Based on the above table, it can be seen that the overdue debt ratio of the Branch increased over the years from 2010 to 2012. In 2010, the overdue debt ratio of the Branch was kept at the lowest level of 2%. The above result was achieved because the Branch tightened credit, disbursed less, and controlled lending more strictly.
However, by 2011, the overdue debt ratio had increased to 5% of the total outstanding loans for science and technology. While in 2010, debt groups 3 and 4 were still low, by 2011, debt groups 3 and 4 increased sharply (Table 2.8 and Table 2.9). The increase in overdue debt reached 7% in 2012 because the growth rate of overdue debt was higher than the growth rate of total outstanding debt. 
This was accompanied by many uncertainties in the macro economy and many fluctuations in the operations of the banking system. The economy grew slowly, with GDP growth for the whole year reaching only 5.03% and not reaching the Government's plan of 5.5 - 6%. Businesses faced many difficulties, many bankruptcies and high inventories caused low credit growth. Bad debt in the banking sector became one of the most concerned issues in 2012. Credit growth of the entire sector in 2012 reached only 8.91%, much lower than expected 
and lower than the State Bank's target of controlling credit growth at 10 - 12%. In addition, the banking system's operations still have many instabilities. In February 2012, the State Bank issued Directive CT-NHNN and Official Dispatch 674/NHNN-CSTT on the organization of monetary policy implementation in 2012. In which, the State Bank classified banks into 4 groups, corresponding to 4 credit growth limits for 2012: Group 1 has a maximum growth of 17%, Group 2 has a maximum growth of 15%, Group 3 has a maximum growth of 8% and Group 4 is not allowed to grow. The 
purpose of the regulation is to classify banks according to their financial situation and control credit growth rate, avoiding the situation where many commercial banks have rapid credit growth, but not based on mobilization capacity - which caused the liquidity of the banking system to become unstable in 2011.
- Bad debt ratio/ Total outstanding loans for science and technology
Table 2.9 and Table 2.10 show that 2010 was an excellent year in the branch's lending activities when the bad debt ratio for lending to science and technology was 1%. This result was achieved because the bank tightened credit, disbursed little, and the quality of the disbursed loans was relatively good.
In 2011 and 2012, the economic difficulties combined with poor management by relevant agencies caused the Branch's bad debt ratio to increase to 4% in 2011 and 6% in 2012.
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- Bad debt ratio/ Overdue debt for KHCN loans
In 2010, the ratio of bad debt to overdue debt for science and technology loans was 60%. By 2010,
In 2011 and 2012, the ratio of bad debt to overdue debt for KHCN loans increased to 80% (2011) and 83% (2012). This is a really worrying signal for the credit quality of the Bank in the past 3 years. In recent years, the appearance of debt groups 3 and 4 has forced the Branch to strengthen credit monitoring and use all collection measures such as: constantly reminding customers to pay their debts, requesting local law enforcement agencies to intervene and enforce against KHCN customers who deliberately delay paying their loans. When all flexible and strict solutions are ineffective, the Bank is forced to initiate a lawsuit if the customer shows signs of criminal violations. In addition to the above solutions, the Branch has also been proactive in restructuring debts for reputable customers who are temporarily facing difficulties, have good business orientations, and have measures to overcome current difficulties.
- DPRR provision rate
Table 2.11. Provision rate for capital for loans to science and technology
Unit: VND
Target | Year 2010 | 2011 | 2012 | 2010-2011 | 2011-2012 | ||
Absolute | Relative (%) | Absolute | Relative (%) | ||||
DPRR lending to science and technology quoted | 11,305,024,755 | 32,856,153,119 | 33,154,955,653 | 21,551,128,364 | 191 | 298,802,534 | 0.91 |
Outstanding balance for science and technology loan | 565.251.237.765 | 764.096.584.166 | 637.595.301.018 | 198.845.346.401 | 35.18 | (126,501,283,148) | (16.56) |
Deduction rate (%) | 2 | 4.3 | 5.2 | 2.30 | 115 | 0.90 | 20.93 |
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(Source: Personal Customer Department - VPBank Dong Do)
This ratio shows how much of the provision for bad debts in the lending of science and technology is deducted compared to the total outstanding balance of the lending of science and technology. This high ratio shows that the quality of the lending of science and technology is not good, and that a lot of provisioning is still required. In 2010, the Branch set aside 2% of the provisioning, which was the lowest provisioning ratio in the 3 years from 2010 to 2012. By 2011, this ratio increased by 2.3% to 4.3% and reached 5.2% in 2012. The main reason for the increase in the provisioning ratio is that the Branch increased the proportion of lending to science and technology, along with the general difficulties of the economy and high inflation affecting production and business activities and the ability of customers to repay debts.
