Luận văn thạc sỹ - Enhancing lending quality to individuals at Agribank Dong Da branch

NATIONAL ECONOMICS UNIVERSITY
ADVANCED EDUCATIONAL PROGRAM
========

BACHELOR’S THESIS
FINANCE

Topic:

ENHANCING LENDING QUALITY TO INDIVIDUAL
CUSTOMERS AT AGRIBANK DONG DA BRANCH

TRUONG THI ANH THU

HANOI, 2019


NATIONAL ECONOMICS UNIVERSITY
ADVANCED EDUCATIONAL PROGRAM
========

BACHELOR’S THESIS
Topic:

ENHANCING LENDING QUALITY TO INDIVIDUAL
CUSTOMERS AT AGRIBANK DONG DA BRANCH

Student:

Truong Thi Anh Thu

Speciality:

Finance

Class:

Advanced Finance 57B

Student’s ID:

11154215

Supervisor:

PhD. Truong Thi Hoai Linh

HANOI, 2019


ACKNOWLEDGEMENTS
I would like to acknowledge the following people for their support and
assistance with this internship. First I am very grateful to the support from the
Board of Directors, my seniors and colleagues in Accounting Department of
Agribank Dong Da branch during my project work.
Another faithfully thanks word I would send to my instructor – PhD. Truong
Thi Hoai Linh for helping me with my report in not only structure but also content
thoroughly.


TABLE OF CONTENT

STATUTORY DECLARATION
I herewith formally declare that I myself have written the submitted
Barchelor Thesis independently. I did not use any outside support except for the
quoted literature and other sources mentioned at the end of this paper.
I clearly marked and seperately listed all the literature and all other sorces
which I employed producing this academic work, either literally or in content.

Hanoi, 20/05/2019

Trương Thị Anh Thư


ABBREVIATIONS
Agribank: Vietnam Bank for Agriculture and Rural Development
BOM: Board of Management
CIC: Credit information center


LIST OF TABLES

LIST OF FIGURES
Figure 2.1: Organization chart of Agribank Dong Da branch
Figure 2.2: Structure of mobilized capital by term
Figure 2.3: Structure of mobilized capital by economic sector
Figure 2.4: Structure of mobilized capital by type of money


INTRODUCTION

Rationale
Along with the growth of the economy, people's life have been improved,
leading to consumer demand increasing. In addition to usual necessities such as
food, houses, jobs; people are more interested in the quality of life such as the
quality of their house, modern vehicles, facilities, traveling and even studying
abroad. However, with the current income level, most consumers could not afford at
the same time all their needs, especially for properties which have great values.
That's the reason why needs for consumption borrowing have been increased
nowadays.
Banking activity plays an important role on human and social life, especially
the establishment and development of commercial banks in terms of quantity and
quality of services. One of banking activities is lending activity. Lending activity is
the most important activities which accounts for the largest portion of total assets
but one of the riskiest activity of the bank. Therefore, enhancing lending quality is
the target job of commercial banks. Lending activity is particularly crucial in
assessing financial strength of customers in the business and customer repayment
capacity. Enhancing the lending quality means that financial status of commercial
banks is also enhanced, creating strengths in the competition between each bank,
helping banks avoid and limit the great risks and losses that may occur. It
contributes to the health of lending relations and facilitates the expansion of lending
relations. Lending quality determines the existence and development of each
Commercial Bank in particular and the whole banking system in general. To make a
lending decision, every banks must carefully consider risk and profitability based on
the lending analysis process. Improving lending quality will contribute to the bank's
business performance.
During my internship at the Bank for Agriculture and Rural development
Dong Da branch, I could access data on bank lending situation and understand
about lending to individuals which is also one of the basic lending activity of the
Bank. In my opinion, lending to individuals has brought a part of the income for the
bank but the results achieve have been less than its capacity due to some difficulties.

To resolve these issues as well as develop lending to individuals, Agribank Dong Da
branch still have to research more and find the solutions to overcome the
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difficulties. After a time of internship in Agribank Dong Da branch at Small and
Medium Enterprises department and also my time studying at National Economics
University, I would like to choose the topic: "Enhancing lending quality to
individuals at Agribank Dong Da branch"

Objectives
- Clarifying some basic arguments about credit, credit for production households,
experience to improve credit quality for individuals of some commercial banks.
- Analyzing and assessing the real situation of lending to production and individual
households at Agribank Dong Da branch in the period of 2014-20178, thereby
drawing the positive as well as the limitations of lending to with individuals at
Agribank Dong Da branch.
- Proposing orientations, solutions and recommendations to improve credit quality
for households and individuals at Agribank Dong Da branch.

