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Improving the quality of short-term loans for small and medium enterprises - 2

Table 2.14: Outstanding debt situation at CT Commercial Joint Stock Bank, Nam Dinh province branch Table Table 2.15: Trade finance situation

Table 2.16: Business performance results

Table 2.17: Number of customers borrowing capital at the Joint Stock Commercial Bank for Industry and Trade, Nam Dinh province branch

Table 2.18: Outstanding loans by customer group

Table 2.19: Outstanding credit for SMEs in 4 years

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Table 2.20: Loan structure by economic sector

Table 2.21: Outstanding short-term loans by collateral

Improving the quality of short-term loans for small and medium enterprises - 2

Table 2.22: Overdue debt of all branches Table 2.23: Overdue debt of SMEs Table 2.24: Short-term overdue debt ratio

Table 2.25: Bad debt ratio of the entire branch and of short-term loans to SMEs


CHART

Chart 1: Loan balance structure by customer group

Chart 2: Credit balance structure for SMEs in 2006-2009

INTRODUCTION

1. Urgency of the topic

As we know, the existence and development of Enterprises are closely linked to the existence and development of Commercial Banks (CBs). In Vietnam, the state-owned banking sector occupies an important position in the economy, especially in credit activities, providing up to 80% of total outstanding loans to the economy. The main customers of commercial banks are State-owned Enterprises (SOEs), large enterprises, while in recent years, this sector of enterprises has begun to reveal some weaknesses, such as business losses, financial imbalances, etc., which have significantly affected the CBs.

In addition to large enterprises, small and medium-sized enterprises (SMEs) play an increasingly important role in the socio-economic development strategy. Currently, small and medium-sized enterprises account for over 90% of the total number of enterprises in the country. Many enterprises have proven their position in the domestic and international markets. SMEs have contributed significantly to creating jobs for tens of thousands of workers, increasing income and improving people's lives, promoting production, circulation and distribution, promptly meeting all aspects of people's living needs and exports. Recognizing the role and development potential of SMEs, most banks today consider them their target customers and always seek to expand lending, especially short-term lending. As a result, fierce competition has arisen between banks and many problems have been revealed in the credit relationship between customers and banks. In that situation, improving the quality of lending is always a matter of concern for banks and measures need to be taken to resolve it. Lending procedures and processes always require improvement to ensure convenience for businesses as well as capital safety for banks.

goods. Based on this problem, I decided to choose the topic " Improving the quality of short-term loans for small and medium enterprises".

2. Research subjects

The research object of the thesis focuses on short-term loans for SMEs.

Scope of the thesis: focuses on studying some theoretical issues related to short-term lending to SMEs of some commercial banks in Vietnam such as: Viettinbank, Vietcombank, ACB, Techcombank ... and Joint Stock Commercial Bank for Industry and Trade, Nam Dinh province branch in recent years to analyze and propose orientations and solutions to contribute to improving the quality of short-term lending to SMEs.

3. Research methods

The thesis uses a synthesis of methods such as dialectical materialism, historical materialism, interpretive thinking, operational method, comparative method, and statistical synthesis method. In addition, the thesis also uses tables and diagrams for illustration.

4. Content and structure of the thesis

In addition to the introduction, conclusion, list of tables and references, the thesis is presented in 3 chapters. Specifically as follows:

Chapter 1: Overview of short-term lending quality for SMEs.

Chapter 2: Current status of short-term lending quality to SMEs at Vietnamese commercial banks.

Chapter 3: Solutions to improve the quality of short-term loans for SMEs.

CHAPTER 1

OVERVIEW OF SHORT-TERM LOAN QUALITY FOR SMALL AND MEDIUM ENTERPRISES

Commercial banks are financial and monetary intermediaries in the economy whose main activity is to receive deposits from customers, on that basis, to conduct lending activities and provide services to customers. In fact, lending activities are the most profitable activities for banks.

1.1. Overview of bank credit

1.1.1. Concept of bank credit

Credit is an economic activity that was born very early in the condition of high-interest credit in low production conditions. Along with the development of society, credit has made great strides. In a market economy, economic organizations operate independently and have relationships with each other through exchange and purchase to form a unified entity. In each economic organization, there are times when there is excess capital and there are also times when there is a shortage of capital, but from the perspective of the entire economy, at a certain point in time there will be a group of economic organizations with temporarily unused capital, and another group in need of additional capital. This is an objective phenomenon that exists in the process of social production, and at the same time it is a contradiction in the process of capital circulation and turnover. This requires credit to be a bridge between places with excess capital and places lacking capital.

Credit is a transaction of assets (money or goods) between a lender (bank and other financial institutions) and a borrower (individuals, businesses and other entities), in which the lender transfers assets to the borrower for use within a certain period of time as agreed, the borrower is responsible for unconditionally repaying the principal and interest to the borrower when the payment is due.

Thus, the nature of credit is a transaction of assets on a repayment basis.

1.1.2. Characteristics of bank credit

- Trust: is the confidence in the lender's ability to repay the borrower in full and on time.

- Term: is the period of time the borrower uses the loan.

