Orientation and Viewpoints on Improving the Quality of Export Credit Activities of Vietnam Bank for Agriculture and Rural Development

Regular operational safety is not guaranteed according to regulations, which has greatly limited the business activities of Agribank Vietnam.

Existence and causes of the staff system: Although the credit staff of Agribank Vietnam has professional qualifications and experience, their strengths are only in the field of Banking - Finance. The level of accumulation of technical expertise is very limited. Therefore, the conclusions when reviewing, evaluating and appraising loan projects are more or less biased. On the other hand, the number, capacity and qualifications of staff, especially the TDXK professional departments with experience in both credit and foreign trade, are still weak, lacking and limited. Especially in branches with strong growth in sales and loan customers such as Lang Ha Branch, Nam Ha Noi... Moreover, in reality, a number of credit officers and managers of Agribank Vietnam lack awareness and are irresponsible, taking advantage of their positions and authority for personal gain, causing damage to the entire Agribank Vietnam system, reducing the image and position of Agribank Vietnam in the eyes of customers. With the current situation of human resources being both lacking and weak in quality, the addition of personnel is still slow, especially senior leadership personnel. Management and executive personnel are not commensurate with the scale of operations of the largest commercial bank in Vietnam. Some key business departments still lack both leaders and employees, typically the Corporate Customer Department has only 01 Deputy Head. The staff's qualifications are still limited (it is even impossible to select staff to strengthen the department-level leadership for the Branch), their working attitude is not enthusiastic, not serious, and their sense of responsibility is not high.

The number of criminal and civil cases... related to Agribank Vietnam's staff and officers has increased, causing the image, reputation and brand of Agribank Vietnam to seriously decline domestically and internationally. The spirit of employees is confused, wavering, afraid of responsibility, hesitant in business, especially some branches in the city are confused, disoriented, some branches even have a surrender mindset, which has negatively affected business activities.

The restructuring project of Agribank Vietnam according to Decision No. 53/QD-NHNN dated November 15, 2013 of the State Bank of Vietnam on approving the project to restructure the organizational structure and business activities of Agribank Vietnam for the period 2013 - 2015 has

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Many points are difficult to implement, not suitable for reality, so the implementation still faces many difficulties. The reduction of branches in the two cities of Hanoi and Ho Chi Minh City, the divestment of capital at securities companies, gold companies... and the restrictions on lending in the restructuring project, especially stopping new real estate loans, leading to difficulties in restructuring loans, handling bad debts, handling mortgaged assets... (In 2014, there were nearly

8,000 billion VND was paid off by customers early to switch to borrowing from other banks).

Debt management and business processes in general and export credit in particular still have many limitations: The construction and completion of policies and business processes lack consistency, risk management and problem debt management have not been implemented, and large-value loans have not been controlled according to international standards and practices. Currently, Agribank Vietnam only implements the methods of lending one time, lending according to credit limits, lending according to investment projects and syndicated loans. In which, the main methods are lending one time and lending according to credit limits. The search for investment projects faces competition from other banks, especially BIDV, which is considered to have prestige and advantages in financing investment projects.

The implementation of customer classification has not been fully implemented, including import-export businesses: Although there has been a classification and ranking of businesses, it has only been applied at the level of collateral ratio and lending method, there is no separate interest rate to distinguish between traditional, reputable and capable customers and other customers... Leading to the credit structure in general and export credit in particular being unreasonable, still focusing on the state-owned enterprise sector, the non-state sector accounts for a low proportion, and export credit loans still account for a very small proportion of total outstanding debt.

The use of special payment methods in international payments has not yet fully exploited: The direct payment system of Agribank Vietnam has been deployed for several years but is still not complete and ineffective. This is also a reason for the reduction in the effectiveness of export credit activities. Export activities of enterprises are often closely linked to international payment services. Normally, when borrowing capital from banks, enterprises often present documents and ask the bank to check the set of documents and claim money on their behalf, discounting the set of documents.

The technical facilities of the Agribank Vietnam system are not yet complete in both hardware and software, reducing the efficiency of export credit activities: Machinery,

Although equipment for staff has been supplemented, it is still lacking and not synchronized. The Agribank Vietnam reporting system is still implemented in both software and paper reports, causing waste, waste and time-consuming synthesis. In addition, the software reporting system provides information at the simplest level, not fully exploiting information such as products, markets, and businesses. The connection across the entire system is still weak, each branch is like a separate "kingdom", reducing the effectiveness of the overall strength and reducing the overall management efficiency.