Methodology
Analysis method: the author uses the method of general analysis, comparison
methods, comparisons, interpretive methods, inductive and economic statistical
methods to study the thesis topic.

Scope
Research object is credit quality for individuals at Agribank Dong Da branch.
Scope of research: Lending activities to individuals at Agribank Dong Da branchin
the period from 2014-2018.

Research structure
In addition to the introduction, conclusion, references, list of tables and
abbreviations, and dissertations are structured into 03 chapters:
Chapter 1: Overview of lending quality to individuals at commercial banks
Chapter 2: Current situation of lending quality to individual customers at Agribank
Dong Da branch
9


Chapter 3: Solutions and recommendations to enhance lending quality to individual
customers at Agribank Dong Da branch from 2019 to 2025

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CHAPTER 1: OVERVIEW OF LENDING QUALITY
TO INDIVIDUALS AT COMMERCIAL BANKS
1.1 Overview of lending to individuals at commercial banks
1.1.1 Definition of lending to individuals
According to the Law on Credit Institutions, to section 14/4 in 2010: “The
credit granting is an agreement for an organization or individual to use a sum of
money or to commit to use a sum of money on the principle of having repayment by
lending, discounting, financing leasing, payment, bank guarantee and other credit
granting operations.”
According to section 14/16 of the Law on Credit Institutions in 2010: “
Lending is a form of credit whereby the lender assigns or undertakes to give the
customer a sum of money to use for the purpose of determining for a certain period
of time in accordance with the principle of refund pay both principal and interest.”
Thus, lending is understood as the act of letting people use equity with the
terms and conditions and borrowers must fulfill the obligation to pay the principal

and interest on time for lenders.
Lending to individuals is a lending relationship that commercial banks
capital transfer in a given time from commercial banking to individuals,
households, cooperations in order to serve the purpose of consumer or investment,
manufacturing and trading.
Lending to individuals is a credit operation of the Bank for the individual
households. The Bank funds for individuals and serves the production business,
personal consumption in a certain period of time based on the principle of timely
repayment of both principal and interest.
- Lending to individuals clients usually be small loans but a big number of
quantity.
- Basically the loans to individuals, especially lending, have relatively good
quality, yet the lending is good only when the client has no problem. And besides
the lending usually contains very high risk so commercial banks normally apply
higher interest rates with this kind of lending.
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- About lending term: Personal loans are usually short-term loans and
medium-term loans. Long-term loans are very little because the loans are primarily
serve the needs of individuals.
1.1.2 Classification of lending to individuals
Managing lending to individuals well needs for lending to individuals
classification. There are many goals to classify a loan, here I'm referring to the
classification of private lending according to certain criteria
•

Based on the purpose of the loan

Based on the purpose of the loan may be classified into three types:

-

Lending to individuals serves the purpose of residence

The loan is aimed to serve the needs of construction, stores or renovate
houses of individuals. Characteristics of this loan is in the long time and the loan
scale is large.
-

Lending to individuals serves the purpose of consumer

It is the loans service of the demand to improve the life such as shopping,
media, travel, entertainment, education,… The characteristics of this loan is small
scale and short duration, the lower risk loans serves the purpose of residence.
-

Lending to individuals serves business purposes

It is the loans to make the small business projects in each household, traders,
shops, rental… characteristics of the loan is usually long-term, depending on the
customer's business approach, the risks of this loan is very high, and there is
possibility of ethical risks.
•
-

Based on the method
Lending to individuals charged once when maturity

It is the short-term loans of individuals and households to meet cash needs
immediately and this loans are paid when maturity. Scale of borrowing is relatively

small, one-time loans short term and often are used to pay for the trip, buy the tools
for families or repair of automobiles, houses… The risk of this loan is not great
dishes.
-

