Outstanding Credit for Long-Term Industrial Crops by Bank

On the other hand, although the outstanding credit balance of CNDN plants has grown again, the recovery time and speed are slower than the total outstanding credit balance of the commercial banking system in Binh Duong. Specifically, in 2013, the total outstanding credit balance increased by 81.28% compared to the previous year, but the outstanding credit balance of CNDN plants only increased by 80.71%.

%. In 2014, total outstanding credit increased at a rate of 14.44%, but outstanding credit of CNDN plants only increased by 1.55%. By 2015, the growth rate of total outstanding credit was 10.21%, while the growth rate of outstanding credit of CNDN plants decreased by 3.29% compared to 2014.

Table 2.4 Outstanding credit for long-term industrial crops by bank

Unit: billion VND

Bank

Outstanding debt
2011	2012	2013	2014	2015	Average	Proportion
Agribank	713	683	699	743	758	719	19%
BIDV	272	260	266	283	289	274	7%
ICB	238	228	233	248	253	240	6%
VCB	136	130	133	141	144	137	4%
SCB	68	65	67	71	72	69	2%
ACB	201	195	200	212	216	205	5%
TCB	136	130	133	141	144	137	4%
VIB	170	163	166	177	180	171	4%
MB	102	98	100	106	108	103	3%
STB	272	260	266	283	289	274	7%
Other	303	354	2374	2304	2101	1487	39%
Total outstanding debt	2611	2566	4637	4709	4554	3815	100%

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Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From Table 2.4, it can be seen that among the commercial banks participating in providing credit for CNDN in Binh Duong province, the Bank for Agriculture and Rural Development has the highest total outstanding debt, with an average outstanding debt in the period 2011 - 2015 of 719 billion VND, corresponding to a proportion of 19%. Due to the specificity of Agribank, which is to focus on

lending to agriculture, rural areas, and farmers, this bank has a wide network of branches and transaction offices, covering most areas where CNDN crops are grown and processed. The bank's credit products are designed to suit the characteristics of agricultural production, so they are generally chosen by many customers. This is a bank with a tradition of lending to agriculture and the bank's long-term policy is to continue to position the agricultural customer group, including lending to CNDN crops.

In addition to Agribank, commercial banks with a relatively high outstanding loan balance for CNDN trees are Techcombank, BIDV, Vietinbank, Asia Commercial Bank and Vietnam International Bank. These banks have outstanding loan balance for CNDN trees ranging from VND 200 billion to VND 300 billion. Most commercial banks in Vietnam, in addition to some main lending sectors and fields, also expand to other lending sectors and fields. The arrangement of branches and transaction offices among banks is in principle to avoid duplication, each bank usually locates a geographical area rather than a specific customer group, so CNDN tree credit is distributed among bank branches instead of being concentrated in just a few specific banks.

Table 2.5 Outstanding credit balance for long-term industrial crops by customer

Unit: billion VND

Year

Outstanding debt	Customer type			Total
Outstanding debt	Farm household career	Household love	Business career	Total
2011	Short term	957	245	280	1,482
	Long term	720	74	335	1.129
	Total outstanding debt	1,677	319	615	2,611
2012	Short term	981	235	268	1,484
	Long term	690	71	321	1,082
	Total outstanding debt	1,671	306	589	2,566
2013	Short term	3.015	240	274	3,529

Long term	706	73	329	1.108
Total outstanding debt	3,721	313	603	4,637
2014	Short term	2,986	256	291	3,533
	Long term	750	77	349	1,176
	Total outstanding debt	3,736	333	640	4,709
2015	Short term	2,796	261	297	3.354
	Long term	765	79	356	1,200
	Total outstanding debt	3,561	339	654	4,554
Average	Short term	2,147	247	282	2,676
	Long term	726	75	338	1,139
	Total outstanding debt	2,873	322	620	3,815

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From table 2.5, it can be seen that the outstanding credit balance of CNDN crops is divided into 3 customer groups: agricultural households, small traders and enterprises. The group of agricultural households has the highest proportion of outstanding debt, on average in the period 2011

– 2015 is 2,873 billion VND, equivalent to 75% of total outstanding debt. Of which, 2,147 billion VND is short-term debt, 726 billion VND is long-term debt. Agricultural household customers are mainly distributed in rural areas of Dau Tieng, Phu Giao, Bac Tan Uyen and Bau Bang districts. The characteristic of agricultural households is to focus on the stages of planting, caring for and harvesting CNDN tree products. Except for the harvesting stage, other stages such as planting and caring for trees often require a relatively long time to bring revenue to agricultural households. Therefore, the credit capital demand of this customer group has a significant proportion of long-term capital.