Preferential loans are not focused on capital allocation: Some TDXK loans under the Government Agreement have long loan terms, large loan turnover, and interest rates are always preferential compared to normal TDXK loans (even lending interest rates are 0%) but the capital for these special loans is not supported by ministries and branches with separate support mechanisms, Agribank Vietnam must mobilize and balance the resources itself. Due to special policy objectives, these loans are always given top priority, making it difficult to meet the needs of normal TDXK loans that are both economically and socially effective.

The work of building customer information systems, market information, and information on export products has not received adequate investment, so it is still weak and lacking, so Agribank Vietnam has not played an effective and practical role in advising businesses, leading to credit safety warnings not being properly implemented, affecting the quality of export credit. There is a lack of specialized departments for market research, consulting and risk assessment based on research, collecting information about customers and the market to propose preventive measures. Marketing information work has had many changes but has not yet achieved high results. The number of customers who are small and medium enterprises has not been attracted really much, even losing traditional customers.

CONCLUSION OF CHAPTER 3

To carry out the research objectives of the topic, based on the theoretical foundation in chapter 2, in chapter 3 the thesis focused on clarifying the current status of export credit quality at Agribank Vietnam in recent years, specifically from 2008 to the end of 2014 with the following specific results:

- Overview of the historical process of formation and development of Agribank Vietnam on issues such as: Achievements, organizational structure, general business performance.

- Analyze and clarify the current status of export credit quality through calculating general assessment criteria for credit quality; assessment criteria for export credit quality and assessment criteria for export credit of typical products: Coffee, rice, seafood.

- Clearly assess the current status of export credit quality of Agribank Vietnam, draw out some basic advantages, point out limitations, give groups of objective causes from the macro environment, causes from customers who are export enterprises and subjective causes of Agribank Vietnam itself.

- The author of the thesis also conducted a preliminary survey to examine the issue of export credit quality with the ethics of Agribank Vietnam staff, the business process of implementing export credit... using a number of research models to clarify the assessments and comments on the export credit quality of Agribank Vietnam, clarify the achievements, remaining problems and their causes.

The above contents are important premises for proposing solutions to improve the quality of export credit in the next chapter.

Chapter 4

SOLUTIONS TO IMPROVE QUALITY

EXPORT CREDIT OF VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

The Bank for Agriculture and Rural Development of Vietnam (Agribank Vietnam) has proposed a number of measures to expand credit for 4 priority areas (production households, exporters, small and medium enterprises, supporting industries) such as: Implementing a preferential loan package to encourage export and import customers with foreign currency revenue with a capital of VND 10,000 billion, VND interest rate of 11% per year; Continuing to reduce lending interest rates to create conditions for customers to reduce costs and expenses to make profitable business; For customers who are doing business but facing difficulties and are unable to repay debts on time, Agribank Vietnam will consider restructuring debts, extending repayment periods in accordance with the cash flow of the project, production and business plans and customers' repayment capacity, reducing debt repayment pressure on customers; Closely coordinating with the Farmers' Association and the Women's Union to promote lending through groups; Apply appropriate internal fee adjustment policies to encourage branches to lend to agriculture and rural areas based on the consideration of the proportion and growth rate of agricultural and rural loans of each branch, in the direction that branches with high proportion of agricultural and rural loans will enjoy lower internal fees; Organize an industry-wide conference on credit to immediately remove difficulties of branches to promote credit growth for the above 4 priority areas...

However, as analyzed in chapter 3, with the current situation of high bad debt, increasing gradually over the years (2008 - 2014), along with many outstanding issues in export credit activities, the measures that have been and are being implemented by Agribank Vietnam are not enough to improve the quality of export credit; not enough to fundamentally solve the nature of the problems of export credit quality. These problems require Agribank Vietnam to have the right orientation and viewpoint, a system of feasible solutions originating from its current problems; Having a good forecast with a vision to 2020, the support of the State and the Banking Association can solve the problem of export credit quality.