Installment loan

It is short-term or the medium-term loans are paid in two or more times in a
row (usually by month or quarter). Loans are charged to do many times under the
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agreement between Bank and customers. This method is used to fund to purchase
expensive items such as homes, cars, …or to invest in business projects. Overall,
this installment loans carry a fixed interest rate, but the type carried floating interest
rates also are becoming popular. Often in the total volume of consumer loans
according to the commercial banks offers, more than 80% are made on the
installment basis. This comes from the financial capability of the client, which is not
enough to pay a one-time loan plus the periodic repayments each month or to the
period of salary is more advantageous. This loan is broken down into: lenders pay
principal and interest every month equally (fixed annuities), the original equal
monthly pay, the interest rate charged by the original balance (annuities are not
fixed), or pay interest period the original last pay period left.
-

Lending card loan

Bank lending cards as well as other payment cards has quickly been accepted
using lending cards, offer a regular line of lending and revolving which customers
can use whenever they are in need. People who use lending cards can pay loans

gradually or pay once because they can charge purchases on his lending card
account. Lending card in the future will be developed by advanced technologies,
which helps to make the lending card holders have access to many financial
services, including savings accounts and payment account and the limits lending.
•
-

Based on the loan form:
Indirect lending:

Form of loans in which the Bank bought the debts incurred by the business,
has sold the goods or services for private customers in the form of Bank lending
through sales or business services that is not directly exposed to customers.
This loan has the following advantages:
+ The commercial banks are easy to extend and increase lending.
+ The commercial banks will save and reduce the cost of loans.
+ This loan is the basis for expanded relations with customers and make
favorable conditions for other activities of the Bank.
+ If the commercial banks have relations with the retail business, the lending
to individuals of indirect lending form has a lower level of risk in lending to
individuals directly.
However, this loan also has these limitations:
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+ The commercial bank when the loan is not in direct contact with clients
through the business has sold the subject goods, the service, the customer selection,
selection criteria of enterprises and banks are not the same.
+ Lack of control of the Bank both before, during and after the loans, when
businesses make retail goods and services.

-

Direct lending:

It is a form of lending where the bank and its customers directly meet for
lending or debt collection.
This has three advantages:
+ Loans are made between bank and customers directly so that the bank can
use the qualifications, knowledge, experience and skills of credit officers
thoroughly, so these loans have the amount is higher than indirect lending through
retail businesses.
+ Lending officer when the loan pays special attention to the quality of loans,
but the retail business of goods and services often matter more to the increase in
sales over the quality of loans, furthermore businesses often make lending decision
quickly, it leads to a situation with non-legitimate lending, otherwise may deny
good customers. So this kind of loan already solve the indirect loans' problems.
+ Direct loan forms are more flexible forms of indirect lending, because
when the direct relationship of Bank and the client handle better, there is more
likely to satisfy the interests of both the Bank and the customer
+ Direct lenders with customers are very wide so the introduction of the new
utility, service is very convenient, which is the way to promote and enhance the
image of the Bank to the customer.
This loan has drawbacks:
+ The expansion and increase adverse loan in the form of private loans
indirectly
+ By the bank officers work directly with the client the Bank should spend
lots of time and costs compared to the indirect lending form, especially when the
amount of customers at the same time will make it difficult for the Bank.
•
-

Based on the measures to secure loans:
Loans with security assets
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It is loans with secured property which is real estate, estate… formed from
loans or assets owned by customers before the Bank loans. Security assets to
increase the safety of loans by the Bank may create pressure to force the customer
to pay the debt or in the worst case the customer does not pay the debt, the sale of
the security property also reduce losses to the Bank. Loan with security assets is
divided into two types:
+ Type 1 includes assets owned or long-term use of the customer. We can
divide the form of guarantee of this type into two main areas:
Lenders pledge form for bank customers to borrow money on the condition
that the customer must transfer control of the collateral to the Bank in time have
committed. Category and condition of the property pledge are Bank specific rules
based on rule of law and the lending policy of each bank. The property often pledge
the assets that banks can control and preserve relative certainty, at the same time the
Bank hold, which does not affect the operation of customers such as: the valuable
papers currency, precious metals,...
Mortgage lending is the form that the borrower must transfer the entire
certification papers owned or used the collateral to the Bank holds in time
commitment. For the mortgage by the property then the property carrying a
mortgage often is the property such as buildings, land use rights, or is the property
that the borrower still needs to use as automotive, motorcycles,... The mortgage by
property allows the recipient to continue financing the assets used during the loan.
However, the process used may deform the assets, more likely to take control of the
assets of the bank guarantee is limited. The valuation of collateral is also a major
difficulty requires the thorough due diligence to avoid pricing too high causing

damage to the Bank or the price is too low to influence the ability of customer
loans.
+ Type 2 loans secured by assets formed from the loan. When customers
need a loan but no collateral or assets that do not meet conditions of the Bank, it
may require customers to use the assets are formed from funding bank as security. If
customers cannot afford to pay the debt, it will sell the assets to recover debts. To
ensure that customers do not sell assets or use to reduce the value of assets, banks
usually require customers to commit to preserve assets, insure beneficiary of the
banks, and time transfer all ownership documents to the bank.
-

