Improving the efficiency of consumer lending activities at Southeast Asia Commercial Joint Stock Bank

CHAPTER 3:

SOME SOLUTIONS TO IMPROVE THE EFFICIENCY OF CONSUMER LENDING ACTIVITIES AT SOUTHEAST ASIA COMMERCIAL JOINT STOCK BANK (SeABank)

3.1. Development orientation of the State Bank of Vietnam on credit activities in 2014

(Chinhphu.vn) - The State Bank has just issued Directive 01/CT-NHNN on organizing the implementation of monetary policy and ensuring safe and effective banking operations in 2014.

Accordingly, the State Bank requires credit institutions to implement effective credit expansion solutions to support economic growth at a reasonable level, contribute to curbing inflation, removing difficulties, and promoting production and business development:

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 Credit growth of about 12-14%: According to the State Bank, in 2014, the orientation is for total means of payment to increase by about 16-18%, credit to increase by about 12-14%, with appropriate adjustments according to developments and actual situations.

At the same time, continue to implement recapitalization loans with volume, interest rates and

Reasonable terms for credit institutions to support liquidity, provide housing support loans, support debt settlement and support economic development in priority areas of the Government. Operate interest rates and exchange rates at levels consistent with macroeconomic and monetary developments, especially inflation developments, contributing to stabilizing the monetary market and ensuring the value of the Vietnamese Dong.

 Controlling credit quality and handling bad debts: In 2014, the State Bank will develop and implement credit solutions towards a credit growth target of 12-14%, in line with the capital mobilization capacity of credit institutions, controlling credit quality and handling bad debts. In addition, the State Bank will resolutely and synchronously handle bad debts using measures in the project on handling bad debts of the credit institution system issued together with Decision 843/Q -TTg dated May 31, 2013 of the Prime Minister; promote the purchase and sale of bad debts through the Asset Management Company of Vietnam Credit Institutions and enhance the role and operational efficiency of this company in handling bad debts; create favorable conditions for the company to operate safely and effectively.

 Reduce lending interest rates: The State Bank requires credit institutions to strictly implement regulations on interest rates; apply lending interest rates

Reasonable on the basis of mobilization interest rates and the risk level of the loan; saving costs, minimizing management costs, advertising, promotion and operating costs to create conditions to reduce lending interest rates in order to share difficulties with borrowers but ensure financial safety in the operations of credit institutions. Credit institutions are not allowed to collect fees related to loans, except for some fees as prescribed in Circular 05/2011/TT-NHNN. Apply reasonable fee levels for fees collected according to the provisions of law to share difficulties with borrowers; publicly list types of fees and fee levels collected according to the provisions of law.

3.2. Development orientation of Southeast Asia Commercial Joint Stock Bank on consumer lending activities in 2014

In terms of sales, the consumer credit growth rate is expected to increase by about 50% compared to 2012, with loan sales reaching 30% of the Bank's total loan sales. The overdue debt ratio will be reduced to the lowest possible level and below 2% as regulated by the State Bank. Pre-tax profit in 2014 will reach about 68 billion VND.

Completing the consumer lending process, simplifying procedures and shortening time are top priorities for SeABank. This is a prerequisite to determine the quality of the Bank's lending products and services, and is also a factor that attracts customers.

Regarding products, the Bank aims to diversify consumer lending products and services by continuing to develop and improve the quality of traditional products while conducting research and developing new products suitable to SeABank's operating characteristics.

SeABank also plans to expand its network of transaction offices in the area to increase competitiveness in consumer lending activities as well as increase market share of retail banking activities.

Strengthen customer development activities and promote the Bank's brand image on mass media to attract more customers to transact with the Bank.

Improve the quality of staff to better serve customers with the orientation of advanced training for leaders of branches, supplementing specialized skills for professional staff, training for new graduates to work at SeABank.

3.3. Some solutions to improve the efficiency of consumer lending activities at Southeast Asia Commercial Joint Stock Bank.

On the basis of theory, practice and subjective and objective causes,

analyzed, proposed solutions to improve the efficiency of CVTD activities focus on 4 issues: Credit policy; Organizational structure and quality of human resources of the credit department; Marketing activities; Service quality.

3.3.1. Credit policy

Business strategy and credit policy are two elements of the group of factors belonging to the commercial banking system itself. Business strategy is decisive to the operational efficiency of the Bank. Based on predicting changes in the environment to build a suitable business strategy, in which the strategy to develop the scale and quality of capital is an important part of the overall strategy of the Bank.

To improve the efficiency of CVTD operations, SeABank must develop a reasonable credit policy. A correct, reasonable, flexible credit policy that meets the diverse needs of customers for capital will help the Bank move towards an effective loan portfolio that can achieve many goals such as increasing profitability while still ensuring credit quality and meeting the requirements of management agencies. This has a direct and strong effect on expanding and improving the efficiency of the Bank's consumer loans.