The group of small traders has the lowest proportion of outstanding debt, averaging 322 billion VND in the period 2011 - 2015, accounting for 8% of total outstanding debt. Of which, 247 billion VND is short-term debt, 75 billion VND is long-term debt. Small traders mainly participate in the purchasing and consumption of CNDN products, so

Their capital turnover is quite fast. Therefore, the majority of credit demand of this customer group is short-term credit capital, accounting for 77%. Only a modest proportion, 23%, is long-term credit capital.

The outstanding credit balance of CNDN plants of the corporate customer group accounts for an average of 17% of the total outstanding balance, equivalent to 620 billion VND. Of which, the short-term outstanding balance is 282 billion VND, the long-term outstanding balance is 338 billion VND. The corporate customer group participates in all stages from planting to caring, harvesting, processing and consuming CNDN plant products. Therefore, their credit needs are quite diverse. The characteristic of CNDN plant enterprises is that they have to invest a significant amount of capital in fixed assets such as factories, production lines, means of transport, so their credit capital turnover is often longer than that of other customer groups. This explains why, for this customer group, the long-term credit balance accounts for a larger proportion than the short-term balance.

Table 2.6 Outstanding credit by industrial crops

Unit: billion VND

Plant type

Outstanding debt
2011	2012	2013	2014	2015	Average	Proportion
Coffee	117	66	475	289	706	331	5%
Rubber	1,410	1,259	2,525	2,502	1,772	1,894	53%
Pepper	99	180	167	127	260	167	4%
Thing	985	1,061	1,470	1,791	1,816	1.425	38%
Total outstanding debt	2,611	2,566	4,637	4,709	4,554	3,815	100%

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From table 2.6, it can be seen that in the total outstanding credit balance of CNDN in the period of 2011

- In 2015 in Binh Duong, credit for rubber trees accounted for the highest proportion with an average

The military is 53% of the total outstanding credit balance for CNDN trees, equivalent to 1,894 billion VND. In Binh Duong, rubber is the most suitable tree for soil conditions, has high economic value and is therefore very popularly grown. This explains why outstanding credit balance for rubber trees accounts for an overwhelming proportion compared to the remaining trees.

In addition to rubber trees, some other CNDN crops are planted sporadically in localities in Binh Duong province such as cashew, pepper and coffee. Of which, the most notable is cashew, this crop has outstanding CNDN crop credit in the period 2011 - 2015 accounting for an average of 38% of the total outstanding CNDN crop credit, corresponding to

1,425 billion VND. The remaining two crops, including pepper and coffee, only account for a modest proportion of 4% and 5%, corresponding to outstanding loans of 167 billion VND and 331 billion VND, respectively.

Table 2.7 Outstanding credit balance for long-term industrial crops classified by purpose of use

Unit: billion VND

Intended use

Outstanding debt billion VND
2011	2012	2013	2014	2015	Average	Proportion
Crop	457	449	811	824	797	668	17.5%
Plant care and harvesting	1,185	1,165	2.105	2,138	2,068	1,732	45.4%
Processing	682	670	1,210	1,229	1,189	996	26.1%
Consume	287	282	511	518	501	420	11.0%
Total outstanding debt	2,611	2,566	4,637	4,709	4,554	3,815	100.0%

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From table 2.7, it can be seen that the production and consumption process of CNDN tree products is divided into the following stages: planting, tree care - harvesting, processing and

consumption. In these stages, the tree care and harvesting stages have the highest credit balance, accounting for an average of 45.4%, equivalent to 1,732 billion VND. Most industrial trees need a fairly long care period to mature and create commercial products. For example, rubber trees need a development period of 5 to 6 years from the time of planting to produce latex, after which latex exploitation will last for several decades before the tree reaches its economic life. The process of latex exploitation lasts about 9 months each year, the remaining 3 months are not harvested because this is the time when the tree sheds its leaves, if harvested during this season, the tree will die. Due to these characteristics, depending on the age of the industrial tree, the credit capital demand for the care and harvesting stages can be short-term or long-term.

The processing stage of CNDN tree products has the second highest proportion of outstanding credit, accounting for an average of 26.1%, equivalent to 996 billion VND. Customers using credit for this stage are mainly enterprises with a complete production process or enterprises and households that only participate in product processing. Most of the natural products from CNDN trees are processed into commercial products within a period of only a few weeks to a few months, and these products can be consumed and generate revenue immediately after being processed into finished products. Due to the fast capital turnover, the risk of CNDN tree loans for processing purposes is considered to be among the lowest. This characteristic affects the lending policy of commercial banks, which prioritizes lending for the processing stage over other stages.