Loans without security assets
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Lending is based on credibility (trust) or a third-party guarantee, no security
assets. Bank customers have the choice of prestige and good repayment ability to
lend. Bank customers borrow money to meet the demands of customers based on
unsecured wages, especially customers having a stable income to cover, recurrent
expenditures is also a part of accruing to repay loans (public servants and
employees in state payroll, employee labor contracts, long-term), in addition to
income created from the production business could also be considered to use as a
source of repayment. This form is suitable for large value loans, short loan term.
1.2

Lending quality to individuals at commercial banks

1.2.1 Definition of lending quality to individuals at commercial banks
According to ISO 9000, the quality of products and services is understood to
be all features of services and products in accordance with the best conditions to

meet the social demands. Improving the quality of services and products is one of
the most essential tasks of businesses, especially in an competitive economy.
Lending quality is understood to meet the demands of parties (borrowers and
lenders) which is suitable for development of social-economic and make sure the
survival and development of enterprises that provide credit products.
•

First of all, from a social point of view:

Lending quality must be judged from socioeconomic status efficiency, which
means that it must be considered to serve the economic development policy of the
government and the loyalty. It should consider the impact of credit policy on the
growth and development of economy, and strength of facilities and techniques.
•

One of the most important aspect worth mentioned is from a bank
perspective:

Commercial banks are a profit-driven business organization, thus all banking
activities are geared towards profitability. In particular, lending activities are mainly
concerned with the level of lending safety and profitability of the bank.
Level of lending safety:
Before making any loan decision, the bank must consider carefully whether
the loan is repayable in full and on time or not, and the most importance is the level
of lending risk. When a loan is made to be risky or high risk, it is said that the loan
is of poor quality. Lending risk includes unsecured loans are unable to repay on time
because borrowers are experiencing temporary difficulties.
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Lending based on trust in future repayment at a specific time. This belief
comes form the two entities of the lending relationship that are the borrower and the
lender. The financial ability and credibility of each subject is the foundation of their
trust.
Lending to individuals is lending granting to individuals who need to borrow
money. They usually use loans for consumption activities to meet the demand for
daily life, business households, producing and manufactoring.
1.2.2 Criteria of lending quality to individuals at commercial banks
Estimating correctly lending quality to individuals at commercial banks
needs criteria based on the principle. Here are some criteria:
•
-

Criteria representing safety
Bad debts ratio to individuals:

Bad debts are essentially concepts used to refer to loans facing risks in the
recovery of principal and interest. This is the most important indicators in
estimating lending quality at commercial banks. In order to accurately assess this
criterion, the first thing is to classify loans.
According to the 03 Circular of National Bank dated February, 2013
"Regulations on debt classification, appropriation and use of provisions to handle
loan risks in the operation of small-sized financial institutions”
+ Group 1: Standard or normal debt is the term debt which is assessed as
being able to recover principal and interest on time, debts overdue for less than 10
days.
+ Group 2: Special mentioned debts, including: Debts which are overdue
from 10 days to less than 30 days and rescheduled debts for the first time.
+ Group 3: Sub-standard debts, including: Debts which are overdue from 30
days to less than 90 days; first-time rescheduled debts which are overdue for less