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- Risk compensation coefficient
In terms of the quality of KHCN loans, another indicator that needs to be considered is the risk compensation coefficient. This indicator shows the bank's ability to compensate for the debts that have been handled for risk.
Table 2.12. Risk compensation coefficient
Unit: VND
Target
Year 2010 | 2011 | 2012 | Difference 2010- 2011 | Difference 2011- 2012 | |||
Absolute | Soy sauce opposite to (%) | Absolute | Soy sauce opposite to (%) | ||||
DPRR for science and technology loans are deducted | 11,305,024,755 | 32,856,153,119 | 33,154,955,653 | 21,551,128,364 | 190.63 | 298,802,534 | 0.91 |
Debt processed | 2,355,213,491 | 7,301,367,360 | 8,679,307,763 | 4,946,153,869 | 210.01 | 1,377,940,403 | 18.87 |
Compensation factor cover (times) | 5 | 4.5 | 3.82 | (0.5) | (10.42) | (0.68) | (15.11) |
(Source: Personal Customer Department - VPBank Dong Do)
Looking at the data table 2.12 above, we can see that in 2010, the outstanding debt was 2,355,213,491 VND. By 2011, the outstanding debt was 7,301,367,360 VND, the deducted DPRR was 32,856,153,119 VND, so the risk compensation ratio was 4.5 times. This ratio is high partly because the outstanding debt was not too much, many bank loans were restructured to create opportunities for customers to repay instead of using reserves to handle. This was a correct and timely action of the Branch in the face of the bank's increasing bad debt situation. With such a bad debt handling policy, by 2012, this ratio was still maintained at a fairly high level of 3.82; although it decreased compared to 2011 by 0.68 times. Although this indicator has not decreased much, the Branch needs to pay close attention because it directly reflects the safety, stability of capital as well as credit quality of the branch.
- Income from lending to science and technology
Lending is always the main income generating activity for banks, therefore, interest income from lending activities always accounts for over 80% (2010: 80.03%; 2011: 88.15%; 2012: 90.69%) of the total income of the bank. The table shows that the proportion of interest income from lending activities to science and technology always accounts for over 70% in the 3 years from 2010 to 2012. Specifically, in 2010 it reached 79.99%; in 2011 it reached 78.53%, in 2012 it reached 79.91%. Not only accounting for a high proportion, interest income also continuously increased over the years.
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years. In 2011, it increased by 70.52% compared to 2010, in 2012, it increased by 64.88% compared to 2011. The main reason for the increase in accrued interest over the years is that the Branch's loan turnover has a relatively high increase, because the Branch is in the process of expanding the market, helping to increase the number of customers, especially the growing number of small and medium-sized enterprises.
Along with the increase in lending revenue and outstanding loans for science and technology, the Branch's actual interest income has also continuously increased over the years: In 2011, the actual interest income for science and technology loans was 616,644 million VND, an increase of 261.27 million VND compared to 2010, equivalent to an increase of 73.52%; by 2012, the actual interest income was 1,014.75 million VND, an increase of 398,106 million VND, equivalent to 64.56% compared to 2011. The increase in actual interest income for science and technology loans has shown the effectiveness in debt collection as well as the increasingly improved quality of loans.
In addition, comparing the actual interest collected over the expected interest also shows that the actual interest collected is relatively high compared to the total expected interest collected during the year: In 2010, the actual interest collected accounted for 86.46% of the expected interest, in 2011 it accounted for 87.98%; in 2012 it accounted for 87.81%. The expected interest that has not been collected is partly due to the fact that the debt repayment deadline has not yet come, and partly due to the fact that the customer has financial and business difficulties and is unable to repay the debt to the bank on time.
In general, through the analysis of some quantitative indicators above, it can be seen that the quality of lending to SMEs at VPBank Dong Do in the past 3 years has been relatively good, reflected in: Loan turnover and outstanding loans to SMEs have increased over the years; debt collection turnover is quite stable; profits from lending to SMEs have increased over the years (including both accrued and actual interest); the ratio of overdue debt and bad debt is low compared to the general situation of the whole industry and at a safe level. However, besides the good indicators, the bank still has some points that need to be noted and overcome. Firstly, the credit capital turnover is still at an average level. This affects the profitability of capital due to slow capital turnover. Second, the increase in overdue debt and bad debt in 2011 and 2012. This increase, in addition to objective factors, has also resulted in ethical risks. This is a very serious problem because if there are no timely corrective measures and handling, it will leave unforeseeable consequences. Based on the assessment of the actual situation of lending to science and technology at the Branch, the Bank's Board of Directors and staff need to have specific strategies and actions in the coming time to overcome the above weaknesses.
