Organizational Structure Model at Vietinbank

for the sustainable development of the branch in the journey to affirm reputation and brand.

2.1.2. Organizational structure

The organizational structure at Vietinbank - Dong Hai Duong Branch is shown in the diagram below:

Figure 2.1. Organizational structure model at Vietinbank – Dong Hai Duong Branch

(Source: TC-HC Department of Vietinbank - Dong Hai Duong Branch)

2.1.3. Business performance results

Vietinbank – Dong Hai Duong Branch has achieved many positive business results in the past 4 years. Specifically:

Table 2.1: Business performance results of Vietinbank - Dong Hai Duong Branch in the period 2017 - 2020

Unit: Billion VND

Target

2017	2018	2019	2020
Total assets	7,476	8,622	10,646	12,864
Total capital	7,476	8,622	10,646	12,864
Total outstanding debt	7,335	8,523	10,448	12,546
Service Charges	10.51	13.5	20.7	20
Profit	165	288	281	276
Number of employees	176	177	178	162

Maybe you are interested!

(Source: Excerpt from Business Results Report 2017, 2018, 2019, 2020 Vietinbank – Dong Nai Branch)

Hai Duong)

The total assets of the branch have increased gradually over the years from 7,476 billion VND in 2017 to 12,864 billion VND in 2020, proving that the scale of the branch is expanding. The business activities of the branch have also brought positive results. The branch's profits have increased sharply over the years. In 2017, the branch's profit was 165 billion VND, by 2020, the branch's profit had increased and reached 276 billion VND.

2.1.3.1. Capital mobilization

The capital mobilization scale of Vietinbank - Dong Hai Duong Branch has been continuously increasing over the years. The branch has constantly diversified its customer base, diversified its mobilization forms, provided flexible services with attractive fees, especially encouraged to serve customers in a package from payment, trade finance to free consultation... for customers. However, considering the overall situation of commercial banks in the area, the capital mobilization results of Vietinbank - Dong Hai Duong Branch are still low and not commensurate with the potential and scale of a large state-owned commercial bank (the capital mobilization market share of Vietinbank - Dong Hai Duong Branch only ranked 4th in Hai Duong province in 2020).

Table 2.2. Capital mobilization results of Vietinbank - Dong Hai Duong Branch in the period 2017-2020

Unit: billion VND

Target

2017	2018	2019	2020
Total mobilized capital	3.120	3,512	3,706	4,193
Short term	2.104	2,234	2,469	2,896
Medium and long term	1,016	1,278	1,237	1,297

(Source: Excerpt from Business Results Report 2017, 2018, 2019, 2020 Vietinbank – Dong Nai Branch)

Hai Duong)

2.1.3.2. Credit granting activities

The scale of credit activities of Vietinbank - Dong Hai Duong Branch has been continuously increasing over the years. As of December 31, 2020, Vietinbank - Dong Hai Duong Branch is the leading credit institution in terms of outstanding loans in Hai Duong province with outstanding credit reaching 12,546 billion VND, the bad debt ratio is only 0.69% of the total outstanding loans. Department

The Branch's bad debt ratio increased in 2020 due to the negative impact of the Covid-19 pandemic on the economy. The Branch's credit granting results are shown in the table below:

Table 2.3: Outstanding loans of Vietinbank - Dong Hai Duong Branch in the period 2017-2020

(Unit: Billion VND)

Target

2017	2018	2019	2020
Total outstanding debt	7,335	8,523	10,448	12,546
In there:
Wholesale balance	6,754	7,246	8,718	10,527
SME loan balance	295	493	654	896
Personal debt	286	784	1,076	1.123
* Bad debt	87	63	50	86
- Bad debt ratio/ Total outstanding debt	1.18%	0.74%	0.48%	0.69%

(Source: Excerpt from the 2017-2020 business performance report of Vietinbank – Branch)

Dong Hai Duong) Not stopping at traditional investment areas, implementing the State's policy of encouraging the development of non-state economic sectors, as well as implementing Vietinbank's strategy of gradually shifting from a wholesale bank to a multi-functional bank, Vietinbank - Dong Hai Duong Branch has continuously diversified its investments in the fields of tourism services, trade, agriculture, forestry, fishery, seafood processing, etc. Therefore, the proportion of loans to SMEs and individual production and business households is increasing with increasingly large outstanding loans. If in the past, retail loans and consumer loans only accounted for a very small part of the total outstanding loans, about 3-5%, in recent years

This has gradually increased, now accounting for over 16% of total outstanding debt.

