank's credit activities. On the contrary, if subjectively imposing products, banks risk losing customers, even leading to credit risks.

In the current context, financial capacity is also a factor affecting the ability to mobilize and grant credit of commercial banks. To ensure safety in operations, the law stipulates that banks are only allowed to mobilize and lend a maximum amount of money in proportion to their own capital. Depending on each country, this ratio may be different. Modern banking management theory has proposed the Cook coefficient, which is the ratio between capital assets and total assets of the bank. This coefficient is a criterion to assess the level of safety in operations of

bank. Meanwhile, the reputation and safety of bank operations

The bank is a decisive criterion for the psychology of depositors. Both theory and practice show that people who deposit money in banks are risk-averse because they are willing to accept a lower interest rate than other forms of investment but are not stable. Therefore, they will choose a bank that operates effectively to deposit money. Also according to the law, the size of a loan must not exceed 15% of the bank's equity. Therefore, if the financial capacity is low, the bank will not be able to meet the large-scale medium and long-term loans of customers.

For customers in agricultural and rural areas,

relationship

between banks and organizations

government and social organizations

land

These organizations are partners, a channel for banks to deploy their products and reach out to customers.

people. If effective relationships are built, banks will

have chance

festival

Minimize operating costs and reach all customer segments within the bank's operating area.

1.2. THE ROLE OF BANK CREDIT IN HOUSEHOLD ECONOMY

1.2.1. Meeting the capital needs for production and business for the economy

household

First of all, bank credit contributes to the formation of financial markets.

right at

rural tools

economy

to promote agriculture and economy

rural development

Our country is a backward agricultural country, over 80% of the population

live by

agriculture and focus on crop production, mainly in crop production

is growing food crops; raising livestock, slow-growing rural industries

development, many traditional craft villages are lost. Because production only relies on the farming industry, which depends heavily on natural conditions, farmers' income and living standards are low, still at the poverty line, without conditions to accumulate capital to invest in expanding production, shifting economic structure, and converting self-sufficient agricultural production to commodity production. On the one hand, due to limitations in the economic thinking of small farmers, agricultural production is limited to the traditional production industry of farming, with little attention paid to developing industries, diversifying products, and producing crops and livestock with high economic value. On the other hand, most household economies, due to lack of investment capital, are still in the cycle of

stuck in a rut, unable to find a way out to create breakthroughs in production

agricultural production. Therefore, bank credit capital plays an important role.

very large for household economic development, creating conditions for them to expand production

production, shifting production structure, shifting from growing food crops, especially rice to short-term industrial crops, vegetables and beans... bringing high income per unit of cultivated area. In addition, developing craft villages and service activities in rural areas, which are still new to farmers, thereby solving employment for workers and increasing income for household economies. Specifically:

Bank credit provides capital to each production household. Providing capital directly to each production household will help the household economy proactively plan production and business, effectively using potentials.