The average credit balance for the CNDN tree cultivation stage in the period 2011 - 2015 was 17.5%, equivalent to 668 billion VND. Most of the capital demand for this stage is to regenerate CNDN tree gardens that have expired their economic life. The demand for expanding the area of CNDN tree cultivation is very small. The nature of CNDN trees is that it takes a few years after planting to harvest, so the credit risk for the cultivation stage is considered greater than for other stages. Due to this characteristic, most of the credits granted for the cultivation stage are required by banks to have collateral.

The average credit balance ratio of the CNDN product consumption stage in the period 2011 - 2015 was 11%, equivalent to 420 billion VND. The main customers using credit capital for this stage are enterprises and small traders. The main risk of this stage is market risk. Due to the relatively fast capital turnover, the credit demand for this stage is mostly short-term credit.

Based on the granting method, CNDN credit is divided into: one-time loans, loans according to credit limits, installment loans, bank guarantees and other methods.

Table 2.8 Outstanding credit balance for long-term industrial crops classified by credit granting method

Unit: billion VND

Lending method

Outstanding debt
2011	2012	2013	2014	2015	Average	Proportion
Loan every time	1,462	1,437	2,597	2,637	2,550	2,137	56%
Loan by HMTD	287	282	510	518	501	420	11%
Loan to pay contribute	731	718	1,298	1,319	1,275	1,068	28%
Bank guarantee	26	26	46	47	46	38	1%
Method other	105.2	103	186	188	182	153	4%
Total outstanding debt	2,611	2,566	4,637	4,709	4,554	3,815	100%

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From Table 2.8, it can be seen that among the credit granting methods, outstanding loans under the one-time lending method reached the highest level. In the period 2011 - 2015, outstanding loans under this method averaged 2,137 billion VND, accounting for 56% of total outstanding loans. This is a fairly popular lending method because the terms of interest calculation and debt collection are designed to be quite diverse and flexible, suitable for the characteristics of loans for the purpose of growing and caring for CNDN trees.

The installment loan method has the second highest outstanding balance, averaging 28% in the period 2011 - 2015, equivalent to 1,068 billion VND. This is a method with interest calculated on the decreasing balance or initial balance, and the amount paid in each period is equal. Because the amount paid is equal in each period, this method is suitable for small loans and borrowers with a fairly stable income. Considering the stages of growing and consuming CNDN plants, this lending method is most suitable for the purpose of implementing the CNDN plant harvesting stage.

The credit limit lending method has the third highest outstanding debt ratio, averaging 11% in the period 2011 - 2015, equivalent to 420 billion VND. In this lending method, the disbursement and debt collection processes are intertwined, depending on the development of credit demand and cash flow from product consumption. Therefore, this method is most suitable for the processing and consumption of CNDN tree products.

2.2.2.3 Credit quality for long-term industrial crops. Chart 2.10 Overdue debt for long-term industrial crops

Unit: %

10,930

9.3

9,870

11,560

7,040

6.1

6,420

4,700

7,190

5,400

2011

2012

2013

2014

2015

Overdue debt ratio of total outstanding debt

Overdue debt ratio of outstanding CNDN credit balance

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

The current state of credit operations shows that when expanding credit scale, commercial banks in Binh Duong province are concerned with credit quality. Credit scale expansion is always within the allowable limit to ensure credit quality. This is demonstrated by the ratio of overdue debt to total outstanding debt and the ratio of bad debt to total outstanding debt of commercial banks in Binh Duong province.

From chart 2.10, it can be seen that credit quality is expressed through many indicators, one of the indicators commonly used to assess credit quality is the overdue debt ratio of commercial banks. The overdue debt ratio of CNDN credit of commercial banks in 2011 and 2012 was 6.1% and 7.0% respectively, in 2013 it increased to 9.9%, in 2014 it decreased to 6.4%, and in 2015 it decreased to 4.7%. Although the overdue debt ratio of CNDN credit is lower than the overdue debt ratio of total outstanding debt in general, the growth rate of this ratio for CNDN in 2013 was faster and in 2014 and 2015 it decreased slower than the overdue debt ratio in general. This leads to the overdue debt ratio of the CNDN tree tending to gradually approach the overdue debt ratio of total outstanding debt in general.