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Table 2.13. Interest income from personal loans of Dong Do branch in the period 2010 - 2012
Unit: Million VND
Target
Year 2010 | 2011 | 2012 | Difference | |||||||
Amount | Proportion (%) | Amount | Proportion (%) | Amount | Proportion (%) | 2010 - 2011 | 2011 - 2012 | |||
Absolute | Soy sauce opposite to (%) | Absolute | Soy sauce opposite to (%) | |||||||
Loan interest receivable Science and Technology | 411,024 | 79.99 | 700,896 | 78.53 | 1155,606 | 79.91 | 289,872 | 70.52 | 454.71 | 64.88 |
Net interest income science and technology loans | 355,374 | 69.16 | 616,644 | 69.09 | 1014.75 | 70.17 | 261.27 | 73.52 | 398,106 | 64.56 |
Earn interest from loan | 411,228 | 80.03 | 786,762 | 88.15 | 1311,498 | 90.69 | 375,534 | 91.32 | 524,736 | 66.70 |
Total revenue | 513,846 | 100 | 892,524 | 100 | 1446,132 | 100 | 378,678 | 73.68 | 553,608 | 62.03 |
(Source: Personal Customer Department - VPBank Dong Do)
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2.4. Evaluation of lending activities for individual customers at Vietnam Prosperity Joint Stock Commercial Bank, Dong Do branch
2.4.1. Results achieved
In recent years, realizing the role and potential of the science and technology sector, Vietnam Prosperity Joint Stock Commercial Bank in general and Dong Do branch in particular have proactively expanded credit capital for science and technology in a reasonable manner, contributing to creating conditions for the development of science and technology, promoting economic growth. The results achieved are of great significance to both science and technology and the bank.
For science and technology
Bank credit capital has brought important investment results to enterprises, providing timely capital for business and consumption activities...
For Branches
The loan turnover and outstanding loans for SMEs at the Branch maintained a fairly steady growth rate for all three years from 2010 to 2012. The Branch has increased its competitiveness with other commercial banks in the area, creating an important premise in improving the quality of loans for these businesses.
After many years of operation, with constant innovation in management quality and customer service in a convenient, civilized and modern direction, the Branch has established and maintained good credit relationships with many customers. Increasing the rate of regular customers and the rate of customers returning to transactions.
Most loans are focused on appraisal and strict inspection before, during and after lending to ensure the use of capital for the right purpose, right target and safety for the bank. The branch clearly defines the responsibilities of each credit officer and business manager, contributing to raising the sense of responsibility of each employee for each loan.
The branch has applied many flexible loan security measures, creating the most favorable conditions for customers. Customers can apply many security measures at the same time, from many different sources to secure their loans.
In general, the lending activities of customers at Vietnam Prosperity Joint Stock Commercial Bank - Dong Do Branch are relatively stable. In the context of the economy facing many difficulties, the capital demand of customers is very large, the Branch has made great efforts to meet the maximum requirements of customers, achieving many commendable results in both quantity and quality. However, in order to achieve even greater achievements
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In the coming years, the Branch needs to make more efforts, overcome shortcomings, promote lending activities for science and technology not only in quantity but also in quality to further improve the quality of lending, bringing benefits not only to the bank but also to society.
2.4.2. Difficulties and limitations
In recent years, although there have been many efforts and positive results in the lending activities of science and technology, the Branch still has many limitations that need to be overcome soon, because these limitations have a direct impact, reducing the quality of the Branch's lending.
The rate of overdue debt and bad debt has increased sharply : showing that the quality of the Branch's loans has somewhat declined. To have bad debt means that the Branch is facing a high risk of losing capital. This problem is always the most painful and worrying problem of commercial banks, especially in the current difficult economic situation.
Lending, debt collection and outstanding debt of KHCN all decreased: in addition to the reason of economic crisis leading to a decline in customers' business activities, affecting the bank, the management needs to have the right policies and guidelines, and offer products suitable to customers' needs to overcome this situation.
