Solutions to promote lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank

MINISTRY OF EDUCATION AND TRAINING

THANG LONG UNIVERSITY

—o0o—

GRADUATION THESIS

TOPIC:

SOLUTIONS TO PROMOTE LIVING ACTIVITIES FOR SMALL AND SME ENTERPRISES AT TIEN PHUONG JOINT STOCK COMMERCIAL BANK Hoan Kiem Branch

Instructor: Th.s Le Thi Ha Thu

Performed by students: Nguyen Thi Nhung

Student code: A16357

Specialization: Banking

HANOI – 2014

THANK YOU

I would like to thank the teachers in the Faculty of Economics – Management, Thang Long University for their good and useful lectures, helping me to apply those professional knowledge in my graduation thesis. . In particular, I would like to express my deep gratitude to my teacher – Master Le Thi Ha Thu, she has always guided me, improved my knowledge, pointed out my shortcomings and helped me during my internship. currently doing a thesis.

In addition, I would also like to thank Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch for helping me, providing useful information and documents for me during my internship at the Branch, creating favorable conditions for me complete this essay.

Hanoi, October 28, 2014

Pupil

Nguyen Thi Nhung

GUARANTEE

I hereby declare that this graduation thesis is my own work with the support of my supervisor and has not copied the work of others. The secondary information used in the Dissertation is original and clearly cited.

I take full responsibility for this pledge!

October 28, 2014

Pupil

Nguyen Thi Nhung

TABLE OF CONTENTS

INTRODUCTION ………………………………………………………………………….

CHAPTER 1: OVERVIEW OF LIVING ACTIVITIES FOR SME AND SME ENTERPRISE OF COMMERCIAL BANK……………………1

1.1. Basic issues of small and medium enterprises ……………………………………….1

1.1.1. The concept of small and medium enterprises …………………………………………………….1

1.1.2. Classification of small and medium enterprises…………………………………………………….1

1.1.3. Characteristics and current situation of small and medium-sized enterprises in the current economy …..2

1.2. Basic issues of lending activities for small and medium enterprises at commercial banks …………………………………………………………………………………… …………..4

1.2.1. The concept of lending activities for small and medium enterprises at commercial banks …………4

1.2.2. Principles of lending to small and medium-sized enterprises……………………..5

1.2.3. Features of small and medium-sized business loans ……………………..6

1.2.4. Methods of lending to small and medium-sized enterprises ……………………..7

1.2.4.1. According to the loan term ……………………………………………………7

1.2.4.2. According to the nature of assurance …………………………………………………….7

1.2.5. The role of small and medium-sized business lending

1.2.5.1. For small and medium enterprises ……………………………………………………8

1.2.5.2. For the bank …………………………………………………………………………………………9

1.3. Promote lending activities for small and medium-sized enterprises at commercial banks. ……………………..9

1.3.1. The need to promote lending activities for small and medium-sized enterprises at commercial banks ………….9

1.3.2. Evaluation criteria for promoting lending activities for small and medium-sized enterprises at commercial banks ……..ten

1.3.2.1. Group of qualitative indicators………………………………………………………..10

1.3.2.2. Quantitative indicator group ………………………………………………………………………….11

1.4. Factors affecting the promotion of lending activities for small and medium enterprises at commercial banks

1.4.1. Objective factors ……………………………………………………..15

1.4.2. Subjective factors …………………………………………………………………………16

1.4.2.1. From the customer …………………………………………………………………………..16

1.4.2.2. From the bank’s side…………………………………………………….17

CONCLUSION CHAPTER 1 ……………………………………………….19

CHAPTER 2: SITUATION OF Lending ACTIVITIES FOR SMALL AND SME ENTERPRISES AT TIEN PHUONG JOINT STOCK COMPANY BANK Hoan Kiem Branch……………………………………………………. ………….20

2.1. Overview of Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch …………………………………………………………………………. ……………………..20

2.1.1. The process of formation and development of Tien Phong Commercial Joint Stock Bank Hoan Kiem branch ………………………………………………………………………. 20

2.1.2. Organizational structure of Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch ………………………………………………………………………………………… …………………….21

2.1.3. Main activities of Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch ………………………………………………………………………………………… ………….24

2.2. Business results of Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in the period 2011 – 2013……………………………………………………25

