agricultural production loan
Overdue debt ratio= | Overdue debt for agricultural production loans | x 100% |
Total outstanding loans for agricultural production |
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In addition to the ratio of overdue loans for agricultural production, people also use the ratio of bad debt to assess the actual situation of the efficiency of agricultural production loans. The total bad debt of the bank includes overdue debt, frozen debt, overdue debt transferred to current debt, so this indicator shows the actual situation of loan quality at the bank, at the same time reflects the ability of the bank to manage loans in the lending stage, and urge the bank to collect debts for loans.
- Bad debt ratio:
Production
Bad debt ratio= | Bad debt for agricultural production loans | x | 100% |
Total outstanding loans |
Credit activities of commercial banks always have many potential risks and bad debt is an unavoidable problem in the lending activities of banks. It is important that commercial banks maintain the bad debt ratio at the lowest acceptable level. According to the World Bank, a bad debt ratio of <= 5% is acceptable and a good level is from 1-3%.
- Agribank's customer growth rate
This indicator reflects the growth rate of the number of customers having loan relationships with the bank over time. This indicator is also shown through 2 indicators: absolute growth rate and growth rate.
- Average increase in outstanding debt per customer
The average outstanding loan growth rate assesses Agribank's lending development by the method of in-depth development. This indicator reflects the bank's ability to develop customer relationships, orient a reasonable customer structure, and perfect policies and mechanisms to maximize the scale of lending to a certain number of customers.
b. Group of indicators reflecting the growth rate of income from production lending activities of Agribank:
Income from lending activities shows the results of lending activities and is also an indicator reflecting the overall scale of this activity.
c. Group of indicators reflecting the suitability in loan structure:
These criteria assess the suitability of the production loan structure with the borrowing needs of customers in the target market and Agribank's ability to meet them.
d. Group of indicators reflecting improvement in service quality:
This is a criterion for evaluating the quality of the lending development process. This criterion is reflected in the level of meeting customer needs and improving customer satisfaction with the bank's lending service provision process in each period (Phi Trong Hien, 2005).
2.3.3.2. Group of indicators reflecting factors affecting Agribank's agricultural production loans
a. External factors:
The external factors mentioned here are factors related to the characteristics of the area where the Bank operates, which also means that the Bank's target market has a great influence on the development of production loans of each specific Bank. Accordingly, the main factors include: Natural conditions, socio-economic characteristics; Macroeconomic environment; State policy mechanism; Capacity and reputation of customers.
b. Internal factors:
The internal factors of the bank are decisive to the operation of the bank itself. There are many internal factors affecting the credit activities of Agribank, including the following basic factors: Agribank's business strategy and credit policy; Agribank's financial capacity, operating network and technical facilities; Credit information; Agribank's lending processes and procedures. Capacity and qualities of credit officers (Phi Trong Hien, 2005).
Chapter 3
RESEARCH RESULTS AND DISCUSSION
3.1. Credit activities at Agribank branch in Van Ban district, Lao Cai province
3.1.1. Credit products
Credit products are quite diverse such as: Real estate loans, car loans, consumer loans, business loans, online loans secured by savings deposits.
3.1.2. Credit activities
With its position and reputation built over many years, the Branch has successfully completed capital mobilization work according to the assigned plan, contributing to the overall capital mobilization achievements of the entire system of the Vietnam Bank for Agriculture and Rural Development.
- Capital mobilization work at Agribank Van Ban district branch:
Table 3.1. Capital mobilization situation of Agribank Van Ban district branch in the period 2016-2018
TT
Target | Unit | 2016 | 2017 | 2018 | |
I | Capital mobilization | Billion VND | 339 | 500 | 480 |
1 | VND | Billion VND | 339 | 500 | 480 |
Proportion | % | 100.0 | 100.0 | 100.0 | |
2 | Foreign currency converted to VND | Billion VND | No generation | ||
II | In there | ||||
A | Classification by economic sector | ||||
1 | Mobilization from the population | Billion VND | 278 | 291 | 334 |
Proportion | % | 82.0 | 58.2 | 69.6 | |
2 | Deposits of economic organizations | Billion VND | 46 | 194 | 131 |
Proportion | % | 13.6 | 38.8 | 27.3 | |
3 | Deposits and loans from other credit institutions | Billion VND | |||
Proportion | % | ||||
TT
Target | Unit | 2016 | 2017 | 2018 | |
4 | Treasury Deposits + Other Capital | Billion VND | 15 | 15 | 15 |
Proportion | % | 4.4 | 3.0 | 33.1 | |
B | Sort by time | ||||
1 | Under 12 months | Billion VND | 202 | 378 | 305 |
Proportion | % | 59.6 | 75.6 | 63.5 | |
2 | 12 months and up | Billion VND | 137 | 122 | 175 |
Proportion | % | 40.4 | 24.4 | 36.5 |
(Source: Business performance reports of Agribank Van Ban in 2016, 2017, 2018)
The data table shows that the capital mobilization situation of Agribank Van Ban fluctuated in the period 2016-2018. Specifically, in 2017, the branch's mobilized capital increased by 161 billion compared to 2018. However, in 2018, the branch's mobilized capital tended to decrease slightly (decreased by 20 billion compared to 2017).