than 30 days within the rescheduled payment term; Debts of which interest is
waived or reduced because customers are unable to pay the interest in full according
to the lending contract.
+ Group 4: Doubtful debts, including: Debts which are overdue from 90 days
to less than 180 days; first-time rescheduled debts which are overdue from 30 days
to less than 90 days within the rescheduled payment term; Second-time rescheduled
debts.
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+ Group 5: Liabilities with loss of capital, including: Debts which are
overdue from 180 days or more; First-time rescheduled debts which are overdue for
more than 90 days within the rescheduled payment term; Second-time rescheduled
debts which are overdue under the second restructured repayment term; Debts with
rescheduled terms of repayments for the third time or more, including those that
have not been overdue or overdue.
The 03 Circular of National Bank dated February, 2013 of the State Bank of
Vietnam also stipulates that debts from Group 3 to Group 5 are bad debts and the
ratio of bad debts in total outstanding loans is about 2% to 5% is an acceptable rate.
Overdue debts from 6 to 12 months are problematic debts. Debts which are overdue
for more than 12 months are called bad debts.
Bad debt ratio of individuals (%) = Bad debts of individuals / Total
outstanding loans of individuals * 100%
This indicator clearly assesses the quality of loans for individuals. The low
ratio means that lending quality is good for individuals. On the contrary, high ratio
indicates that the quality of lending of producing individuals of the bank decreases.
-

Provisions for credit losses ratio:

According to the the Circular of National Bank dated February, 2013 of the
State Bank of Vietnam, "Provisions for credit loseses is an amount of money to be
set aside for possible losses caused by customers of credit institutions failing to
fulfill their committed obligations. Provisions for credit loseses is calculated based
on the outstanding principal and accounted for operating expenses of the credit
institution. Risk provisions include: Specific provisions and general provisions ".
Specifically:
+ "Specific provisions" are amounts set up based on specific classification of
debts prescribed Circular dated February, 2013 to prevent possible losses.
+ "General provision" is the amount set up for the loss of unspecified losses
in the process of debt classification and specific provisioning and in the financially
difficult cases of organizations credit when the quality of debts deteriorates.
Debts are classified from Group 1 to 5 with specific provisions from 0% to
100% of deductible debts (-) deductible value of collateral.
General provisions is the amount set aside for the loss of unspecfied losses in
the process of debt classification and specific provisioning and in the case of
18


financial difficulties when the quality of debts is reduced, is calculated at 0.75% of
the total value of debts from Group 1 to 4.
+ Group 2 (Special mention): 5%.
+ Group 3 (Sub-standard debt): 20%.
+ Group 4 (Doubtful debt): 50%.
+ Group 5 (Debts that cannot afford to lose capital): 100%
Since 2010, banks have to extract all of these general provisions.
Provisions for lending risk ratio to individuals = Provision for lending losses
to individuals / Total outstanding loans to individuals
This index indicates how much of the outstanding balance is set aside. The
higher index shows that the quality of bank lending is negative and debt recovery

capacity is low. If this index is low, it may indicates improved quality of debts, or it
may be due to provisions that have not been appropriately set up.
Outstanding loans for production individuals: Outstanding debts in general,
outstanding loans for production individuals in particular are the balances on
customers' loan accounts. This target is calculated by banks at a certain time usually
at the end of the month, the end of the quarter and the end of the year with the
formula:
Outstanding loans of production individuals at the end of the period =
Outstanding loans of individuals at the beginning of the year + Sales of individuals
in the period - Debt collection revenue of individuals in the period
•
-

Criteria representing profit
Rate of interest revenue for individuals

Rate of return from lending activities to individuals = Interest revenue for
individuals/ Outstanding loans of individuals
This indicator evaluates the effectiveness of bank lending. The high rate of
return from lending activities to individuals proves that the loan is effective, high
quality, which demonstrates debt collection and settlement of overdue debts are
well. The high rate partly reflects the bank’s good business results, which is very
important because the revenue from lending activities is the main sources of
imcome of the bank. The low rate will prove that the bank is not performing well
and is not effective. It requires the bank take measures to improve situation in the
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future.
Profit before tax from lending to individuals

This indicator reflects the profit before tax from lending that individuals
bring to the bank compared to other loans. This also assesses the attractiveness of
lending to customers being individuals compared to other customers.
-