4.1. ORIENTATION AND PERSPECTIVE ON IMPROVING THE QUALITY OF EXPORT CREDIT ACTIVITIES OF THE BANK FOR AGRICULTURE AND RURAL DEVELOPMENT OF VIETNAM

4.1.1. General orientation

Vietnam is focusing on the cause of industrialization and modernization of the country, first of all, industrialization and modernization of agriculture and rural areas. In the roadmap for Vietnam to become an industrialized country by 2020, we need to develop a reasonable economic structure of pure industry, industry in services and industry in the Tam Nong area. That is a comprehensive and long-term strategy on the path to building a modern country, rich people, strong country, democratic, fair and civilized society. Therefore, banking services in the Tam Nong area must also develop strongly in both quantity and quality, creating a premise for promoting the development of this sector, thereby promoting our strategic export products.

The Board of Members of Agribank Vietnam has set out the direction, following the Government's policy and the direction of the State Bank, that Agribank Vietnam will continue to develop, restructure its business operations according to the goal of "Competition - Sustainability - Integration", continue to build Agribank Vietnam into a modern bank, improve the efficiency and quality of operations in urban areas, play a key role in the monetary and credit market in the agricultural and rural areas, meet the capital needs of the agricultural, rural areas and farmers, and provide high-quality products and services. To achieve this, Agribank Vietnam needs to focus on implementing the following basic issues:

- Focus on promoting capital mobilization both domestically and internationally by diversifying forms of mobilization, expanding transaction networks, taking advantage of capital from international organizations, foreign banks, etc. Actively applying banking management solutions according to CAMELs standards.

- Accelerate the restructuring of Agribank Vietnam towards becoming a modern commercial bank, meeting international standards on safety and efficiency (Equity safety ratio/Risk assets; Profit/Equity (ROE); Profit/Assets (ROA); Overdue debt, bad debt...). After equitization, the Agricultural - Farmer Finance Group will be formed.

- rural Vietnam.

- Thoroughly implement the principle of synchronous credit for economic sectors, which is credit according to market principles, ensuring that the Bank makes a profit after covering costs and setting aside risk reserves. The State budget support for farmers must be post-investment support, through many forms: Infrastructure investment, encouragement of science, technology, training, direct subsidies when there are natural disasters. The motto is to accompany the people, but Agribank Vietnam does not subsidize or compensate for losses through credit...

- New loans must comply with the correct procedures and regulations. Previously, the credit process was not complete and did not clearly define the responsibilities in each step of the work. And now, it is implemented step by step in the lending regulations of Agribank Vietnam, which clearly states the responsibilities of credit officers, business managers, and department directors for each loan.

- Credit appraisal work has truly become the basis for lending decisions, eliminating most ineffective capital use options, ensuring capital safety. The rate of overdue debt is within the allowable limit. The process of appraisal and monitoring of each credit after disbursement is assigned to a responsible officer. That assignment requires credit officers to improve personal responsibility and professional capacity, loans will be monitored and evaluated regularly for effectiveness through feedback from the person in charge, demonstrating the expertise of credit operations. Seriously implement corrections according to the conclusions of the State Bank inspectors and have initially been effective.

- Continue to expand the network of branches in the localities to increase access to Tam Nong. Currently, with more than 2,400 branches and transaction offices, Agribank Vietnam is present in all provinces and districts and on average, less than 4 communes have 1 credit service headquarters for farmers. At the same time, apply Mobile Banking with 741 modern specialized money transport cars, of which 341 cars are sponsored by the World Bank (WB). The Mobile Banking model helps people deposit money, borrow capital, and repay debts very effectively, is praised by the people and highly appreciated by the International Monetary Fund (IMF) in the mass media.

- Strengthen learning and experience exchange with member organizations APRACA, CICA. The experience of Agricultural Banks of countries such as France, Canada, Thailand, Indonesia, Malaysia... is very meaningful to help Agribank Vietnam in management and organization of activities. Agribank Vietnam regularly participates actively

actively participated in the Workshops organized by the Asia Pacific Rural and Agricultural Credit Association (APRACA), CICA and through that learned many useful lessons and applied them effectively in practice.

4.1.2. Orientation in export credit activities

4.1.2.1. On long-term orientation

To become an official professional export financing organization, Agribank Vietnam needs to adapt to international regulations on export credit while ensuring support for businesses in strategic export production and business sectors to achieve the Government's goals in economic development, specifically:

Firstly, it must be consistent with current policies, laws and international commitments, including compliance with the provisions of the Agreement on subsidies and countervailing measures when Vietnam officially joined the WTO, regardless of economic sector.

Second, the subjects of export credit loans must be closely reviewed, in accordance with the country's resource capacity and long-term strategy in each period, while improving the stability of the subjects.