2.2.1. Capital mobilization situation…………………………………………………….25

2.2.2. Status of capital use (mainly lending activities)……………………….30

2.2.3. Other business activities …………………………………………………….36

2.2.4. Business results……………………………………………………..39

2.3. Some general provisions in lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch …………..40

2.3.1. Subjects and conditions for lending to small and medium-sized enterprises……………..40

2.3.2. Collateral for loans to small and medium enterprises…………………….41

2.3.3. Forms of lending to small and medium-sized enterprises…………………….42

2.3.4. The process of lending to small and medium enterprises ……………………………………………………43

2.4. Current status of lending activities at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in 2011-2013 ……………………………………………….49

2.4.1. Loan turnover for small and medium enterprises ………………………………………49

2.4.2. Revenue from loan collection for small and medium-sized enterprises ………………51

2.4.3. Outstanding loans for small and medium-sized enterprises ……………………..52

2.5. Assessing the current situation of lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in the period

2011-2013………………………………………………………59

2.5.1. Qualitative indicators …………………………………………………………………………59

2.5.2. Quantitative indicators…………………………………………………….61

2.6. Evaluation of lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in the period 2011-2013

…………………………………………………………………………………………………..68

2.6.1. Achievements……………………………………………….68

2.6.1.1. In terms of qualitative………………………………………………………..68

2.6.2. Limitations in lending to small and medium-sized enterprises…………..69

2.6.3. Reasons for limitation …………………………………………………………………………70

2.6.3.1. From the Bank’s side……………………………………………….70

2.6.3.2. From the customer (SME) ……………………………………………………71

2.6.3.3 From the side of the economy ……………………………………………….72

CONCLUSION OF CHAPTER 2 ……………………………………………….73

CHAPTER 3: SOME SOLUTIONS TO PROMOTE LIVING ACTIVITIES FOR SMALL AND SMALL ENTERPRISES AT TIEN PONG JOINT STOCK COMMERCIAL BANK Hoan Kiem Branch………………………………………. ..74

3.1. Development orientation of Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in the next few years……………………………………………………………………74

3.1.1. Orientation of lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch in the coming years………….74

3.2. Solutions to promote lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch ……………………75

3.2.1. Building flexible customer policy ……………………………………………………75

3.2.2. Developing preferential credit policies suitable for small and medium enterprises

…………………………………………………………………………………………………..76

3.2.3. Improving the qualifications of bank staff …………………….77

3.2.4. Improving appraisal quality ……………………………………………………..77

3.2.5. Simplifying loan procedures …………………………………………………….78

3.2.6. Strengthening the inspection and control work……………………..79

CONCLUSION CHAPTER 3 ………………………………………………..79

LIST OF Abbreviations

Abbreviation Full name

Commercial Bank Commercial Bank

TPBank Tien Phong Commercial Joint Stock Bank

TPBank – Hoan Kiem Tien Phong Commercial Joint Stock Bank

Hoan Kiem Branch

SBV State Bank

SMEs Small and Medium Enterprises

NQH Overdue debt

Special Assets Secured assets

Production and Business Production and business

DPRR Provision for risks

Credit institutions Credit institutions

Employees Staff Officers

LIST OF TABLES, DIAGRAMS

Page

Table 1.1. Criteria for identifying SMEs in Vietnam 2

Table 2.1. Capital mobilization activities at TPBank – Hoan Kiem in the period 2011-2013 26

Table 2.2. TPBank – Hoan Kiem lending activities in the period 2011-2013 31

Table 2.3. Income from services of TPBank – Hoan Kiem in the period 2011-2013 35

Table 2.4. Business results of TPBank – Hoan Kiem in the period 2011 – 2013 39

Table 2.5. Sales of SME loans at TPBank – Hoan Kiem in the period 2011 – 2013 50

Table 2.6. The situation of TPBank – Hoan Kiem’s SME loan collection in the period 2011 – 2013 51

Table 2.7. Outstanding loans to SMEs by time structure and industry structure of TPBank – Hoan Kiem period 2011 – 2013 53

Table 2.8. Outstanding loans to SMEs by business type of TPBank – Hoan Kiem in the period 2011-2013 58