Regarding the implementation of credit mechanisms and regulations and the assessment of customers' borrowing needs, there are still limitations : The implementation of credit procedures is sometimes not taken seriously. The assessment of customers' financial capacity still relies heavily on documents and records provided by customers, reducing the practicality of customer assessment. In the process of reviewing and deciding on credit as well as the process of checking before, during and after lending, there are still neglects, not really going deep, closely, so there are often signs of risks, or difficulties that businesses encounter have not been detected, handled, and helped promptly. Or in the assessment process, with traditional customers, the assessment staff is negligent, does not comply with the principles, increasing the risk of the loan.
Regarding lending procedures : VPBank's current lending procedures are still quite rigid and not flexible. The bank needs to survey and research to come up with a shorter, more flexible process to support customers quickly.
Regarding the capacity and quality of credit officers : Most credit officers are still very young, so they lack experience in granting credit, do not follow the actual situation closely, and are still hesitant when having credit relations with customers. Some officers have worked for many years based on experience.
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experience, so little research and update on changes in the market economy, limited technological level. There is a situation where credit officers collude with customers for personal gain, causing harm to the bank.
Fifth, the inspection, urging and debt collection are not thorough: Although the debt collection work of the Branch has gradually improved over the years, there are still certain limitations. Sometimes, the responsibilities of each stage and each department in the inspection, urging and debt collection are not clear and overlap. Departments and divisions still lack coordination in reviewing, comparing, adjusting and thoroughly handling debts. The work of organizing customer verification, researching, evaluating records and current status to make plans, debt handling solutions, and exploiting each debt collection asset is sometimes lacking.
2.4.3. Causes of limitations
- Cause from Vietnam Prosperity Joint Stock Commercial Bank - Dong Do branch
+ The bank's lending interest rate is not really flexible when there is a fluctuation in interest rate. To apply competitive interest rate, a file must be prepared and submitted to the General Director for approval, so the disbursement time will be slow. At the same time, it will lose business opportunities and compete with other banks.
+ Although the bank's lending process has been innovated, it is still not really convenient for customers, still rigid and inflexible compared to the actual situation, causing customers to encounter many difficulties in preparing loan applications.
+ The inspection and control work of the Branch has not been carried out regularly and thoroughly, often just perfunctorily on paper and not in practice, leading to some unnecessary mistakes such as dishonest employees falsifying customer records causing great damage.
+ Regarding the credit staff: With long-time staff, most have received basic training, but have not been retrained to meet new requirements, especially in implementing operations. Besides, some new staff are very young in age and career, so they lack a lot of experience and do not meet the requirements of current credit work.
+ Customer contact marketing activities have recently been paid attention to by the Branch but still have many limitations, there are not many measures to promote banking services, making many people not know about the services and the benefits they bring.
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+ The bank's credit appraisal work is not good, which has led to a sharp increase in bad debt in 2011 and 2012. Employees also colluded with customers to take advantage. At the same time, debt collection work has not been fully implemented, so the bank has not been able to recover all bad debt.
- Causes from science and technology
In recent years, the number of KHCN in Hanoi has increased sharply but the scale of loans is small. Most of the KHCN customers of the Branch are reputable customers. However, during the operation, due to changes in the market mechanism, some customers have difficulty in repaying debts to the Branch. Some customers, because they want to appropriate the Branch's capital for other purposes, even though they have enough money to repay their debts, still ask for a debt extension, thus causing overdue debts of the Branch, affecting the quality of the Branch's loans. At the same time, in some KHCN, the financial management capacity and technical level are weak, not keeping up with the requirements of the market mechanism, leading to production and business being under a lot of competitive pressure, producing unsold products, stagnant production and unable to repay debts.
- Objective reasons
Originating from the macroeconomic environment, the legal corridor for bank credit activities is still incomplete, overlapping, and has many loopholes for customers to take advantage of. At the same time, the socio-economic environment has a significant impact on customers' borrowing situation, such as the impact of inflation, interest rate competition between banks, and the tightening and strict control policies of the State Bank in recent times, which have affected the credit activities of branches. In addition, the banking market is developing more and more vibrantly and strongly. Recently, in Hanoi, many new branches of commercial banks have appeared, creating great competitive pressure, requiring VPBank Dong Do to have appropriate and highly competitive measures and policies to attract customers.
