Solutions to Develop Credit for SMEs of Joint Stock Commercial Bank for Foreign Trade of Vietnam - Quang Binh Branch

Annual increase over the previous year. In which, the medium and long-term debt of SMEs strives

accounting for over 30% of total outstanding debt.

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Improve business efficiency to achieve profits of 30 - 40 billion VND/year. Maintain and develop traditional products and services, develop and expand new services. Strive to increase service income by over 30% compared to five years ago. Specifically, leading the way are guarantee services, money transfer and especially developing card services.

Strengthening modern information technology systems, effectively supporting operations

Management and development of banking services

3.2. SOLUTIONS TO DEVELOP CREDIT FOR SMES OF JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM - QUANG BINH BRANCH

Through analyzing the current situation of credit activities of Vietcombank Quang Binh for SMEs in Quang Binh province, although the results have many advantages, there are still many existing problems. The causes come from many sides: from the bank itself, from the SMEs themselves and from relevant agencies as well as State policies. To develop credit services for SMEs, the thesis proposes a number of solutions in both breadth and depth, that is, both expanding services and improving the quality of credit services of Vietcombank Quang Binh for SMEs in Quang Binh province. These solutions are implemented for VCB Quang Binh bank, SMEs and recommendations to relevant agencies as follows:

3.2.1. Solution to expand credit services of Joint Stock Commercial Bank for Foreign Trade of Vietnam - Quang Binh Branch for SMEs

3.2.1.1. Solutions to increase capital

As in the above part of the thesis, the credit scale of Vietcombank Quang Binh for SMEs in Quang Binh province in recent years has grown but is not stable. One of the subjective reasons on the bank's side is due to difficulties in capital sources.

Therefore, in the coming time, to increase the credit scale (within the annual credit growth target limit set by the State Bank), the first thing Vietcombank Quang Binh needs to think about is measures to increase capital sources, including equity and mobilized capital. Research and develop a feasible plan and specific measures to increase equity sources.

Although it is not the main source of capital for lending, increasing this source of capital, on the one hand, directly increases the source of capital for monetary business, on the other hand, it is directly related to the credit capital capacity of the bank.

To form this source of capital, normally using the measure of stimulating depositors by means of interest rates is considered a very important and effective measure. However, in the current conditions, state banks are implementing the policy of "restoring order" in the capital mobilization market, with strict regulations on the ceiling of mobilization interest rates, the measure of raising deposit interest rates is difficult to implement. Therefore, Vietcombank Quang Binh needs to research and deploy new, diverse and highly flexible capital mobilization products and services to be able to increase its mobilized capital. Specifically:

+ Expand operations and improve card payment quality

Bank cards (payment cards, credit cards) are a modern means of non-cash payment. Providing this service brings many benefits to both customers and banks. From the banking perspective, one of the significant benefits is creating a source of "cheap" mobilized capital in large quantities to meet their credit needs.

However, to increase the number of customers participating in card services, banks

Customers need to pay attention to the following issues:

 Increase propaganda, advertising and marketing to customers.

 Apply appropriate fees to ensure competitiveness

 Expand the network of card payment acceptance units.

 Expand the network of ATMs and distribute them reasonably, focusing on schools, hospitals, hotels, labor-intensive businesses, entertainment areas, export processing zones, industrial parks and densely populated residential areas.

 Improve machine quality, minimize malfunctions and usage risks.

 Quickly resolve customer issues such as:

forgot password, card held, lost card, damaged card when using card.

+ Diversify deposit products and services:

In the current condition of limited interest rates, banks need to pay special attention to researching and applying a variety of deposit products and services to customers to contribute to expanding mobilized capital sources.

 To attract mobilized capital, banks need to apply a more flexible interest rate policy, for example, if a depositor is facing temporary financial difficulties, they are allowed to withdraw money but still receive interest if the customer deposits it within the day or the next day. This only applies to reputable customers who have regular transactions with the bank and the customer must present a feasible and reasonable plan for using and depositing it back to the bank.