Table 2.9 Overdue debt ratio by banking group

Unit: %

Year

Target	Banking Group
Target	Agribank	State-owned commercial banking sector	Commercial banking sector without state capital
2011	Overdue debt ratio of total outstanding debt	9.7	9.4	8.1
2011	Overdue debt ratio of outstanding CNDN credit balance	7.7	6.7	5.1
2012	Overdue debt ratio of total outstanding debt	11.5	10.5	9.2
2012	Overdue debt ratio of outstanding CNDN credit balance	8.7	7.7	6.3
2013	Overdue debt ratio of total outstanding debt	12.7	11.9	8.5
2013	Overdue debt ratio of outstanding CNDN credit balance	10.9	10.5	8.3
2014	Overdue debt ratio of total outstanding debt	7.9	7.5	6.1
2014	Overdue debt ratio of outstanding CNDN credit balance	7.3	6.7	4.9
2015	Overdue debt ratio of total outstanding debt	6.5	6.1	4.7
2015	Overdue debt ratio of outstanding CNDN credit balance	5.2	5.1	3.5
Average	Overdue debt ratio of total outstanding debt	9.66	9.08	7.32
Average	Overdue debt ratio of outstanding CNDN credit balance	7.96	7.34	5.62

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From Table 2.9, it can be seen that in the period 2011 - 2015, the overdue debt ratio of Agribank's CNDN credit balance reached the highest level, an average of 7.96%.

The second group is the group of commercial banks with state capital (excluding Agribank) with an average overdue debt ratio in this period of 7.34%, and finally the group of commercial banks without state capital with an average overdue debt ratio of 5.62%. The reasons for Agribank's overdue debt for CNDN crop loans being higher than other banks can be attributed to the relatively loose lending process for the rural agricultural sector of this bank, the checking of income sources for debt repayment of CNDN crop farmers has not received due attention from Agribank's credit officers, loans for this sector are often granted based on the value of collateral. On the other hand, post-loan checks are not regularly carried out by Agribank's credit officers. Although the overdue debt ratio of Agribank's outstanding credit balance for CNDN plants is higher than that of other commercial banks, if we look at the difference in the overall overdue debt ratio between this bank and other banks, the difference in the overdue debt ratio of outstanding credit balance for CNDN plants is not too large. This result suggests that commercial banks, including Agribank, should increase the proportion of outstanding credit balance for CNDN plants in the total outstanding debt.

Chart 2.11 Bad debt ratio of commercial banks in Binh Duong

Unit: %

4.5

3.5

2.5

1.5

0.5

3,500

4,600

3.3

2,700

2,900

1.9

3,098

2,108

2,700

1,900

2011 2012 2013 2014 2015

Bad debt ratio of total outstanding debt

Bad debt ratio of outstanding credit balance of CNDN plants

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

From chart 2.11, it can be seen that the ratio of bad debt to total outstanding debt of commercial banks reached 3.3% in 2011, and stabilized at 3.5% in 2012, increased to 4.6% in 2013, and decreased to 3.1% in 2014, and continued to decrease to 2.7% in 2015. Compared to the ratio of bad debt to total outstanding debt, the ratio of bad debt to outstanding credit of CNDN is significantly lower, reaching 1.9% in 2011, 2.7% in 2012, increasing to 2.9% in 2013, decreasing to 2.1% in 2014, and decreasing to 1.9% in 2015. In general, the rate of change in the bad debt ratio of the CNDN tree in the period 2011 - 2015 is lower than the rate of change in the bad debt ratio of the total outstanding debt. This implies that the risk in lending to CNDN trees is significantly lower than the risk in lending to commercial banks in general.

Table 2.10 Bad debt ratio by banking group

Unit: %

Year

Target	Banking Group
Target	Agribank	State-owned commercial banking sector	Commercial banking sector without state capital
2011	Bad debt ratio on total outstanding debt	4.5	4.1	3.1
2011	Bad debt ratio on total outstanding debt CNDN tree credit	2.7	2.5	1.2
2012	Bad debt ratio on total outstanding debt	4.7	4.3	2.9
2012	Ratio of bad debt to total outstanding credit of CNDN	3.5	2.9	1.8
2013	Bad debt ratio on total outstanding debt	5.8	4.9	3.1
2013	Ratio of bad debt to total outstanding credit of CNDN	3.8	3.1	2.3
2014	Bad debt ratio on total outstanding debt	3.7	3.3	2.1
2014	Ratio of bad debt to total outstanding credit of CNDN	3.6	2.8	1.5
2015	Bad debt ratio on total outstanding debt	3.5	3.1	1.9
2015	Bad debt ratio on total outstanding debt CNDN tree credit	2.5	2.1	1.1
Average	Bad debt ratio on total outstanding debt	4.44	3.94	2.62
Average	Bad debt ratio on total outstanding debt CNDN tree credit	3.22	2.68	1.58

Source: Statistical report on credit activities for long-term industrial crops of the State Bank, Binh Duong province branch, 2011 - 2015

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