1.3. Factors affecting lending quality to individuals
1.3.1. Macro factor
- Macroeconomic status: Macroeconomic stability will create opportunities
to expand effectively lending to the economy in general and individuals in
particular. Macroeconomic stability, especially monetary stability with price,
interest rate, exchange rate and inflation indicators will reassure the financial
institutions lending capital, borrowers have more jobs, increase income, help them
feel secure about the stability in income as well as the stability in borrowing costs,
the cost of purchasing and repairing houses, and other goods and services, thereby
increasing their loans and at the same time facilitate the sustainable development
and development of bilateral relations of borrowing and repayment.
- The policy of developing the private economy of the Party and the
Government: In the past years, the Party and the Government have had many
specific guidelines and policies to eliminate discrimination and ensure equal
competition between economic components; Complete the land law to ensure equal
access to private economic resources for land and natural resources; There are many
incentives to create a favorable business and investment environment for private
economic development and support private economic innovation, modernization of
technology and human resource development, improving labor productivity
capacity ... All of which has created favorable conditions for the private economy in
general and individuals in particular to develop and stand firm in competition,
improve capital efficiency and increase productivity.
- Political - legal environment: Stable political environment, no conflict,
main island or civil war will create a healthy, safe business environment, create trust
for the people, thereby creating things favorable conditions for banks to expand

business operations, including investment in lending capital for production
individuals.
A complete and comprehensive legal system is the basis to protect the
development of a safe, stable financial market, and promote financial institutions to
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improve the capacity of providing high quality of financial services, protect the
sustainable development of cooperative relations between banks and customers,
including customers who are individuals, for the benefit of both sides.
- Socio-cultural environment: The elements of culture, society, customs,
practices or behavior also affect the quality of lending to individuals.
1.3.2. Micro factors
Includes objective factors from customers and subjective factors from the
bank, specifically:
The objective factors:
- Regarding legal capacity: The prestige of customers plays an important
role, because it can determine the willingness of customers to pay debts, which is
the basis to create trust for banks. For customers who are individuals, prestige is
expressed in honesty, trust and especially the responsibility to repay the bank.
Although this is an impressive element, it is always concerned by banks and
thoroughly studied.
- Financial ability: important influence on bank lending decision. A customer
with healthy financial ability will ensure an effective loan, good debt recovery
ability.
- Regarding lending guarantee: It is considered as the second source of debt
repayment when the first source (from business results) cannot be recovered.
Lending guarantee is effective: on the one hand, reducing the loss to the bank when
the customer for some reason fails to repay the debt, on the other hand is the driving
force for the customer to fulfill the debt repayment obligation. Thus, the purpose of

lending guarantee is to limit the risks in the business operations of the bank rather
than the basis for deciding to grant lending. However, for customers who are
individuals, the lending guarantee is only applied to large loans, mainly applied for
loans without collateral or in other words, lending do guarantee mortgage loans.
The subjective factor:
- Bank's development orientation: This is a prerequisite for developing
individual lending. Agribank always persevere with customer strategy, especially
individuals; to attach importance to expand the operation network to districts and
communes in order to create conditions for customers in all regions of the country
to easily and safely access bank capital sources.
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- Financial capacity of the bank: The bank's financial capacity depends very
much on the credibility of the depositors because it will stabilize and grow the
bank's capital.
- Developing appropriate lending policies: Lending policies, reasonable
lending procedures, appropriate and consistent, smooth coordination in the
implementation process are factors that determine the success or failure of Bank.
A suitable lending policy means that the lending policy must be consistent
with the bank's goals and capabilities. Determining lending Individuals' production
is a potential land, so for many years and in the coming years, expanding individual
loans is the business strategy of BOM.
- Regarding professional skills and ethics of lending officers: In all areas,
especially in monetary activities, people are very important factors.
A suitable lending policy is not enough, but the bank itself needs to
implement regulations in the system such as implementing measures to limit risks,
implementing lending guarantee and regulating lending extension and information
collection. In addition, the bank should pay attention to minimize cumbersome
procedures, technical complexity and appraisal procedures, in order to create

conditions to improve the efficiency and quality of the lending process in the bank.
The organization, training and education of staff must be respected in order
to improve morality, professional qualifications and skills in order to understand
and implement the lending process as well as handle other relationships, at the same
time limit to the lowest level of abuse, corruption which may occur.
- Information: Lending information plays an important role in lending quality
management. Thanks to lending information, managers can make appropriate
decisions related to lending activities.
For lending, especially lending to individuals, trust is considered to establish
lending relationships. Therefore, it is necessary to find out information related to
customers. The management of tracking and capturing information is gathered from
many sources: information available in the bank (loan documents, information from
CIC of the state bank, between commercial banks, groups lending institutions),
from customers, from domestic and foreign information agencies .... The more
complete, timely, accurate and comprehensive information, the greater the risk
prevention capacity in lending activities, lending quality is enhanced. Internal audit
inspection is a source of information on the use of bank loans very effectively.
22


Timely detection of errors, violations in the process of implementing lending and
proposing remedial measures will help banks limit risks and improve lending
quality in lending.
For customers, providing information to customers also contributes to
expand and enhance lending quality. Information on banking activities, markets,
prices, weather, science and technology ... will help customers access bank capital
in a timely manner and use capital more effectively, avoiding unreasonable risks.

