Improving the quality of financial appraisal of investment projects in medium and long-term lending at the Military Commercial Joint Stock Bank, Hoang Quoc Viet branch

supply and demand of the product in the market, check the product supply status of the market revenue (often oversupplied or undersupplied), and also need to check the demand and taste of consumers for this product in the market (is it a main product or a secondary product, determine the competitive position of the product in the market).

+ Determining the expected selling price of the product: the project's revenue depends on many of these factors because it directly affects the quality of the project's financial appraisal. Determining the selling price also depends on the brand, reputation, product quality, competitive products, and replacements of the project. If the brand, reputation, and product quality are higher, the selling price of the product may increase, thereby increasing the annual revenue of the project, thereby ensuring the ability to repay the branch. On the contrary, the more competitive products and replacements for the product increase, the selling price of the product may be lower than the capital invested, not to mention the factors of unfair competition that can seriously affect the cash flow of the project.

c. Cash flow assessment

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The project's cash flows include: Investment cash flows, cash flows from business operations, cash flows from liquidation of fixed assets and current assets. Determining cash flows must ensure the following principles: Appropriate cash flows, eliminating sunk costs from the analysis, calculating opportunity costs, considering side effects and allocating general administrative costs of revenue to the project.

MB Hoang Quoc Viet's appraisal staff should repeat the cash flow based on the investor's perspective in addition to the total investment perspective in the financial analysis of the investment project to help the investor clearly understand the costs, benefits, and financial efficiency brought to the investor.

Cash flow appraisal is a very important step, affecting the calculations of the following efficiency indicators. MB Hoang Quoc Viet's appraisal staff should pay attention to the following aspects:

- Assess the reasonableness of financial forecast tables through analyzing the completeness and reasonableness of the data provided. If the data is not suitable, such as the unit price of raw materials is higher or lower than the market price, which can lead to a large deviation between the actual cost and the calculations in the forecast table, it must be rebuilt based on the standard parameters of the industry being used or the basis from the market and technical assessment.

- Assess the necessary and reasonable costs of the project as well as whether the proportion of costs is appropriate to the reality of the industry or field? For example, in the construction industry, the cost of raw materials accounts for a high proportion, in the information technology industry, the main cost is the purchase of computer equipment and human resources. If necessary, you can hire experts or set up a consulting board to ensure the accuracy of the cash flow assessment.

- Cash flow appraisal includes revenue, income from liquidation, tax refunds, subsidies, etc. It is necessary to verify the accuracy and authenticity of the data to avoid "beautifying" the income level, improving the financial efficiency of the project. MB Hoang Quoc Viet's appraisal staff should use information collected from market analysis such as project supply and demand, for export products, it is necessary to grasp the economic relationship with customers, tax policies of partners, etc.

- Assess the reasonableness of the project's costs and revenue streams. It is necessary to assess the "cause and effect" relationship between the project's costs and estimated revenue streams.

d. Factor inflation into appraisal

Inflation causes market prices to fluctuate frequently, thereby affecting costs, product prices, output, and project revenue, thereby affecting the project's cash flow. In addition, inflation also affects the discount rate, causing inaccurate calculations of financial indicators NPV and IRR. Therefore, MB Hoang Quoc Viet's appraisal staff needs to focus on taking inflation into account in the financial appraisal of investment projects.

When inflation is included in the analysis, it is easier to assess the possibility of liquidity and debt repayment difficulties of the project. At the same time, the appraiser can assess the sensitivity of the project to the inflation rate, the financial feasibility may be lost (for example, NPV changes from positive to negative) when the inflation rate increases. Therefore, the branch appraiser needs to analyze inflation to see how it affects the financial variables, thereby changing the cash flow.

3.4.2. Solutions on professional qualifications and ethical qualities for staff

In any circumstance, people always play a central role, the most important factor determining the quality of project appraisal. The field of project financial appraisal is a complex, diverse task, related to many economic issues -

society. On the other hand, it greatly affects the capital and profitability of the bank, it requires a large amount of capital, a long time and contains risks. Therefore, credit officers must have high professional capacity, practical experience and professional ethics. Appraisal officers need to be clear-headed and sensitive in all situations to be able to make the most accurate comments about customers. In addition, they must always be steadfast, honest and maintain the standards of a bank officer. To build a team of officers with good qualities, meeting job requirements, banks need to take the following measures:

 Based on the existing appraisal staff, the branch needs to review the staff, transfer those who do not meet the job requirements to other tasks. At the same time, there should be preferential policies to encourage the spirit and sense of responsibility of each appraisal staff, such as: after each successful project, the branch will reward the staff who appraised that project, or use the target of projects with high appraisal quality as the basis for year-end bonuses for appraisal staff.