The bank's summary report shows that customer savings are the most important resource of Agribank Van Ban. This is consistent with the situation in Van Ban district in recent years. Mobilization from the population tends to decrease from 82% in 2016 to 69.6% in 2018. On the contrary, capital mobilized from organizations tends to increase from 13.6% in 2016 to 27.3% in 2018.
Analyzing the mobilized capital over time, data from the bank shows that short-term mobilized capital accounts for a large proportion of the total mobilized capital of the Branch. However, this proportion fluctuates unstably over the years. In 2016, the proportion of short-term mobilized capital accounted for nearly 60%. But by the end of 2017, short-term mobilization increased and accounted for 75.6% of the total mobilized capital. However, in 2018, this figure decreased to 63.5%. This fluctuation is due to the fact that in 2017, the Bank had a strategy to increase medium- and long-term mobilized capital to meet long-term projects approved by the Board of Directors at the beginning of the year. Therefore, the Bank has policies to attract capital.
Medium and long-term capital such as increasing interest rates for deposits with terms over 12 months; applying policies to encourage people to deposit medium and long-term capital.
- Lending work:
Lending activities of Agribank Van Ban district branch have fluctuated slightly over the years, outstanding loans converted in VND in 2016 were 608 billion VND, increased to 660 billion VND in 2017 and outstanding loans in 2018 decreased to 610 billion VND. Outstanding loans over the years are shown in the table below.
Table 3.2. Outstanding loan situation over the years 2016 -2018
TT
Target | Unit | 2016 | 2017 | 2018 | |
I | Total outstanding debt | Billion VND | 608 | 660 | 610 |
1 | Outstanding loan growth rate | % | 23 | 8 | -7.5 |
II | Outstanding balance by | ||||
A | Classification by economic sector | Billion VND | 608 | 660 | 610 |
1 | Outstanding loans for households and individuals | Billion VND | 378 | 474 | 520 |
Proportion | % | 62.1 | 71.8 | 85.2 | |
2 | Business debt | Billion VND | 219 | 178 | 81 |
Proportion | % | 36.0 | 26.9 | 13.2 | |
3 | Cooperative debt | Billion VND | 11 | 8 | 9 |
Proportion | % | 1.8 | 1.2 | 1.3 | |
B | Sort by time | Billion VND | 608 | 660 | 610 |
1 | Short-term debt | Billion VND | 254 | 274 | 200 |
Proportion | % | 41.8 | 41.5 | 32.8 | |
2 | Medium and long term debt | Billion VND | 354 | 386 | 410 |
Proportion | % | 58.2 | 58.5 | 67.2 | |
III | Credit quality | ||||
Bad debt | million dong | 300 | 400 | 500 | |
Bad debt ratio / Outstanding debt | % | 0.04 | 0.06 | 0.08 |
(Source: Business performance reports of Agribank Van Ban in 2016, 2017, 2018)
3.1.3. Other business activities
In addition to capital mobilization and lending activities, branches also have other intermediary activities such as: Payment activities include: Non-cash payments, capital payments between banks and ATM cards, currency trading activities and some other activities.
Due to many limitations due to conditions not allowing, most of the above activities are not yet active.
