Viewpoints on Credit Expansion for Production Households

CONCLUSION OF CHAPTER 2

In the focus of chapter 2, the author has analyzed in depth the current situation of expanding credit for production households at the Bank for Agriculture and Rural Development of Phuc Tho district. On that basis, the author has evaluated the results achieved in credit investment for production households, and at the same time pointed out the shortcomings and causes of the shortcomings in credit work in general and credit for production households in particular. This is the basis for proposing appropriate solutions to expand lending for production households at the Bank for Agriculture and Rural Development of Phuc Tho district more effectively, which will be mentioned by the author in the following chapter 3.

CHAPTER 3

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SOLUTION TO CONTINUE EXPANDING HSX CREDIT AT NHNo & PTNT PHUC THO DISTRICT

3.1. VIEWPOINTS ON CREDIT EXPANSION FOR PRODUCTION HOUSEHOLDS

When talking about “expansion”, people will immediately think about how to increase the scale of volume and quantity, that is, talking about horizontal growth. Or in other words, credit expansion is the response to customers’ increasing demands for credit scale, is the increase in the credit ratio in the assets of commercial banks.

- The expansion of credit for production households must be based on both increasing the credit scale and increasing the number of customers:

+ Increase the scope and target customers, through forms of marketing propaganda, expanding the network system, improving business processes, simplifying loan application procedures combined with using many capital transfer channels such as: direct lending, lending through groups, third-party delivery through material suppliers... to meet the demand for loans for production costs, purchasing agricultural products, agricultural mechanization, rural areas, farm economy, new rural programs and key economic programs of the province so that production households in need of loans can easily access bank loans.

+ Increase investment rate: In addition to increasing the number of households, banks need to boldly increase the investment rate for households that do business effectively and have effective production and business projects, to help households expand their production scale. In reality, many times customers need to borrow a certain amount of capital to fully implement a production and business project, but banks often cut it due to fear of risk. To do this, banks need to improve the appraisal level of credit officers to fully appraise the project, thereby making decisions on investment rates for each customer in a scientific and reasonable manner.

- Expanding credit scale must go hand in hand with improving credit quality. To effectively manage investment capital, along with credit expansion, banks need to focus on improving credit quality, avoid chasing credit growth targets while neglecting quality improvement, avoid hot credit growth, effective credit investment has a positive impact on credit expansion: Especially in the current conditions, mobilizing capital to meet sufficient investment capital for economic development is extremely difficult. More than ever, improving credit quality must always be focused on, high credit quality means fast credit turnover, which means that the opportunity for many customers to access bank capital is very large.

3.2. ECONOMIC DEVELOPMENT STRATEGY OF PHUC THO DISTRICT WITH A VISION TO 2020

Phuc Tho is a suburban district located in the West of Hanoi city. Basically, Phuc Tho is still a purely agricultural district. The district's economy and infrastructure still have many difficulties. The gap in economic development of the district compared to inner-city districts and neighboring districts is still quite large.

With the characteristics of a suburban district, the agricultural structure still accounts for a large proportion, over 58% of the labor force in the agricultural sector. Implementing the Government's Resolution on planning the capital Hanoi, in which Phuc Tho is planned as the green belt of the city. Therefore, in the process of shifting the economic structure of the district towards sustainable development, agriculture is still a typical industry towards high-quality, sustainable agricultural development.

Besides, the district needs to continue to accelerate investment in developing industrial clusters according to the planning approved by the city, creating conditions for small-scale industries, services, and industries using natural resources.

Using high technology to accelerate the process of economic restructuring of the district to develop in a sustainable direction. In the process of development to become an advanced district of the city, with a progressive economic structure, a green, clean environment, and guaranteed social issues, the issues of capital, investment in economic and social infrastructure, quality of labor resources, etc. require great efforts, efforts and strong leadership of the Party Committee, government and support of the people in the district. With the tradition of being a heroic unit awarded by the State, with the attention of the city, the political, economic and cultural center of the whole country, it is certain that in the coming time, the process of economic restructuring of Phuc Tho district will take place strongly in the direction of sustainable development, catching up with the development of districts and being the green lung of the capital Hanoi.

3.3. ORIENTATION OF ACTIVITIES OF AGRICULTURE AND RURAL DEVELOPMENT BANK BRANCH IN PHUC THO DISTRICT TO 2020

3.3.1. Development orientation of NHNo & PTNT, Phuc Tho branch

In 2015 and the following years, the branch has determined the general goal of continuing to maintain credit growth at a reasonable level. Prioritizing investment in "three rural areas", first of all households producing agriculture, forestry, fishery, small and medium enterprises to meet the requirements of shifting investment structure for agricultural and rural production, increasing the outstanding loan ratio for this sector to 70% of total outstanding loans. In 2015, Agribank strives to achieve specific growth targets, which are: compared to 2014, capital sources increase from 11% - 13%; outstanding loans increase by 9% - 11%; the ratio of agricultural and rural loans reaches 70% of total outstanding loans; bad debt under 5%; the ratio of non-credit collection increases by 10%; the capital adequacy ratio (CAR) meets international standards.

* Orientation to 2020.

- Capital source: + Domestic and foreign currency converted to 760 billion

- Outstanding debt: + Local currency reached 680 billion

- Finance: Income fund difference of 24 billion, striving for salary coefficient to reach 1.2 coefficient and bonus.

- Bad debt: Bad debt ratio/total outstanding debt < 2%

- Capital growth from 16-18%/year

- Outstanding loans grow from 14-16%/year

- Bad debt under 5% of total outstanding debt.