 Periodically every month and quarter, invite good experts in the field of finance and banking to teach, train and improve professional knowledge for staff. Along with that, organize seminars for staff to have the opportunity to discuss and resolve questions and difficulties encountered during the working process with experts and the bank's management. After each course, the branch can organize exams to check with the form of rewards and discipline to raise the learning awareness of the staff.

 Regularly conduct ideological and ethical education for appraisal staff, and have timely reward and discipline policies.

3.4.3. Solutions on information source quality

Information is an important input factor in financial appraisal. Having accurate, reliable and timely information sources will create many favorable conditions for financial appraisal. Therefore, MB Hoang Quoc Viet needs to take measures to improve the quality of information used and build a complete information system.

The information provided by the enterprise to MB Hoang Quoc Viet is the most basic information, including: legal capacity records, financial reports, loan and debt repayment plans, etc. Upon receiving this record, MB Hoang Quoc Viet will send an appraisal officer to check the mandatory, valid and completeness. For large and complicated projects, additional related documents may be required to prevent risks. In addition, the officer

The appraiser may directly interview some key members related to the project: director, project officer, chief accountant. The purpose of the interview is to re-determine the accuracy of the information provided, supplement necessary information, or better understand the past production and business situation of the enterprise through contact with employees at the enterprise. To conduct the interview well, the appraiser needs to study all the documents provided by the investor, carefully prepare the questionnaire, create a comfortable atmosphere, and be able to lead the respondents to follow their own ideas.

MB Hoang Quoc Viet's appraisal staff needs to make full use of available information from the bank, in the records stored at the bank (if there has been a previous credit, deposit, or payment relationship), the appraisal staff needs to pay attention to the customer's balance on the current account, because if the balance is always high, the business is financially stable and can ensure payment capacity.

- The appraisal officer at the branch proactively collects information by visiting the business's premises to get a visual view of the investment project that can be funded. Through this direct contact, the appraisal officer can assess the current status of the equipment, the number of employees, the accounting work at the business, etc. If necessary, experts or consultants can be hired to increase accuracy.

- Collect additional information related to the business from investigations from units that have relationships with the business:

 From the business's customers: through contact with many of the business's customers (if conditions permit), MB Hoang Quoc Viet has a basis to evaluate the products as well as the selling price and volume of products consumed by the business.

 From the supplier side: MB Hoang Quoc Viet sends an appraisal officer to discuss with the supplier to collect information on the estimated input costs of the project, re-check the operating capacity of machinery and equipment, from which it can provide estimated figures on selling price, output and revenue.

MB Hoang Quoc Viet's appraisal staff can exploit information from the market to grasp the increasing or decreasing fluctuation trend of output products, thereby being able to evaluate the project's revenue and collection.

Appraisers need to regularly monitor information from tax, legal, auditing agencies, and the CIC credit center... First, changes in

State policies, industry orientations and guidelines can affect the financial efficiency and risks of investment projects. Secondly, due to the poor quality of financial reports in some enterprises, the appraisal staff can coordinate with auditing companies to check the honesty and completeness of these financial reports.

Collecting information from external sources requires time, effort, relationships and financial costs for the bank, however, this is necessary and important for the appraiser to have reasonable and reliable data for their appraisal process.

3.4.4. Solutions for organizing and operating appraisal work

Currently, the Military Commercial Joint Stock Bank, Hoang Quoc Viet branch, has a project appraisal department, helping to reduce the workload of credit officers. However, to maintain a good operating mechanism, the branch needs to pay attention to the following issues:

 The project financial appraisal department, although only has 2-3 staff, still has to operate according to a disciplined process for all credit operations, ensuring principles in all appraisal operations.

 Assign appraisal officers to be in charge of customers in certain business areas. A credit officer cannot be knowledgeable about all projects in all business areas. Therefore, only assign an appraisal officer to be in charge of one or several certain business areas so that they can have the opportunity to delve into issues related to the issue they are studying.

 Strengthen inspection and supervision of appraisal officers in complying with relevant legal documents and official dispatches to avoid unfortunate errors in appraisal results.

3.4.5. Solutions on information technology applications

Technological and technical equipment plays an important role in the financial appraisal of investment projects. Therefore, MB Hoang Quoc Viet needs to prioritize investment in these technological equipment.

Firstly, MB Hoang Quoc Viet needs to build an internal information network, with a rich and diverse database and a modern, high-speed computer system so that appraisal staff can flexibly use information when necessary.