Table 2.9. Turnover ratio of SME loans of TPBank – Hoan Kiem for the period 2011-2013 61

Table 2.10. Ratio of overdue debt and bad debt of TPBank – Hoan Kiem in lending to SMEs in the period 2011 – 2013 62

Table 2.11. Provisioning rate for DPRR loans for SMEs at TPBank – Hoan Kiem for the period 2011-2013 64

Table 2.12. Covered SME loan risk ratio 66

Table 2.13. Profit from SME lending at TPBank – Hoan Kiem in the period 2011-2013 66

Diagram 2.1. Organizational structure of TPBank- Hoan Kiem 22

Diagram 2.2. The process of lending to small and medium enterprises at TPBank – Hoan Kiem 43

FOREWORD

1. Urgency of the topic

Since Vietnam implemented the policy of opening its economy in 1986, the Vietnamese economy has made rapid and promising developments. In that transformation and development, the contribution of businesses is very significant. Especially, small and medium-sized enterprises, with their dynamism, activities in many fields, and their large number, have contributed to increasing national income (GDP), reducing inflation, solving the problem of poverty. employment issues, helping to make adjustments to macroeconomic policies, etc., play a certain role in the sustainable economic development of the country. However, in recent years, small and medium enterprises in Vietnam have faced enormous challenges and difficulties.

The development of small and medium-sized enterprises is a matter of great importance to the Party and the State, and is considered a central task in the country’s socio-economic development strategy. And the top issue is to help businesses overcome the immediate difficulties, especially the lack of capital. Recognizing that problem, most commercial banks have identified small and medium enterprises as the target customer group, including Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch. In recent years, the bank has had strategies to attract and promote lending activities to small and medium-sized enterprises and has achieved certain results, but has not achieved the set targets, has not fully exploited yet. potential of the locality as well as not timely meet the needs of the economy.The promotion of lending to small and medium-sized enterprises is really necessary, in line with the guidelines of the Party and the State, helping the bank to rationalize investment restructuring, increase credit diversify loan portfolios, spread risks and improve competitive position.

Therefore, through the process of researching, studying and learning about lending activities at banks with the guidance of Master Le Thi Ha Thu, the author has chosen the topic: “Solutions to promote banking activities.” lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank, Hoan Kiem branch” as the topic of my graduation thesis. Based on the results of the research and analysis of the collected data, the thesis would like to make some recommendations to promote the lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Branch. Hoan Kiem.

2. Research objectives of the topic

The thesis focuses on researching the basic theoretical issues of lending activities for small and medium enterprises, and determining the necessity of promoting SME lending activities of commercial banks. commercial. The thesis also studies the current situation of lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch from 2011 to 2013, from which to draw strengths, weaknesses and limitations. in the lending activities of small and medium enterprises of banks and the reasons for such limitations.

From the research problems, thereby proposing solutions to promote lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch.

3. Object and scope of research

The object of the research is the promotion of lending activities for small and medium enterprises of the Commercial Bank.

Research scope is lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch from 2011 to 2013.

4. Research Methodology

The research methods used are mainly data collection and analysis methods. Information is collected through many channels such as direct internship at the bank, interviews with bank employees, annual financial statements, credit reports, etc. This information, combined with the method of comparing, contrasting and synthesizing information, thereby making judgments on the situation of small and medium-sized enterprises lending at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch. .

5. Thesis structure

In addition to the introduction, the list of tables, diagrams, conclusions, appendices, the main content of the paragraph includes 3 chapters:

Chapter 1: Overview of commercial banks’ lending to small and medium enterprises.

Chapter 2: Current status of lending activities for small and medium enterprises at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch.

Chapter 3: Solutions to promote SME lending at Tien Phong Commercial Joint Stock Bank Hoan Kiem Branch.

CHAPTER 1: OVERVIEW OF LIVING ACTIVITIES FOR SME’S OF COMMERCIAL BANK

1.1. The basics of small and medium enterprises

1.1.1. The concept of small and medium enterprises

According to Clauses 1 and 2, Article 4 of the Law on Enterprises No. 60/2005/QH11 dated November 29, 2005, an enterprise is an economic organization with its own name, assets, stable transaction office, and registration. business in accordance with the law for the purpose of carrying out business activities. Business means the continuous performance of one, several or all stages of the investment process, from production to consumption of products or provision of services in the market for profit purposes.