 Strengthening links and cooperation with labor-intensive enterprises, retail enterprises, schools, and hospitals to provide products and services to workers, students, and patients through payment by ATM cards with preferential policies such as discounts on sales, tuition and hospital fees, etc. This will stimulate the use of ATM payment cards and banks will mobilize non-term deposits from card-opening customers.

+ Develop online payment services for customers

Modern banking services (homebanking, phonebanking, internetbanking...) bring a lot of convenience to customers, and also bring significant profits to banks. Not only do they collect service fees, but through these services, banks can mobilize a certain amount of capital in the payment deposit accounts of customers participating in the service.

3.2.1.2. Strengthening links and cooperation with associations and domestic and foreign financial and credit institutions in lending to support SMEs.

Link with Business Associations, Business Associations, Credit Support Funds

and other credit financial institutions such as the Quang Nam Young Entrepreneurs Association.

Binh, Dong Hoi City Credit Guarantee Fund... in lending to small and medium enterprises that are eligible for loans according to bank regulations. These associations, unions and credit financial institutions will guarantee part or all of the loans of small and medium enterprises, thereby increasing the ability of SMEs to access bank credit capital.

3.2.1.3. Building credit targets and interest rate policies for SMEs

* About credit goals:

- Regarding market share: Currently, Vietcombank Quang Binh's lending market share is less than 50%. Therefore, the bank needs to develop short-term and long-term goals for lending market share to SMEs. To do this, the bank needs to develop an attractive interest rate policy, research and provide useful and convenient products for SMEs.

- Regarding outstanding loans: Gradually increase the proportion of outstanding loans to SMEs.

- Regarding business type: Priority is given to lending to joint stock companies and companies

LLC from 2 to 50 members.

* About interest rate policy:

Credit activities are carried out on the basis of ensuring three benefits: the State's benefits, the bank's benefits and the customers' benefits in the form of a fair buying and selling through loan prices or loan interest rates. Therefore, to attract customers who are SMEs, the loan interest rate must be flexible, depending on each period or each subject, the interest rate policy also has different priorities.

For SMEs, interest rates are of more concern because their investment capital is often not large. If the input costs are too high, the profits they earn will not cover the costs, leading to the inability to repay debts, the appearance of overdue debts, bad debts, causing credit quality to decline, which will be the cause of limiting credit expansion. Therefore, banks need to keep up with market information on capital supply and demand to build a reasonable interest rate solution to ensure the bank's profits but also not exclude the interests of businesses and be accepted by the market.

Depending on the standards of each SME, the bank offers different preferential interest rates. For businesses that have a long-term relationship with the bank, repay loans on time, and have good credit, the bank can lend at a more preferential interest rate, or the repayment period is unlimited, depending on the collection time of the business... These priorities will encourage SMEs to use capital effectively, ensuring the quality of credit relationships so that this relationship continues to expand. For businesses that borrow capital for the first time, if the project is feasible, the bank can create conditions for quick disbursement with incentives of lower interest rates and higher loans than normal loans.

3.2.1.4. Perfecting lending conditions for some credit products for businesses

small and medium enterprises

- For Factoring products:

Factoring is a service product that combines payment and credit. To implement this service, currently, commercial banks often build a list of customers who have the need and are eligible to participate in regular service products and fix the list. Thus, there has been a phenomenon that customers outside the list, who have the need and are eligible to participate in this service, are rejected by the bank. Therefore, to expand this service product to meet the needs of customers, especially SMEs and contribute to increasing the bank's income, Vietcombank Quang Binh should study and apply the following measures:

+ Every quarter, the bank's management should review and add to the list of customers who have needs and meet the conditions according to the bank's criteria to add to the customer list.

+ In addition to the subjects in the pre-registered customer list, in each case, customers who have sudden needs and are considered qualified to provide this product or service, the bank should also be ready to consider providing the service to meet the requirements of both parties for mutual benefit.

+ For this product or service, the bank does not need to request collateral or pledge, it only needs to ask the business requesting the payment limit to transfer all payment transactions to its bank.

- For unsecured loan products

When processing unsecured loans, banks need to pay special attention to credit appraisal and only process loans when SMEs meet at least the following conditions:

+ Loan objects include production and business cost factors, loans

Reasonable expenses and must have clear and transparent documents.