In addition to expanding lending and increasing outstanding debt to meet development requirements, Vietinbank - Dong Hai Duong Branch also pays great attention to ensuring credit quality. Therefore, along with the principle of lending without lowering credit standards, Vietinbank - Dong Hai Duong Branch also constantly strengthens measures to recover bad debts and off-balance sheet debts. Thanks to that, the bad debt ratio at the Branch has decreased both in absolute and relative terms. At the end of 2020, the branch's bad debt was VND 86 billion, accounting for only 0.69% of the total outstanding debt. This shows that the risk in the branch's credit activities is very low.

2.2. Current status of lending to small and medium enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade - Dong Hai Duong Branch

2.2.1. Products, customers

2.2.1.1. Loan products for small and medium enterprises

Currently, Vietinbank - Dong Hai Duong Branch has been providing diverse products suitable for the needs of each SME customer segment.

- Regular short-term loans: This is a loan product to supplement working capital to serve the production and business needs of small and medium enterprises.

Characteristics: The lending target is SMEs customers who pay expenses related to production and business activities in accordance with the provisions of law. With this product, the bank provides customers with 02 lending methods: single lending and lending by limit with a maximum term of 12 months.

- Regular medium and long-term loans: This is a product that finances medium and long-term investment capital needs for small and medium enterprises.

Characteristics: The loan objects are SMEs customers paying for fixed asset investment costs such as purchasing machinery, equipment, means of transport, building factories, offices, etc.

- Indirect fixed asset investment loans: Vietinbank - Dong Hai Duong Branch flexibly meets the fixed asset investment needs of businesses and administrative and career organizations with income to serve business investment purposes.

Characteristics: The lending subjects are SMEs customers who need to pay for tangible fixed assets with an original value of up to fifteen (15) billion VND, which do not directly generate revenue (or do generate revenue but it is difficult to separate and accurately calculate the revenue generated from the investment in that asset) and are invested and purchased by customers independently from the New Investment Project/Expansion Investment Project.

- Business overdraft loan: Is a loan product to supplement working capital, meeting the sudden needs of businesses to compensate for temporary business capital shortages, accordingly, customers are allowed to spend more than the amount (residual balance) in the payment deposit account opened at Vietinbank.

Characteristics: SMEs customers have VND payment deposit accounts at Vietinbank, meeting criteria on financial status and payment reputation.

In addition, Vietinbank - Dong Hai Duong Branch also provides product packages and incentive programs for each specific customer group, as follows:

- Credit for micro enterprises

- Supporting industrial enterprise sponsorship products

- Corporate sponsorship products provided

- Financing products for dealers and SMEs customers to buy cars

- Credit products without collateral for SMEs

2.2.1.2. Customers

SMEs have credit relationships with branches operating in many industries and business sectors. The largest number of enterprises are in the service sector (76%), followed by industry and construction (22.49%), and finally agriculture, forestry and fishery (1.46%).

Figure 2.2: Structure of SMEs having credit relationships with branches by business lines in 2020

23%

76%

Service

Industry and construction Agriculture, Forestry, Fishery

(Source: Excerpt from the 2017-2020 business performance report of Vietinbank – Branch)

East Sea)

Because the majority of SMEs have credit relationships with branches operating in the service and industrial production sectors, they are mainly concentrated in key economic areas, where there are crowded commercial activities of the city such as industrial parks, around national highways. These SMEs have created jobs for thousands of workers in the city every year with an average increase of over 9%/year, contributing to solving employment for 25-26% of the labor force of the entire Kinh Mon town, contributing to shifting the labor structure in accordance with the economic restructuring orientation of Hai Duong province, which is to increase the proportion of the service sector, gradually reducing dependence on the industrial sector.