Second, MB Hoang Quoc Viet should develop or purchase modern software programs with specific features to directly serve the project financial appraisal work, such as software that integrates standards for each financial indicator of each project.

industry, as well as financial criteria for selecting feasible projects, with the aim of improving efficiency and shortening the time for processing appraisal information.

Third, MB Hoang Quoc Viet should regularly train IT skills for credit officers and officers doing project appraisal work.

3.4.6. Solutions for organizing coordination between departments

Firstly, MB Hoang Quoc Viet needs to separate the appraisal function and the monitoring and management of loans. Credit officers at the branch currently have to do a lot of work in a loan: they are the seekers, the proposers, the appraisers and the monitors of these loans. In other words, we see that there is no specialization between the appraisal and monitoring functions. The officer who appraises the debt repayment capacity of the enterprise is also the one who monitors the loan, which will lack objectivity, which will reduce the quality of the financial appraisal stage, leading to wrong decisions when financing.

Second, MB Hoang Quoc Viet needs to seriously specialize its appraisal staff according to each specific industry group and field, because project financial appraisal activities depend heavily on the market and technical appraisal work ahead. If the appraisal staff do not have enough expertise and qualifications to deeply research the technical aspects, it will be very difficult to conduct financial appraisal.

Third, MB Hoang Quoc Viet needs to have a plan to strengthen the inspection and evaluation work after project appraisal. Through analysis and evaluation reports on investment project activities, appraisal officers can see the achievements and limitations related to the project financial appraisal stage in particular and project appraisal in general to draw lessons and experiences for future financial appraisal work.

3.5. Some recommendations

3.5.1. Recommendations to the State Bank

The State Bank of Vietnam is a state agency in charge of monetary management in Vietnam. This is the agency responsible for issuing currency, managing currency and advising on monetary policies for the Government of Vietnam such as: issuing currency; exchange rate policy; interest rate policy; managing foreign exchange reserves; drafting laws on commercial banking and credit institutions; considering the establishment of commercial banks and credit institutions; managing state-owned commercial banks. Therefore, the State Bank needs to issue regulations and rules

appropriate and timely regulations to support the operations of commercial banks. The State Bank needs to specify the Banking Law, the Law on Credit Institutions, coordinate with relevant agencies to draft documents and regulations under the law (Decrees, Circulars, Guiding documents). In particular, provide more specific guidance on the Banking Law, amend unreasonable contents, inconsistent with current reality, causing many inconveniences for commercial banks.

The State Bank of Vietnam needs to support commercial banks in training their staff to improve their professional skills. The State Bank of Vietnam needs to regularly organize periodic training courses, professional development, and invite good financial and banking experts from the country and from countries with developed financial systems to teach, exchange, and answer questions. During the training process, it is necessary to focus on practical skills in computer-based appraisal software programs.

The State Bank should also enhance the role and effectiveness of the Credit Information Center (CIC) in providing information to commercial banks to serve the appraisal work. To enhance the coordination role of the CIC, the State Bank needs to stipulate mandatory provision of credit information from commercial banks to the CIC to ensure completeness and timeliness. At the same time, the CIC should also actively collect information from other sources, not only credit information but also economic information such as the General Statistics Office, the Ministry of Finance, etc.

3.5.2. Recommendations to the Government and relevant Ministries and branches

The State needs to further improve the legal environment, especially regulations, circulars, and decrees related to investment, financial management, accounting, auditing, and taxes... The State's macroeconomic policies need to create a safe, equal, and attractive investment environment for domestic and foreign investors. From there, it will create conditions for businesses to confidently invest in business, balance capital sources, ensure commercial bank loans, and repay debts on time.

Ministries and sectors also need to strengthen the process of checking, controlling and supervising investment projects that the revenue agencies submit, avoiding the situation of approving in a formal, unfocused and unfeasible manner. Therefore, it will make commercial banks spend a lot of time on appraisal, causing waste and the result is that the project is not approved because it does not bring efficiency to the bank.

3.5.3. Recommendations to investors

Investors must strictly comply with the construction and project establishment in accordance with the provisions of legal documents on the field of construction investment. In addition, investors need to provide necessary and complete documents to commercial banks as prescribed, actively support credit agencies in searching and verifying.

information sources, helping the appraisal process to proceed more quickly and effectively. Investors need to put personal interests and revenue in parallel with the interests of the bank and social interests, in order to be able to establish highly feasible projects, helping commercial banks to access good projects more easily, thereby improving the quality of project financial appraisal.

Improving the quality of financial appraisal of investment projects in medium and long-term lending at the Military Commercial Joint Stock Bank, Hoang Quoc Viet branch - 14

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