In the market economy, there are many types of enterprises coexisting, developing and competing with each other. However, in order to facilitate the management and support of businesses to develop, people often rely on different criteria to classify businesses. Commonly used criteria to classify enterprises include: Classification based on the relationship of capital and assets, based on the business purpose of the enterprise, based on the field of operation….

In Vietnam, in order to help the State assess the level of development and make reasonable support policies for enterprises in each period, the types of enterprises are divided according to the criteria of size, divided into: large enterprises, medium enterprises and small enterprises. Small and medium enterprises (SMEs) classified according to this criterion are also the objects of lending activities that the thesis focuses on.

SMEs are defined according to Article 3 of Decree No. 56/2009 ND-CP dated 30/06/2009 of the Government On assistance to SME development as follows: “Small and medium-sized enterprises are business establishments that have registered their business. According to the law, enterprises are divided into three levels: micro, small and medium according to the size of total capital (total capital is equivalent to total assets determined in the enterprise’s balance sheet) or number of employees. average annual movement (total capital is the priority criterion)”.

1.1.2. Classification of small and medium enterprises

Currently, in the world, there is no uniform standard to classify SMEs for all countries because the socio-economic characteristics of each country are different and even within a country, the classification is also different from time to time. each industry, each region. However, in many countries, there are still some common classification standards such as number of regular employees, production capital, revenue, profit, added value…. In Vietnam, SMEs are divided according to production capital and labor criteria, as shown in the following table:

Table 1.1. Criteria for identifying SMEs in Vietnam

Scale	Micro business	Small Business	Medium Enterprise
Area	Number of employees	Total capital	Number of employees	Total capital	Number of employees
1. Agriculture, forestry and industrial and marine products	10 people or less	20 billion or less	from more than 10 people to 200 people	from over 20 billion VND to 100 billion VND	from over 200 people to 300 people
2.Industry and construction	10 people or less	20 billion or less	from 10 people to 200 people	from over 20 billion VND to 100 billion VND	from over 200 people to 300 people
3. Trade and services	10 people or less	10 billion or less	from more than 10 people to 50 people	from over 10 billion VND to 50 billion VND	from over 50 people to 100 people

Maybe you are interested!

(Source: Decree No. 56/2009 ND-CP dated 30/06/2009 on supporting the development of SMEs)

Thus, according to Decree No. 56/2009/ND-CP dated June 30, 2009 of the Government, small and medium enterprises are classified according to the number of employees and total capital, stipulating the average number of employees per year. from 10 people or less are considered as micro enterprises, from 10 people to less than 200 employees with a total capital of 20 billion VND or less are considered as small enterprises, and from 200 to 300 employees with a total capital of VND 20 billion. capital over 20 billion is considered as a medium enterprise.

1.1.3. Characteristics and reality of small and medium enterprises in the current economy

In 2011, the Department of Small and Medium Enterprises Development (Ministry of Planning and Investment) conducted a study with the participation of more than 63,000 businesses in 30 northern provinces to capture the situation of SMEs. . Thereby showing some characteristics of SMEs in general and SMEs in Vietnam in particular. Specifically, SMEs in our economy today have the following highlights: SMEs account for a large number, very diverse in industries and sizes.

SMEs exist and develop in almost all fields and economic sectors: commerce, services, industry, construction, agriculture, forestry and fishery… and operate in all forms such as: State-owned enterprises, private enterprises, joint stock companies, limited liability companies, foreign-invested enterprises and individual economic establishments.

SMEs have low capital size and financial capacity, which is also a prominent feature of SMEs. Through a survey conducted by the Department of Small and Medium Enterprises Development in 2011, it was found that in Vietnam, nearly 50% of enterprises have a capital of less than 1 billion VND; nearly 75% of enterprises have capital below 2 billion dong and 90% of enterprises have capital below 5 billion dong. SMEs have low initial capital size, when borrowing from banks, they face barriers in interest rates, procedures, methods and policies, etc., so their ability to access bank capital is poor. From the low initial capital, it affects the scale of the enterprise’s investment in equipment, the ability to invest in depth, etc., making the business difficult. This is a factor that greatly affects the development goals of SMEs in particular as well as the economy in general.