Third, to overcome the shortcomings in the implementation process in the past, it is necessary to promote the application of modern technology and banking services in export credit activities, strengthen credit control and credit risks, staff must be carefully selected, improve the qualifications of staff, capacity and be properly trained, improve the working ability and customer service of professional staff in a professional direction.

Fourth, continue to study the experience of export financing organizations, and diversify the forms of export credit. However, it is necessary to base on the actual situation, the needs of enterprises and the implementation conditions to have appropriate and feasible implementation steps. However, in addition to the form of seller credit, it is necessary to develop more buyer credit, export guarantees (including export credit guarantees, bid guarantees, contract performance guarantees, etc.) and export credit insurance.

Fifth, seek support and assistance from the government and socio-political organizations such as the Veterans Association, Farmers' Association, Women's Association; Ho Chi Minh Communist Youth Union... Agribank Vietnam is a commercial bank but its credit activities for business are limited.

The Bank always closely cooperates with and supports farmers in consulting to develop production, improve their lives, stabilize rural areas, and thereby increase exports. Therefore, the Bank always seeks and receives great attention and support from authorities at all levels, creating favorable conditions for the Bank to lend and collect debts safely and on time. The Bank has coordinated with the Association to establish tens of thousands of loan groups to support and supervise each other in appraisal, disbursement, debt collection, and has saved many steps of the Bank's work.

In addition, Agribank Vietnam needs to have more preferential mechanisms on loan guarantees and lending interest rates for traditional customers with good reputation, good financial status, and high export turnover. Implement new operations to diversify customer support products such as: Foreign currency loans, export credit guarantees, further enhancing the role of the Bank of Agriculture and Rural Development and a companion with Enterprises in export activities.

4.1.2.2. On short-term orientation

Agribank Vietnam needs to focus on the following issues:

- Review the Corporations that have and have not had credit relations with the Bank, consider the current credit relations of each Corporation (with the Bank and other commercial banks) to develop and establish credit relations and banking services. Pay special attention to Corporations with potential for import and export.

- Expand marketing, work directly with potential import-export corporations such as Coal, Tea, Coffee, Food, Textiles, Footwear, Rubber, Glass and Ceramics, Vegetables, Forestry, Livestock, Import and Export of Agricultural Products and Processed Food, Machinery and Spare Parts, Medical Equipment, Pharmaceuticals, Corporations of the Ministry of Agriculture and Rural Development. Make every effort to serve the loan needs and banking services of these Corporations.

- Expand trading relations with units with foreign currency sources to promote capital mobilization and foreign currency trading, strive to self-balance foreign currency capital to further finance import-export credit.

- On the basis of issuing the Temporary Regulation on lending to finance export goods, initially focusing on implementation at Branches, key areas in conjunction with Corporations with export potential, on the principle of prudence, ensuring capital safety, buying back foreign currency, increasing the number of export transactions through Agribank Vietnam, in order to enhance the reputation of Agribank Vietnam in the international market. Strive in the period of 2011 -

In 2015, the total export loan turnover of the entire system focused on 8 main commodity groups: coffee, rice, oilseeds, seafood, garments, footwear, tea, and rubber, achieving higher turnover this year than last year.

- Continue to promote this activity by actively searching for and selecting customers and effective investment projects through information channels such as foreign banks with relationships, branches, ministries, and corporations. Link import credit with export credit.

- Research to pilot lending using new, advanced methods that are easy to apply and suitable for the current economic conditions of Vietnam.

4.1.3. Viewpoints on improving the quality of export credit of the Bank for Agriculture and Rural Development of Vietnam

4.1.3.1. Improving the quality of export credit must be associated with developing and improving the socio-economic efficiency of the agricultural, rural and farmer sectors.

The agricultural - rural - farmer economic sector plays a very important role for developing countries. The majority of the population and workers live in rural areas, the rural economy creates conditions for providing goods to support the development and export of urban areas. In fact, in Vietnam today, the rural area is a market with great potential, home to over 74.8% of the country's population, but Vietnam still lacks a truly sustainable rural financial system to serve this area. Rural enterprises, especially small and medium enterprises, have created 2/3 of jobs but still face many difficulties in accessing capital to serve investment needs... The difficulty in accessing capital for investment has limited the development scale and market expansion ability of enterprises in rural areas.

