0.49
2.7
1.74
45.08
2.73
Poor household
Near poor household
Newly escaped poverty
Students have NSVSMT passport
Solving labor export problems
VKK Production and Business Household
Poor housing
11.27
5.76
9.04
21.19
Chart 2.2 Proportion of overdue debt of loan programs.
From the data in Table 2.6 and Chart 2.2, we can see that the ratio of overdue loans to poor households accounts for 11.27% of the total overdue debt at the branch, while the ratio of outstanding loans to poor households/total outstanding loans is 1.98%. Thus, it can be concluded that the credit risk in lending to poor households is very high, which is consistent with the nature and characteristics of the borrowers.
Most households with overdue debts are due to ineffective production and business activities, causing capital loss; some households that borrowed money due to illness used the borrowed money for personal expenses; some households that borrowed money left the locality; and a few households that are slow to repay bank loans, intending to wait for the State to support debt cancellation.
2.2.1.2 Risky debt for lending to poor households according to the trust unit.
Table 2.7 Classification of overdue loans for poor households by entrusted unit
Unit: million VND
Classification of loans for poor households by loan type
2019 | 2018 | 2017 | |||||||
Outstanding debt | NQH | NQH rate by contract (%) | Outstanding debt | NQH | NQH rate by contract (%) | Outstanding debt | NQH | NQH rate by contract (%) | |
(2) | (14) | (15) | (16) | (17) | (18) | (19) | (19) | ||
LIVE NEXT | 0.00 | 0.00 | 0.00 | 0.00 | 50.00 | 0.00 | 0.00 | ||
TRUSTEE | 166,933.00 | 324.00 | 282,243.00 | 446.00 | 387,777.00 | 531.00 | |||
Farmers Association people | 47,580.00 | 146.00 | 0.31 | 84,083.00 | 209.00 | 0.25 | 118,884.00 | 205.00 | 0.17 |
Father's Association female | 99,165.00 | 139.00 | 0.14 | 162,067.00 | 182.00 | 0.11 | 219,474.00 | 250.00 | 0.11 |
Veterans Association | 15,688.00 | 39.00 | 0.25 | 29,818.00 | 54.90 | 0.18 | 41,041.00 | 76.00 | 0.19 |
Doan Thanh year | 4,500.00 | 0.00 | 0.00 | 6,275.00 | 0.10 | 0.00 | 8,428.00 | 0.00 | 0.00 |
Total | 166,933.00 | 324.00 | 282,243.00 | 446.00 | 387,827.00 | 531.00 | 531.00 | ||
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(Source: Hanoi City People's Credit Fund)
From Table 2.7, we can see that overdue debt is mainly the outstanding debt entrusted to the Farmers' Association, Women's Association and Veterans' Association. Also from the data table, we can assess that the overdue debt ratio in lending to the poor tends to increase, but this is mainly due to the total outstanding debt of the lending program for the poor decreasing, in absolute terms, overdue debt is still decreasing. From the data as well as in reality at the Hanoi City Social Policy Bank, debt managed by the Women's Association is often of better quality, this is due to the high responsibility of the association from the city to the communes.
2.2.1.3 Quality of loans to poor households, repayment rate and loss rate
The performance of the poor household lending program is shown in the data in Table 2.8.
Table 2.8. Quality of lending activities of the poverty program.
Criteria
Unit | 2017 | 2018 | 2019 | 2018/2017 | 2019/2018 | |||
+,- | % | +,- | % | |||||
1. Return on capital | % | 97.16 | 96.43 | 97.25 | -0.73 | -0.75 | 0.82 | 0.85 |
2. Loss rate (debt write-off) | % | 0.02 | 0.005 | 0 | - 0.015 | -75.00 | - 0.005 | -100.00 |
3. Profit margin | % | 91.6 | 94.6 | 95.2 | 3 | 3.28 | 0.6 | 0.63 |
4. Debt ratio with debt extension | % | 2.49 | 3.05 | 2.46 | 0.56 | 22.49 | -0.59 | -19.34 |
5. Overdue transfer rate | % | 0.33 | 0.47 | 0.29 | 0.14 | 42.42 | -0.18 | -38.30 |
Source: Hanoi City Social Policy Bank's performance report 2017-2019
- The capital repayment rate in the period from 2017-2019 reached from 96.43 to 97.25%. The reason for the capital repayment rate not reaching 100% is that some customers whose production and business were ineffective and could not repay their debts or whose production had not yet reached the harvest period but whose capital recovery period had come, requested debt extension. Some households facing risks had their debts frozen or written off, and some households who did not repay their debts were forced to transfer their overdue debts.