CONCLUSION OF CHAPTER 2
Chapter 2 briefly introduced the history of establishment and development, organizational structure of Vietnam Prosperity Joint Stock Commercial Bank, Dong Do branch. In addition, chapter 2 presented data and general information on the business performance of VPBank Dong Do in terms of capital mobilization, capital use and business results over the three years 2010, 2011 and 2012. From citing theoretical bases and mechanisms, this chapter presented information and general perspectives on the current lending situation for SMEs in Vietnam and focused on analyzing the current lending situation for SMEs of VPBank Dong Do. Through that analysis,
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We can see a part of the actual situation of the bank's lending activities and find out the existing limitations as well as the causes of those limitations. That is also the basis for being able to propose some solutions and recommendations with the hope of improving the quality of lending to SMEs at VPBank Dong Do in chapter 3.
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CHAPTER 3. SOLUTIONS TO IMPROVE THE QUALITY OF LOANS FOR SMALL AND MEDIUM ENTERPRISES AT VIETNAM PROSPERITY JOINT STOCK COMMERCIAL BANK, DONG DO BRANCH
3.1. Business operation orientation of Vietnam Thinh Vuong Joint Stock Commercial Bank, Dong Do branch in the period of 2013 - 2015
3.1.1. Orientation for development of lending activities
Over the years, the branch's lending activities have had some remarkable achievements. Besides, there are also many limitations that the branch needs to pay attention to amend. Therefore, in order to promote strengths and overcome unnecessary weaknesses, the branch has had the following orientations to develop its lending activities:
- Continue to well perform the tasks and policies assigned by the Party and Government to the banking sector. Provide interest rate support loans to production and business enterprises, meeting the capital needs of individuals, households and enterprises located in the area. Prioritize short-term loans for good customers in the fields of production, processing, export, etc. with stable output, certain income, good financial capacity, and collateral to develop the economy and ensure social security, achieving the goal of maintaining the growth and sustainable development of the country's economy.
- Regarding lending interest rates: Control lending interest rates, apply flexible and suitable interest rates for each lending object and industry with high competitiveness. Particularly for foreign currency lending interest rates, the Branch strictly complies with the State Bank's regulations on foreign currency lending in Circular 07/TT-NHNN.
- Increase credit growth, ensure loan safety, control bad debt well, continue to control quality for each customer. Implement preferential policies for familiar customers who regularly come to the bank to transact, thereby building customer loyalty to the Branch. Particularly for customers who have temporary difficulties in paying debts due to objective impacts from the business environment, the Branch will consider debt restructuring, restructure capital for businesses with the assessment that after restructuring, the customer's production and business activities will be better in the future.
- Strictly control and strengthen supervision of foreign currency lending activities throughout the system, strictly implement foreign currency lending according to regulations. Strictly control foreign currency sources for debt repayment of customers from foreign currency revenue from production and business activities in case of foreign currency lending to pay for imports.
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- Continue to maintain and improve lending quality. Credit officers need to closely monitor loans, monitor customers' capital usage, and urge customers to repay interest and principal on time to minimize possible risks in lending.
3.1.2. Orientation for development of personal customer lending activities
Lending to SMEs is a potential market and lending to SMEs is considered one of the top important goals of Vietnam Prosperity Joint Stock Commercial Bank, Dong Do branch at present.
- Develop new customers ensuring compliance with credit guidelines.
- Stick to traditional customers using multiple services/large outstanding debt to fully exploit the customer chain, ensuring cash flow management.
- Closely follow the operating area, monitor and evaluate KHCN customers in the area by field and industry to find target customers within the credit orientation and focus on marketing and care.
- Divide specific areas of responsibility for each business unit
- Simplify procedures, review business mechanisms, shorten loan processing time, especially the appraisal process, creating favorable conditions for customers to easily borrow capital.
- Evaluate the capacity and effectiveness of credit officers through credit quality; focus on training and retraining, political and ideological education...
3.2. Solutions to improve lending efficiency for individual customers of Vietnam Prosperity Joint Stock Commercial Bank, Dong Do branch
Through the analysis of the above data, it can be seen that the growth in the activities of Dong Do branch is not good. Besides the achievements, there are still some limitations that need to be resolved. In order to overcome the limitations pointed out in Chapter 2, this content will propose some solutions to improve the quality of lending to SMEs at Vietnam Prosperity Joint Stock Commercial Bank, Dong Do branch.
3.2.1. Capital mobilization
Branches should maintain and develop more credit relationships with old customers: One of the remaining weaknesses is that they place too much importance on finding new customers and sometimes neglect taking care of old customers. Old customers, especially those with long-term relationships with the bank, are customers.
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