+ The reasons for the loans are objective.

+ Enterprises must have feasible solutions and solutions.

+ Enterprises must have prestige in credit relations with banks.

+ Enterprises must have prestige in credit relations with banks.

+ The business has good financial and management capacity.

+ The business has opened a payment account at the bank and has regular transactions.

+ The company's products and services are in the development period.

3.2.1.5. Strengthen marketing and introduce loan products to customers.

small and medium enterprises

- Organize recruitment, training and skill development for staff

Specialized in marketing and introducing products and services.

- Banks should establish a customer consulting, advocacy and support center under branches in all provinces and cities to support, advise and answer all questions for customers about the bank's products and services. There must be a department specializing in SME customers.

- Periodically (every three months, six months or a year) organize introductory seminars

products and services to customers, focusing on small and medium enterprises.

- The department in charge of marketing and introducing products and services must regularly update information about newly established businesses to carry out marketing and introducing products and services to businesses.

- Promote your image to the public through

mass media such as newspapers, radio, television, billboards...

3.2.2. Solutions to improve credit quality for SMEs of Joint Stock Commercial Bank for Foreign Trade of Vietnam - Quang Binh Branch.

3.2.2.1. Perfecting internal management work in the Bank

As mentioned above, although the branch has achieved encouraging results, it still faces many difficulties in management and operation. Therefore, the branch needs to: Focus on summarizing the work achieved in 2015, evaluate the good and bad aspects, and propose specific tasks to be done in 2016 and the coming time. Each department, especially the capital planning department, must evaluate and forecast the socio-economic situation, the domestic and foreign currency market and its specific conditions to propose solutions and directions for its unit's operations to effectively implement the assigned business goals in 2016 and the coming years. In addition, it is necessary to continue to supplement, edit, and develop internal management guidelines, thereby creating a corridor for operations to ensure compliance with the law, in accordance with the actual situation, and deploy risk prevention measures to ensure operations are in compliance with the law and in accordance with the actual situation.

Implement well the development of human, technology, financial and marketing strategies. Ensure effective business, based on specific solutions to increase domestic and foreign currency capital sources according to plan and with stability. Focus on investment to expand credit, ensure quality, have many solutions to prevent bad debts from arising, ensure high liquidity, sustainable and effective. At the same time, strengthen financial capacity to increase revenue, save expenses to create increasing convenience and have enough capacity to set up risk provisions and improve the lives of officers and employees.

3.2.2.2. Perfecting SME credit work

a. Have a care policy for SME customers

Every quarter, classify SME customers according to specific criteria of Joint Stock Commercial Bank for Foreign Trade of Vietnam, analyze corporate finance, determine the benefits the business brings to evaluate customers in a true manner, and from there, have credit policies for each customer group.

+ Potential customers:

For the group of SME customers who have not used the bank's credit products and services but are using other banks' products and services or have never used any bank's credit products and services. The bank bases on the characteristics of each product and service, combined with market research and evaluation of the results, from which the bank builds a target market, plans a program to promote and advertise appropriate products and services. The methods of promotion can be through the media, signs and boards at the bank's transaction points, direct marketing and consulting via phone, documents, organizing conferences, etc.

For SME customers who stop using the bank's products and services: The bank monitors changes in customer activity, finds out why customers stop transacting with the bank, then implements customer care policies, and persuades customers to continue using the bank's products and services.

+ Main customers:

The bank regularly cares for and looks after existing small and medium-sized enterprise customers, in order to create good, long-term relationships to stimulate increased demand for products and services of customers through activities such as: Updating and analyzing customer information on the number and types of customers, on sales and balance of each type of product and service. Organizing investigations and surveys to collect opinions of businesses on the bank's products and services.

+ Target customers:

This is a group of SME customers that is of great importance to the bank in maintaining the stability of the bank's income. The bank needs to carry out special promotions, give gifts on the occasion of major events, prioritize resolving requests and opinions of businesses. At the same time, be proactive in finding out customer satisfaction with the bank's products and services...

b. Strengthening SME credit management

* Effective handling of SME debts