The specific credit policy that SeABank needs to do is to focus on increasing lending revenue in general and consumer lending in particular in the context of SeABank's capital mobilization trending up, the amount of money in and out of the Bank must be in harmony, promoting lending, especially consumer lending, is the fastest way for SeABank to gain high profits from high consumer lending interest rates and many consumer loans.

3.3.2. Organizational structure and personnel quality of the credit department

Currently, the organizational structure of SeABank's credit department is still limited because the number of employees dealing with customers is small. To increase the level of interaction with customers, SeABank needs to have more employees, specifically, a SeABank transaction office needs 1 Head of Department, 1 Deputy Head of Department support, 3 customer relationship credit officers, and 4 transaction officers.

In addition, the Bank needs to regularly organize professional training courses, improve professional qualifications, technical methods of project appraisal, select staff who are truly capable in both professional and cultural qualifications, have knowledge in fields related to the operation of commercial banks; build a human resource development strategy, arrange a reasonable staff team, the right person for the right job to promote the strengths and limit the weaknesses of each person, create a unified apparatus, operate most effectively, have a reward and discipline policy.

Reasonable material and spiritual laws to enhance the sense of responsibility in work, commitment, love for the job and maximize the creativity of the credit department.

3.3.3. Marketing activities

Improve existing products and research and develop new products .

In fact, SeABank's product portfolio for consumer loans is not rich and diverse, mainly lending to employees, loans for buying and repairing houses, loans for buying cars... While at other commercial banks, their product portfolio is very diverse, in addition to the above products, there are also loans for labor export, student loans, quick loans by pledging valuable documents and gold, loans secured by listed securities 

As a latecomer, the Bank must build and perfect its product portfolio to be able to compete with other commercial banks. Moreover, it also helps the Bank increase its income from service fees through providing CVTD support products and services such as: card payment services, home banking services, etc. and minimize risks by diversifying products.

Currently, SeABank's consumer lending structure is not balanced, the proportion of short-term credit is much higher than long-term. If the Bank wants to increase profits as well as its position in the hearts of customers, it needs to further promote long-term consumer lending, only then can it fully meet the needs of all customers coming to SeABank.

The product that the Bank currently needs to deploy is Loans for house exchange.

This is a product that ACB Bank has deployed and achieved many successes. Because currently, the need to change the current house to have a better house is always an essential need of everyone, SeABank can completely provide this service. Because the newly formed property if the Bank finances the customer is a new, better house, the value will be higher and the Bank can see it as a TSB for the customer's loan. Moreover, the old house also has value, the Bank only finances a part of the shortage when the customer changes the house. Thus, the safety goal of Vietnamese banking activities is guaranteed while the income of Vietnamese banks increases.

Expand product marketing channels.

Banks can advertise products through channels such as: Personal channel - a channel implemented by individuals conveying messages including a team of transaction staff directly serving customers, this channel is low cost but effective, widely used in banks today, the most specific action is that SeABank staff need to print and distribute information about products and services.

of the Bank in crowded places such as intersections, residential areas, supermarkets, parks, shopping centers, entertainment and drinking centers...; Non-personal channel - the channel is implemented through organizations such as mass media agencies, advertising companies, this channel has higher marketing, wider promotion range.

Banks can also engage in sponsorship activities, which contribute to increasing customer awareness of the Bank and its innovations, attracting media attention, enhancing the Bank's reputation and image, and helping the Bank in recruiting and attracting talent.

3.3.4. Service quality

Increase investment in facilities and modernize banking technology.

Innovation and modernization of banking technology is an essential requirement for most banks today if they want to survive and develop. Only with modern and advanced technology can we design many high-quality, multi-utility, cost-saving products to meet customer needs. In addition, the application of current management models is also an important factor, increasing the competitiveness of banks.

Particularly for the software dedicated to lending service products - T24 software, to avoid transaction delays and customer downtime due to power outages or internet outages during transactions, the Bank itself must use high-quality internet to minimize network outages, and the Bank must always regularly update the power outage schedule of the regional power company to arrange transactions with customers at more appropriate times such as transactions before and after power outages.

Reforming business processes and procedures for consumer lending.

Reforming in a quick, simple and legal direction is an urgent requirement in this fiercely competitive environment. SeABank can consider and eliminate unnecessary procedures without violating the regulations of the State Bank to simplify, reduce costs and time for customers. By doing this, the Bank has created a position that is difficult to replace in the customers' choice of borrowing. Credit officers should directly arrange a scientific work plan, a specific daily customer reception schedule, and not let customers wait too long, especially for customers who are borrowing for the first time.

Strengthen appraisal, investigation, review and supervision of loans.

Compared to other lending products, consumer lending products bring in a relatively high profit ratio, but they are also high-risk products because

So the problem that SeABank poses is to build a tight and effective risk management system.