In general, SMEs with credit relationships with branches are assessed as dynamic and adapt quickly to market changes. However, the common characteristics of SMEs in the area are limited in both capital and management skills, small production scale, limited management skills, reporting systems that are not really transparent and complete, ineffective production and business activities, difficult to access bank capital, outdated machinery and equipment, and difficult to access information. This brings risks to the Branch. It is difficult for the Branch to recover credit capital if the business is not effective. Providing capital mainly to SMEs in the industry - construction and trade - services sectors helps limit risks for the branch because these enterprises have a lower risk ratio than SMEs in the agriculture - forestry - fishery sector.

2.2.2. Small and medium enterprise lending process

The SME customer lending process is the steps that describe the bank's work from receiving a customer's loan application until deciding to lend, disburse debt and liquidate the loan contract. The SME customer lending process at Vietinbank - Dong Hai Duong Branch is currently applied in common with the general lending process, similar to large corporate customers. Specifically as follows:

Approval level

Control monitoring

after disbursement

Disbursement

The following procedures are followed:

approve

Collection of interest and fees

Case handling

overdue debt

Contract liquidation

Customer Marketing

row

Risk assessment

round

Figure 2.2. Loan process for SMEs customers

(Source: Vietinbank Credit Department – Dong Hai Duong Branch)

Step 1: Customer Marketing, Credit Proposal Report Creation and Credit Proposal Approval

- Marketing, receiving documents: Customer management staff market, receive customer needs, guide customers to create credit documents including: (i) Credit application form; (ii) Customer's legal documents; (iii) Documents on customer's financial situation; (iv) Documents on credit projects and plans; (v) Documents on loan guarantees.

- Customer management staff conducts general assessment of customers and their financial situation; prepares credit proposal report;

- Approval of credit proposal: based on assigned authority, Head of Transaction Department/Deputy Director in charge of Customer Management Division approves credit proposal. In case of exceeding the authority of the Branch: submit to Head Office (Focal Credit Risk Management Board) after approval by Branch Director.

Step 2: Risk Assessment

The Risk Management Department receives the Credit Proposal Report and Credit Profile from the Customer Management Department and the Transaction Department, assesses the risks and prepares the Risk Assessment Report to submit to the competent authority for risk approval at the Branch (Deputy Director of Risk Management, Branch Director, and Base Credit Council).

Step 3: Credit approval

- In case of granting credit without risk assessment: Deputy Director of Customer Management/competent authority signs to approve credit granting.

In case the customer has a credit need that falls under the credit approval authority of the Transaction Office Leader, the Transaction Office Leader shall sign the approval to grant credit on the Credit Proposal Report.

- In case of granting credit through risk assessment: the Deputy Director of Customer Management approves the Credit Proposal Report and the Director/Deputy Director of Risk Management approves the Risk Assessment Report.

- For credit under the risk approval authority of the local Credit Council: Risk management officer sends the dossier to members of the local Credit Council for review and decision.

- In case the credit proposal approval opinion is different from the risk approval opinion, the Deputy Director of Risk Management must discuss directly with the Deputy Director of Customer Management to reach an agreement. In case of disagreement, the Branch Director will consider and make the final decision.

Step 4. Procedures to be followed after approval

- Drafting the Credit Granting Decision: In case of credit granting that requires risk assessment, the risk management department is responsible for drafting the Credit Granting Decision. In case of credit granting that does not require risk assessment, the Credit Proposal Report with the approval of the competent authority is the Credit Granting Decision.

- Customer management staff informs customers, drafts and signs contracts, and enhances other procedures (registering secured transactions, notarization, ...).

Step 5: Disbursement

- The customer management department receives disbursement documents, checks the purpose, disbursement conditions, credit limit and prepares disbursement proposal (disbursement documents).

- Disbursement approval: The credit management department checks the completeness and reasonableness of the disbursement documents and submits them to the competent authority for approval;

- Disbursement and record keeping.

Step 6: Post-disbursement monitoring and control

- The customer management department monitors the disbursement process; performs debt classification; re-evaluates collateral; implements risk prevention measures; urges customers to repay debts; is responsible for proposing solutions and directly handling bad debts.

Organizational Structure Model at Vietinbank – Dong Hai Duong Branch

Comment