2.2.2 Survey results on views and perceptions of credit risk management and some causes of credit risk and managers' expectations.
Credit risk is an issue that any bank is very concerned about. Based on Decision No. 50/2010/QD-TTg dated July 28, 2010 of the Prime Minister on the issuance of a mechanism for handling credit risk debts at the Social Policy Bank, based on Decree No. 78/2002/ND-CP dated October 4, 2002 of the Prime Minister on credit for the poor and policy beneficiaries, the credit risk management process has been developed and implemented uniformly nationwide. Based on the guidance of the Social Policy Bank, based on the actual situation, the Hanoi branch of the Social Policy Bank has issued specific instructions on the process.
credit risk management to affiliated units, in order to effectively implement credit risk management, limit credit risks, the branch has assigned the KHNVTD department to regularly monitor and proactively contact units to grasp the implementation situation as well as provide implementation instructions. To have an assessment of the views, perceptions and wishes of credit risk managers at the Social Policy Bank, Hanoi Branch, I conducted in-depth interviews and the results collected some views as follows:
2.2.2.1 Views of some experts on credit risk management.
During the expert interview, the trainees used unstructured questions with the purpose of: creating an open atmosphere in the interview, creating an environment for experts to have the opportunity to exchange all the experiences they have without being limited or constrained by the questions according to the interviewer's understanding. The interview content is diverse and can be detailed for many different types of candidates, with plenty of time to ask in depth the factors that the interviewer needs. The interview results can summarize some of the following points.
Box 2.1: Views on the importance of credit risk management
“Credit risk management is the only concern of the Social Policy Bank, Hanoi branch, after lending. With the characteristics of the Social Policy Bank implementing lending programs with many incentives on interest rates, loan conditions, and credit procedures related to many subjects, credit risk management is something that needs special attention. It helps the State's policy capital reach poor households and policy subjects in a timely and correct manner, and loans help borrowers make a profit, banks collect debts, preserve and develop capital sources. This is a condition for the Social Policy Bank to exist and develop.”
(Source: Interview with Branch Deputy Director)
Box 2.2: Impact of management policies on credit risk management
“I see that the credit risk management policy of the People's Credit Fund is the first important factor, deciding the credit risk management work of the entire People's Credit Fund system. It shows the organization, methods, and techniques to implement credit risk management, and is the basis for implementation at all levels. Only with good policies can credit risk management work achieve good results.”
(Source: Interview with Director of PGD)
Box 2.3: The impact of human resources on credit risk management
“I see human resources as an important factor in the bank's credit risk management, especially credit officers, who are the ones who directly manage customers and supervise the activities of the savings and loan group, and who decide many factors to ensure the bank's credit quality.”
(Source: Interview with Deputy Branch Director and some Branch Directors)
Box 2.4: Impact of science and technology on credit risk management
“Currently, science and technology are being directly applied by the Branch to the management and development of the bank. The branch is paying great attention to the application of IT to credit risk management. Based on the data extracted from the core-banking program by the Social Policy Bank IT Center, the branch has initially developed a number of utilities to support remote monitoring and sampling in internal control inspection, helping to narrow down the inspection subjects.
( Source: Interview with Branch Deputy Director)
Box 2.5: Limitations in implementing credit management at branches
“The organizational structure for arranging people for inspection work is still limited, most of them are still holding concurrent positions, the management area is large so there are not many inspections arranged, and many borrowers have not been inspected.
( Source: Interview with branch deputy director, some district-level branch directors)
2.2.2.2 Experts' views on some causes of credit risk .
Box 2.6: Causes from the borrower side
“Some borrowers organize ineffective business activities, leading to failure to recover capital; borrowers use capital for the wrong purpose, using the loan money for daily expenses without having a source of income to repay the debt; some borrowers are procrastinating, waiting for support policies from the State.”