For CVTD work, in all steps, appraisal is the most important step, it determines 90% of credit quality and prevents risks. The most difficult appraisal work is to evaluate the qualifications of consumer loan customers. To limit the risks of CVTD activities, it is necessary to perform the following tasks:

 Check the legality of loan documents, mortgage contracts, authorization papers, must have signatures showing agreement and joint responsibility for the loan of the borrower.

 Legality of collateral (TSTC). Attention must be paid to the sense of responsibility of the members involved in the loan, because the Collateral (TSTC) factor is the last resort to handle bad debts, and the source of loan repayment is the income or salary of the customer, the willingness to pay is the deciding factor in the Bank's ability to recover capital.

 Lending control must be initiated from the stage of receiving loan applications until the collection of principal and interest. In particular, the Bank needs to focus on closely checking the application before granting loans and checking the customer's ability to repay the loan from the beginning.

 Loan approval does not mean the process is complete, but credit officers need to regularly monitor and supervise the loan until the loan principal and interest are fully paid. Loan monitoring is to check whether the customer uses the loan for the right purpose or not, because if the customer uses it for the wrong purpose, the risk to the Bank is very high. Credit officers need to periodically check the customer's income, remind and urge the customer to repay the debt when due. This is extremely necessary because only then will the credit officer know the customer's ability to repay the principal and interest, and at the same time, promptly detect any problems that arise so that they can take measures such as reminding the customer to prepare a sufficient and timely source of repayment.

3.4. Recommendations to the State Bank

To ensure that consumer lending activities of SeABank in particular and the commercial banking system in general are developed smoothly, the State Bank needs to promptly draft and promulgate specific legal documents with clear regulations on consumer lending. This will create a legal corridor for commercial banks' lending activities, ending the situation where there are too many documents and related guiding regulations but no document directly regulating consumer lending activities. This is the most urgent and urgent requirement for commercial banks today.

The State Bank needs to conduct specific and thorough research on the current consumer lending situation of the Vietnamese commercial banking system, the operating environment, and the individual customer market in Vietnam, in order to draft documents that are close to reality and highly practical.

3.5. Recommendations to Southeast Asia Commercial Joint Stock Bank, Hanoi Head Office

First of all, to improve the efficiency of consumer lending activities, SeABank Hanoi needs to design a specific consumer lending process so that branches can simultaneously deploy all personal banking services, the essential business practices will be completed, improving service quality. SeABank Hanoi needs to expand its network of operations further in Hanoi, which will soon become the financial center of the country, and at the same time continue to expand and cooperate in services between the Bank and other commercial service enterprises. In addition, the Bank needs to quickly apply the latest and best information technology to increase utilities, create competitive advantages in the market, and at the same time create new services to bring income to the Bank.

Although the development orientation of branches must comply with the general development orientation of SeABank Hanoi, it is really necessary to strengthen the independence of branches. SeABank Hanoi can allow its branches to operate independently, depending on the characteristics of the business environment, customers, and networks of other commercial banks in the area, 

The role of guiding and coordinating the activities of the entire network system of SeABank Hanoi is very important, especially in the context of competition and integration of banking services that have begun to heat up, SeABank Hanoi needs to quickly deploy specific mechanisms and business processes to promote the activities of branches as well as the entire Bank.

CONCLUDE

The Banker, a leading UK banking magazine, commented: "Today's trends show that any bank that seizes the opportunity to expand its retail banking services to a huge population that is "hungry" for financial services in emerging economies will become the global giants of the future." Improving the efficiency of consumer lending operations will be what Vietnamese commercial banks need to do to achieve that goal.

The graduation internship report on the topic "Improving the efficiency of consumer lending activities at Nam A Commercial Joint Stock Bank" presented 4 main topics:

 State a theoretical basis for consumer lending activities, research and apply it to analysis to clarify the research topic.

 Study the business activities of SeABank: history of establishment and development, fields of operation, business performance in 3 research years (2011-2013).

 In-depth analysis of consumer lending activities at the Bank, detection of limitations and causes of this activity, on that basis proposing solutions to improve the efficiency of consumer lending activities, and at the same time overcome the limitations.

 Propose specific solutions to improve the efficiency of consumer lending activities, including solutions on policies, human resources, risk prevention, marketing and service activities.

Due to limitations in knowledge, theory as well as practice, reference materials, research time, and practical contact, the article cannot avoid errors. I respectfully hope that teachers and brothers and sisters at Nam A Commercial Joint Stock Bank will contribute their opinions, sincere comments and supplement their knowledge to make my article more complete.

Finally, I would like to sincerely thank Ms. Diep Thi Phuong Thao and the brothers and sisters at Nam A Commercial Joint Stock Bank for their dedicated guidance and help in completing this thesis.

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