3.1.4. Business performance results of Agribank Van Ban
The performance results achieved by Agribank Van Ban are shown in the following table:
Table 3.3. Business performance results of Agribank Van Ban in the period 2016-2018
TT
Target | Unit | 2016 | 2017 | 2018 | |
I | Total income | Billion VND | 55 | 65 | 67 |
1 | Revenue from credit services | Billion VND | 51 | 60 | 63 |
2 | Revenue from non-credit services | Billion VND | 3 | 4 | 3 |
3 | Other income | Billion VND | 1 | 1 | 1 |
II | Total cost | Billion VND | 35 | 40 | 42 |
1 | Interest payment | Billion VND | 25 | 31 | 30 |
2 | Other expenses | Billion VND | 10 | 9 | 12 |
III | Profit before tax | Billion VND | 20 | 25 | 25 |
IV | ROA | % |
(Source: Business performance report of Agribank Van Ban in 2016, 2017, 2018)
The above table shows that the business performance of Agribank Van Ban has grown over the years. The profit target in 2016 reached 20 billion, and in 2018 the profit increased to 25 billion. This result shows the efforts of the Board of Directors as well as all staff of Agribank Van Ban to achieve high efficiency in business activities. However,
To examine more specifically the business performance, we will further study the income and expense structure of the Bank in recent years:
In the income structure of Agribank Van Ban, we see that the main source of income is from credit activities. The income structure from credit services accounts for a very large proportion of the total income of the branch. In the past 3 years, the proportion of income from services accounts for over 90% of the total income. This shows that the main source of income of the Branch is from credit activities.
In summary, through the above analysis, we can see that in the past 3 years, the business results of Agribank Van Ban have achieved stable growth. However, a problem is that the income structure still has a large difference. The main source of revenue is from credit activities, revenue from branch activities still has a serious imbalance, the branch still focuses on traditional operations such as lending, receiving deposits, and there are no solutions to promote the development of banking services.
3.2. Current status of Agribank's agricultural production lending at Van Ban branch
3.2.1. Legal basis of agricultural production lending activities in Vietnam
In 2015, the Prime Minister issued Decree No. 55/2015/ND-CP dated June 9, 2015 on Credit Policy for Agricultural and Rural Development. Decree 55 consists of 6 chapters and 27 articles, effective from July 25, 2015, replacing Decree No. 41/ND-CP (Decree 41) dated April 12, 2010 on credit policy for agricultural and rural development. Compared to current regulations, Decree 55 has the following basic new points:
Supplementing the subjects eligible for loans to serve agricultural and rural development, including individuals and households living in cities and towns but participating in production and business in the agricultural sector, and customers operating in the agricultural sector but located outside rural areas, except for real estate businesses, mining enterprises, hydroelectric and thermal power production facilities and some other types of enterprises.
The unsecured loan amount is 1.5-2 times higher than the regulation in Decree 41. Specifically, the maximum unsecured loan amount is 100 million VND for individuals and households; 300 million VND for business households; 1 billion VND for cooperatives and farm owners. In addition, Decree 55 adds two groups of subjects eligible for unsecured loans. These include: cooperatives engaged in aquaculture or offshore seafood exploitation, providing services for offshore seafood exploitation, cooperative unions operating in the agricultural sector are eligible for a maximum loan of 2 billion VND; cooperative unions engaged in aquaculture or offshore seafood exploitation, providing services for offshore seafood exploitation are eligible for a maximum loan of 3 billion VND.
Individuals and households borrowing capital from credit institutions do not have to pay fees for notarizing property mortgage contracts at the agency performing contract notarization, or fees for registering secured transactions at the agency registering secured transactions.
Decree 55 has additional provisions on credit policies to encourage the development of agricultural production according to the linkage model and the application of high technology (Article 14). For enterprises, cooperatives, and cooperative unions that sign supply and consumption contracts with organizations and individuals directly engaged in agricultural production, the unsecured loan amount is up to 70% of the value of the project or loan plan according to the linkage model. For enterprises, cooperatives, and cooperative unions that sign contracts to implement value chain linkage projects in agricultural production, the unsecured loan amount is up to 80% of the value of the project or business production plan according to the linkage model.
In order to limit risks in the agricultural sector, Decree 55 provides more specific regulations on principles and procedures for handling loans at risk due to natural disasters, large-scale epidemics or due to objective reasons beyond the control of borrowers (Article 12); encourages borrowers to purchase insurance in agriculture through the regulation: credit institutions reduce lending interest rates by a minimum of 0.2%/year compared to the interest rates of loans of the same type and with corresponding terms (Article 16).