(Source: Interview with Deputy Branch Director and some Branch Directors)
Box 2.7: Causes in the management, approval and inspection of capital use
“Assigning the Board of Directors to supervise the Savings and Credit Committee to evaluate loans and check the use of capital for customers has the advantage of promoting closeness and understanding of borrowers, but also has some limitations due to deference, lack of compliance with regulations, leading to the situation of borrowing from others.”
((Source: Interview with Deputy Branch Director and some Branch Directors)
Box 2.8: Some objective causes leading to credit risks for poor households
“Borrowing households face credit risks due to epidemics such as avian flu and African swine fever; In the household, someone is sick and has to be hospitalized for a long time, leading to spending beyond their means…”
(Source: Interview with Deputy Branch Manager)
Box 2.9: Some subjective causes leading to credit risks for poor households
“The borrower uses the loan for the wrong purpose, uses the loan for daily expenses; the borrower uses the loan ineffectively, causing loss of capital…”
(Source: Interview with Deputy Branch Manager)
From the results of interviews with experts, we can see that credit risk management at the branch has received special attention, and leaders have recognized the importance of credit risk management. Through the opinions
Experts from the leaders are the Deputy Directors in charge of credit, Internal Audit of the branch who are experienced and have vision in directing and operating credit risk management. In addition, with the Directors of the Transaction Office, we have a close look at the actual operations of the unit. From these interviews, students have realized the current status of credit risk management at the branch, the factors that directly affect credit risk management as well as the causes that can cause credit risks. This is one of the important bases for me to focus on researching and making assessments as well as proposing solutions to help credit risk management at the branch have better quality and efficiency.
2.2.3 Credit risk management apparatus and organization.
Regarding the organizational structure of the credit risk management apparatus of the Social Policy Bank, Hanoi branch: There is no independent credit risk management department, the staff performing inspection and supervision work are mostly part-time, especially at the lending place, credit risk management is carried out at two levels:
- Branch level: The branch director is primarily responsible for implementing credit risk management at the branch, however, there is a deputy branch director in charge of directing credit risk management at the branch; The branch mainly carries out remote monitoring, periodically establishing comprehensive inspection teams to inspect credit activities at transaction offices every year; when credit risks occur, direct handling according to regulations; with credit risks due to objective causes, the branch checks credit risk records transferred from transaction offices, synthesizes and submits to superiors for appraisal and approval. Assisting the branch director in credit risk management is assigned to 1 deputy director and the Credit Risk Management Department. The Credit Department is the unit that advises and implements remote credit risk management, periodically using the program
Information report on the synthesis of monitoring and evaluation of lending and debt collection activities of transaction offices through data exploited from the core-banking program.
- Social Policy Bank where lending is made (28 district-level Social Policy Bank transaction offices):
+ The Director of the Transaction Office is primarily responsible for implementing credit risk management operations at the Transaction Office; synthesizing, checking and submitting risk files to the branch for review. Assisting the Director of the Transaction Office is a Deputy Director and credit officers at the unit. The lending bank is the transaction office in the district, town, and city, which is the place to lend and implement many important parts of the credit risk management process, directly manage the loan, identify and receive credit risk processing files directly from customers.
+ Union officers receiving the trust: Carry out a number of entrusted stages, including supervising the loan evaluation work; inspecting and supervising the activities of poor households; promptly advising borrowers on capital use; advising borrowers on establishing credit risk profiles and promptly notifying the Social Policy Bank where the loan is made.
+ Management Board of Savings and Credit Group: Conduct loan evaluation, monitor the capital usage of borrowers, collect interest, notify borrowers of due debts, promptly detect signs of credit risk to guide borrowers to submit requests to the District Social Policy Bank for consideration and handling, and immediately notify the District Social Policy Bank for coordination in handling.
- In addition to the structures mentioned above, the inspection and supervision of the Representative Boards at all levels also contributes to credit risk management at the Social Policy Bank: The City Representative Board conducts inspection and supervision of the activities of the City Social Policy Bank, inspects the activities of the District-level Board of Directors to evaluate the organization and implementation of policy credit in the area, based on which there are timely instructions for relevant parties to strictly implement the regulations of the State, the State Bank, and the Social Policy Bank.