CONCLUSION OF CHAPTER 1
The content of chapter 1 is the basic arguments about lending activities and

lending quality in general, individuals in particular. From generalized issues to
specific issues such as concepts, objects, characteristics and roles of lending to
individuals, especially the need to improve lending to individuals are also
mentioned in a specific, practical way.
Chapter 1 also outlines the factors affecting lending quality to individuals as
well as the important role of individual lending, and also analyzes and assesses the
ability to expand lending markets in the future.
The above problems are analyzed on dialectical relationships between banks
and customers and economy.
From the arguments, situation and issues mentioned in Chapter 1, it is the
basis for evaluating and analyzing lending and lending quality to individuals in
Agribank Dong Da branch in the next chapter.

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CHAPTER 2: CURRENT SITUATION OF
LENDING QUALITY TO INDIVIDUAL CUSTOMERS
AT AGRIBANK DONG DA BRANCH
2.1 Overview of Agribank Dong Da branch
2.1.1 History and key milestones
Vietnam Bank for Agriculture and Rural Development ( abbreviated as
Agribank) is the largest commercial bank in Vietnam by total assets. It is a stateowned corporation under a special status. According to a report by UNDP in 2008,
Agribank is also the largest corporation in Vietnam.
In 1988, the banking system transformed from one level to two. Since then,
together with the new management mechanism of the banking system and new
demands on the market mechanism such as increased savings and investment, the
banking system has been increasingly expanded and developed. Agribank in Dong
Da district is the second level branch of Agribank Hanoi branch. It was established
in 2000 in order to meet the needs of economic development in Dong Da district

and contribute to expand the scope of operations of Agribank Hanoi branch. Its
head office is located at 154 Ton Duc Thang - Dong Da District - Hanoi.
In 2007, Agribank in Dong Da district branch transferred its office from 154
Ton Duc Thang, Dong Da District, Hanoi to 37 De La Thanh, Dong Da District,
Hanoi, contributing to improving position of Agribank in Dong Da district to
customers. At the same time, the branch maintains the operation of the transaction
office at 154 Ton Duc Thang, Dong Da District, Hanoi to facilitate depositors who
have previously traded in order to maintain and develop the capital source.
From April 1, 2008, Agribank in Dong Da district has been upgraded to a
level 1 bank branch under the Vietnam Bank for Agriculture and Rural
Development and renamed to Agribank Dong Da branch. The bank has expanded its
network of transaction offices in urban districts. By 12/2017, the operation network
of Agribank Dong Da branch has one main office at 211 Xa Dan, Dong Da District,
Hanoi and 5 subordinate transaction offices.
In recent years, Agribank Dong Da branch has constantly adjusted its
technical facilities, as well as strengthened and promoted the expansion of its
24


network, expanded its market share, which make the branch initially affirmed its
position in the area. Many new mechanisms, processes and business operations of a
modern commercial bank branch have been applied and operated with good results
to the needs of business operations and the integration trend of the banking in new
stage.

2.1.2 Organizational Structures
Agribank Dong Da branch has a specific organizational model; the
organizational structure is relatively reasonable with departments assigning tasks
clearly, under the management of 3 Deputy Directors under Director of the branch
to created conditions for bank officials to maximize their professional capacity,

authority as well as responsibility and ability to reach customers. In 31/12/2017,
Agribank Dong Da branch had 82 officials, 100% of the staff had university degrees
or higher, of which 18.3% of staff had PhD degrees and 81.7% of officials had
Master degree.
The organizational model of Agribank Dong Da branch:

Transaction offices

Figure 2.1: Organization chart of Agribank Dong Da branch
The 6 professional divisions is in charge of 6 separate areas to help staff
better serve customers more professionally. However, for lending operations, there
is currently no document reception department, appraisal department, separate

25 and Human Resource Department
ervice
International
Financial
and Marketing
Accounting
Payment
Department
Department
Internal
Department
Control Department
Administration

Orga
Plannin