However, reality has proven that, in the recent crisis, agriculture and rural areas have contributed to stopping the decline of other sectors and fields of the economy. In Vietnam, this has been confirmed through a series of policies and orientations of the Party and Government towards the agricultural and rural economy, in which Resolution No. 26-NQ/TW dated August 5, 2008 of the Politburo on developing the Three Rural Areas clearly stated: “Agriculture, farmers and rural areas have a strategic position in the cause of industrialization, modernization, construction and protection of the Fatherland, are the basis and important force for sustainable socio-economic development, maintaining political stability, ensuring

security - defense. Solving the problems of agriculture, rural areas and farmers is the task of the entire political system and the whole society"

According to statistics from the State Bank, the credit growth of the entire system in the years 2010 - 2014 was only at 8% - 12%, much lower than the adjusted target of 13% - 15% and is a low level. Compared to the economic growth rate, credit growth is only 2 times higher, while the rate of previous years is often up to 5 - 6 times. The average credit growth in the last 5 years is 33% and in the last 10 years is 29.4%. According to the analysis of the Governor of the State Bank of Vietnam, credit is still the main channel contributing to bank profits, so reducing the growth rate represents a great sacrifice of the entire banking industry. In particular, bank capital flows have been better oriented to go to the necessary addresses. While the overall credit growth rate was only 12% - 13%, capital for production and business increased by 15%, capital for agriculture and rural areas increased by 24%, at times more than 30%. Export credit growth even increased by 58%.

Thus, it can be seen that even in the most difficult period, credit in the agricultural and export sectors still has strong growth, reflecting the large capital demand of this sector and the State's priority orientation in development for the agricultural - rural - farmer sector and promoting export turnover. This requires the high concentration and promotion of the banking system in general and Agribank Vietnam in particular in continuously growing and improving the quality of export credit for this sector.

4.1.3.2. Improving the quality of export credit must go hand in hand with restructuring the entire system.

The restructuring of the entire banking system is attracting public attention. In particular, when the State Bank of Vietnam (SBV) specifically announced that it would develop a restructuring plan for Agribank Vietnam, experts and investors raised many questions about the Bank's operational capacity and the starting point of the restructuring roadmap.

In the current period, we need to have a truly correct view on restructuring because banking activities play a very important role, this is also a very sensitive issue. In previous years, when the economy developed in breadth, the banking system provided enough capital for the economy. Up to now, when the economy is facing the need to shift to in-depth development, the system must also change to not only meet

capital but also meet the increasingly diverse needs for banking and financial services. The task of restructuring the Bank to meet the new stage of socio-economic development of the country, when Vietnam has become a middle-income country. Vietnam currently has 37 joint stock banks, of which 8 strong banks are the pillars of the system, 8 medium-sized banks, 8 small-sized banks operating healthily and 8 small-sized banks operating unhealthy. The rate of weakly operating banks does not exceed 5% of the number of credit institutions nationwide.

Restructuring aims to build a healthy banking system with good credit quality, competitive enough domestically and internationally in the context of international fluctuations, creating a banking system that meets the upcoming development requirements of capital as well as banking services, creating a banking system with diverse scales and ownership types. According to calculations, there will be 2 banks with enough regional competitiveness, from 10 to 15 banks strong enough to be the pillars of the banking system. At the same time, there will be medium and small-sized banks operating in certain market segments. To carry out restructuring, the State Bank has planned to divide banks into 3 groups:

Group I includes large-scale credit institutions with good and healthy operations. Group II is a group of small-scale credit institutions with healthy operations and no need to expand their scale. And finally, Group III and IV are small-scale credit institutions with weak operations and unhealthy finances. The restructuring roadmap is from now until the first quarter of 2012, clearly defining the 3 banking groups and solving liquidity problems for banks in groups III and IV. From the second quarter of 2012 to 2013, complete the restructuring of all banks in groups III and IV. From 2013 to 2015, complete the restructuring of the system and improve the quality of banking services.

The goal of this phase is to have 15 large, healthy credit institutions as pillars of the banking system. There are 2 credit institutions capable of competing in the region. From 2015 to 2020, restructuring will continue to bring 4 credit institutions capable of competing in the region and 2 credit institutions ranked as large credit institutions in the Southeast Asian region. To implement the above roadmap, the State Bank has proposed specific solutions in which the policy is to promote internal strength, using large-scale, financially healthy credit institutions to participate in restructuring to merge small, weak credit institutions. With this solution, the State Bank believes that it meets 2 goals: small, weak credit institutions are restructured and well-performing credit institutions have the conditions to increase their scale and operate better.

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