- Medium and long-term debt accounts for about 40% of total debt.

- Outstanding loans in the agricultural and rural areas grow at an average of 18-20% per year, maintaining the proportion of agricultural and rural loans at 70% of total outstanding loans. Of which, outstanding credit loans for production households and individuals account for about 55% of total outstanding loans, increasing investment rates to raise the average outstanding loan level per household to 50 million VND per household.

3.3.2 Credit expansion orientation for production households of the Bank for Agriculture and Rural Development, Phuc Tho branch

Based on the socio-economic development goals of Phuc Tho district in 2014. Based on the orientation and goals set by the NHNo & PTNT Phuc Tho, the credit orientation for production households until 2020 is as follows:

Taking the economic efficiency of the project as the basis for investment: Prioritize investment in effective projects of individual production and business households, small and medium enterprises. Promote capital investment in agriculture and rural areas according to Decree 41/2010/ND-CP dated April 12, 2010, focusing on credit investment for rural agricultural households, solving loans up to 50 million VND without collateral, Resolution 30a/2008/NQ-CP (new rural construction program) investing in loans for large-scale fields, converting land into VACs of NHNo Vietnam. Focus on overdraft credit investment through the accounts of customers who are civil servants and public employees with stable salary accounts opened at the bank. Do

Work with local associations and political organizations such as the Women's Union, Veterans' Association, Farmers' Association, and Ho Chi Minh Communist Youth Union through cooperation agreements and the establishment of groups for each association and organization in the residential area. Expand consumer lending to households with stable income sources.

Credit expansion must go hand in hand with ensuring credit quality and selective investment; Improving the quality and capacity of financial analysis and project appraisal; Strengthening thematic credit inspection, changing the location of credit officers to ensure capital safety. Controlling credit growth within the plan and in line with capital growth in accordance with regulations on plan management; Linking closed lending from production to product consumption and export, on that basis expanding international payment relations and foreign currency trading to contribute to increasing service revenue rates.

Potentially bad debts need to be analyzed and evaluated if the customer is still operating but the scale is reduced, the operation is moderate leading to difficulty in debt repayment, debt can be extended and restructured according to Decision 780 of the State Bank of Vietnam. For bad debts from group 3 to group 5, it is necessary to analyze and evaluate to clarify the objective causes from the general economic recession of the country affecting the production and business activities of customers and the subjective causes to clarify the responsibilities of each implementing officer. Continue to assign the task of urging the collection of overdue interest, restructured debt, bad debt, and risk-handled debt to each credit officer, each transaction office, consider this as a criterion for salary and bonus consideration with the motto "Work more, get more, work less, get less, do not work, do not get no reward" and apply the emulation campaign criteria.

3.4. SOLUTIONS TO EXPAND CREDIT AT NHNo & PTNT PHUC THO DISTRICT

3.4.1. Strengthening credit policy communication for production households

The current situation in rural areas shows that for production households, interest rates are an important issue, but the more important issue is the ability of production households to access credit capital. Due to remote conditions, poorly developed roads and rural infrastructure, low educational level and living conditions are the reasons that reduce the ability of production households to access bank credit capital sources. For the Bank for Agriculture and Rural Development of Phuc Tho district, the most effective way to propagate the bank's credit policy is through local authorities from the district to communes, villages, hamlets. Through mass media such as television channels, radio stations of wards and communes... Each credit officer is a propagandist who directly approaches production households through meetings, conferences... of the government and organizations to combine propaganda and dissemination of credit policies and directive documents of the bank. Conduct on-site propaganda and advertising such as publicly posting loan subjects, procedures, and processes at the office, distributing leaflets and advertising posters. For rural production households, raising people's awareness of bank credit capital as "a source of capital borrowed for economic development loans", must fully perform the borrower's obligations to the bank, especially in debt repayment, ensuring that the bank has circulating capital for lending for economic development. Raising awareness of each person will create conditions for bank credit capital to reach production households quickly and avoid ethical risks and borrowers, reducing difficulties for banks in collecting principal and interest when payment is due.

Focusing competent credit officers on key investment areas to increase outstanding loans and capital safety.

When those policies, guidelines and institutions reach the people and are widely supported by the masses, capital investment will be expanded and become effective. Especially for mountainous districts with low education level and limited access to information, information and propaganda work and choosing appropriate forms of propaganda are extremely important and need attention.

3.4.2. Expanding the network of operations, consolidating the existing network

To maintain market share, the local market has competition from many credit institutions, requiring the District Agricultural Bank to constantly innovate its operations to maintain and develop market share.

Over the years, NHNo & PTNT Phuc Tho District has covered key areas, both to meet capital mobilization needs and to facilitate customers to transact with the Bank.

Currently, the branch network includes 01 district banking center and 04 transaction offices serving people of 22 communes and 01 town (on average, each transaction point manages 05 communes).

In practice, infrastructure, equipment and a large branch network are the best representation of a bank's strength, reputation and brand, and at the same time, it is the cheapest and most effective marketing measure. Therefore, expanding the network is one of the important measures to approach and attract customers.

In the future, the bank needs to expand its network of transaction offices, but must carefully study the economic characteristics of the regions because economic development in the district is uneven between regions and areas. Especially the transaction offices, exploiting the maximum advantages of mobile banking, because this model is suitable for the bank's operating area in the agricultural and rural areas to best meet the needs of the people.

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