- Repayment: this is the most basic characteristic and repayment is the standard to distinguish credit relations from other financial relations. The value at the time of repayment must be greater than the value at the time of lending, or in other words, the borrower must pay additional interest in addition to the principal. In a bank credit relationship, the loan must be repaid unconditionally when the payment is due.

1.1.3. Classification of bank credit

Credit classification is the arrangement of credit into groups based on certain criteria.

* Classification by time:

Time division is important for banks because time is closely related to the safety and profitability of credit as well as the repayment ability of customers. According to time, credit is divided into.

- Short-term credit: from 12 months or less is used to compensate for the shortage of working capital of businesses and short-term spending needs of individuals.

- Medium-term credit: According to current regulations of the State Bank of Vietnam, medium-term loans have terms from 12 months to 5 years. Medium-term credit is mainly used to invest in purchasing fixed assets, improving or innovating technology...

- Long-term credit: long-term credit has a term of 5 years or more to meet long-term needs for housing construction, building new factories, etc.

* According to the form of credit financing is divided into:

- Loan: is a form of credit, in which a credit institution commits to giving the customer a sum of money to use for a certain purpose and time according to the agreement with the principle of repayment of both principal and interest.

- Guarantee: is a written commitment of a credit institution (guarantor) to the entitled party (guarantee) to perform financial obligations on behalf of the customer (guarantee) when the customer fails to perform or improperly performs the obligations committed to the guarantee recipient. The customer must acknowledge the debt and repay the credit institution the amount paid on behalf of the customer.

- Leasing: is when a bank spends money to buy assets to lease to customers according to certain agreements. After a certain period of time, the customer must pay both principal and interest to the bank.

- Discounting of commercial bills: Discounting of commercial bills is when a bank advances money to a customer equivalent to the value of the commercial bill minus the bank's income to own a commercial bill that has not yet matured.

* Customer credit rating:

- Unsecured credit: Is credit granted to customers without collateral.

- Secured credit is credit that requires collateral or third party guarantee.

* Credit classified by risk:

- Healthy credit: loans with high recovery potential.

- Problematic credit: credits showing signs of unhealthy conditions such as slow consumption by customers, slow progress in implementing plans, customers affected by natural disasters, customers late in submitting financial reports to the bank.

- Recoverable overdue debt: overdue debts with short term and customers have good debt recovery plan, collateral assets have large value...

- Bad debt: long overdue debt, poor ability to repay, small or depreciated collateral, slow customers...

1.2. Short-term loans for small and medium enterprises

1.2.1. General overview of small and medium enterprises

1.2.1.1. Concept of small and medium enterprises

An enterprise is an economic organization with its own name, assets, and a stable transaction office, registered for business in accordance with the provisions of law for the purpose of carrying out business activities.

The term DNV&N in Western countries is written as SME (Small and Medium Enterprise). In literal terms, the above words mean production and business establishments with relatively small scale. However, to determine how large or how small the scale is to justify the above issue is still very difficult, it depends on each different country with the economic development situation, employment situation and the nature of the economy of that country.

The criteria for determining SMEs are the total investment capital mobilized for production and business, the value of fixed assets, the number of employees regularly employed, etc. In reality, these criteria are not used exactly the same in all countries. However, for ease of comparison, the commonly used criterion is the number of employees regularly participating in production because it is not subject to differences between countries. In addition, the criterion on total investment capital is also often used. Depending on the specific conditions of each country, the magnitude of these criteria is different.

Some concepts of SMEs in countries around the world:

- Taiwan: SMEs are enterprises with contributed capital of less than 40 million Taiwan dollars and with less than 300 regular employees for enterprises.

100 people work in the industrial and construction sectors, while less than 500 are in the mining sector.

- Philippines: SMEs are enterprises with capital from 1.5 to 60 million

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- Japan: in the manufacturing sector, SMEs have less than 300 employees.

and 1 million USD investment capital. In the trade and service sector, SMEs are enterprises with less than 100 employees and investment capital of less than 300,000 USD.

- European Union: SMEs are enterprises with less than 250 employees, turnover not exceeding 40,000 ECU or total annual capital not exceeding 27 million ECU, with shares not exceeding 25% in a large enterprise.

- Vietnam: Our country also uses two common criteria: the number of regular workers and production capital. The use of these two criteria is very reasonable because they are popular, comprehensive and realistic. According to Government Decree No. 90/2001/ND-CP (November 23, 2001), small and medium-sized enterprises are independent production and business establishments, registered in accordance with current law, with a business capital of no more than 10 billion VND or an average annual number of employees of no more than 300 people.

1.2.1.2. Characteristics of SMEs

The characteristics of SMEs have a great influence on the policy-making process for these enterprises. The characteristics of SMEs come first from the capital scale of the enterprises. Because the criteria for determining SMEs in Vietnam are the same as in other countries in the world, the characteristics of SMEs in our country also have similarities with other countries. However, due to the specific characteristics of our country, which is the transition from a centrally planned economy to a socialist-oriented market economy. The low starting point of our economy combined with the remnants of the old society has affected the characteristics of SMEs.

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