Thesis - Improving the performance of capital mobilization at vietnam bank for agriculture and rural development - hoan kiem branch

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Thesis - Improving the performance of capital mobilization at vietnam bank for agriculture and rural development - hoan kiem branch

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This research discusses the details of mobilizing capital Vietnam Bank for Agriculture and rural development in. The purpose of this was identify the “best” way, accessing the issues in the theory and practice, this subject uses the concepts of mobilizing capital, and then combines with statistics, analysis, synthesis, and comparison method in Vietnam Bank for Agriculture and Rural Development in order to clarify the matters. It is hoped that these findings will illustrate the strengths, weaknesses, and current issues of each situation which in-turn will leads to improvements in future mobilizing capital in Hoan Kiem branch.

1 ACKNOWLEDGEMENT I would like to express my profound gratefulness to my supervisor Prof Ta Loi, who has dedicatedly guide, help and encourage me during the time of making this thesis I also would like to give my thanks to the lecturers and tutors in National Economics University generally and Advanced Program particularly who have conveyed valuable knowledge to me during the last school years I sincerely thank all of the staffs in Vietnam Bank for Agriculture and Rural development (VBARD) - Hoan Kiem Branch who gave me favorable conditions, helps and guidance in the days of internship at the bank Student Tran Thi Nhung Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance TABLE OF CONTENTS ACKNOWLEDGEMENT TABLE OF CONTENTS ABBREVIATION LIST OF TABLES LIST OF DIAGRAMS EXECUTIVE SUMMARY INTRODUCTION APPENDIX ABBREVIATION HO Head Office SBV State Bank of Vietnam Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance VBARD Vietnam Bank for Agriculture and Rural development NHNN Ngân hàng nhà nước Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance LIST OF TABLES Table 1.1 - simplified balance sheet Table 2.1 - Source of capital mobilizing 28 Unit: million VND 28 Table 2.2 – Structure of capital Mobilizing .31 Table 2.3 - Deposits from Business organizations 32 Table 2.4 – Structure deposit of credit organizations .33 Unit: million VND .34 Table 2.5 - Structure source of deposit from Credit Institutions 35 Unit: million VND .35 Table 2.6 – Structure of bill of exchange 37 Unit: million VND .37 Table 2.7 – the cost of mobilizing capital 39 Table 2.9 – Balance of mobilizing capital for medium and long term loan 40 Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance LIST OF DIAGRAMS Diagram 2.1 - Organizational structure .39 Diagram 2.2 - Organizational structure of the branch 42 Diagram 2.3 - Structure of Capital mobilizing 49 Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance EXECUTIVE SUMMARY This research discusses the details of mobilizing capital Vietnam Bank for Agriculture and rural development in The purpose of this was identify the “best” way, accessing the issues in the theory and practice, this subject uses the concepts of mobilizing capital, and then combines with statistics, analysis, synthesis, and comparison method in Vietnam Bank for Agriculture and Rural Development in order to clarify the matters It is hoped that these findings will illustrate the strengths, weaknesses, and current issues of each situation which in-turn will leads to improvements in future mobilizing capital in Hoan Kiem branch The methods utilized in this research include The time period for this research is from 2007 to 2010 ( expected 2010) Preliminary results of this research indicate that a good method to mobilizing capital depending on the method of analysis demand of customers, the experience of deposits officers, the regulations of the commercial banks and SBV, the availability of public information, and the strength of information system Finally, it is recommended that content of mobilizing capital should be updated and adjusted to bring the most effective and efficient It is also recommended that focused human resources be highly concerned; training and recruitment are necessary to improve Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance INTRODUCTION 1.Rationale Banks play an important role in the international economic integration, especially in the period of business Industrialization - Modernization of the country and the transformation of the economy from a backward agricultural economy to a modern intensive Through the banking system, promoting the mobilization of capital is an essential requirement to meet the needs of capital for the economy to ensure the effectiveness and safety in business and contributing to Vietnam stability monetary Most of the banks own capital resources can not meet the needs of banking activities Because of this, banks must seek to expand their capital To be able to raise capital and provide a more effective way, the bank's capital raising should be considered in terms of quality Through the process of internship at the Vietnam Bank for Agriculture and Rural development (VBARD) - Hoan Kiem Branch, through practical activities raise capital, I realize that this is an important issue that Vietnam's banking system in general, VBARD - Hoan Kiem Branch in particular are very interested Besides these successes have been achieved, there are other limitations exist in this Hoan Kiem branches need to overcome to achieve better results So I bravely selected the thesis topic: " Improving the performance of capital mobilization at Vietnam Bank for Agriculture and Rural Development - Hoan Kiem Branch" to contribute a small part in improving efficiency in the work of raising capital in the branch My research is a broad complex so errors are inevitable I look forward all the comments from teachers, people who are interested in my report Research questions:  How the work mobilizing capital in Vietnam Bank of Agriculture and Rural Development Hoan Kiem branch is going on? Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance  What are the problem exist on the mobilizing capital ?  How can we solve that problems? Research objectives - To further clarify the basic theories of economic effciency of mobilizing capital field, especially during the period of globalization and international integration - To assess the reality of mobilizing capital in the changing of economic during the international and economic development of Vietnam - Suggest solutions to improve solutions and recommendations to promote mobilizing capital activities in Agriculture and Rural Development Hoan Kiem branch Research methodology Accessing the issues in the theory and practice, this subject uses the concepts of mobilizing capital, and then combines with statistics, analysis, synthesis, and comparison method in Vietnam Bank for Agriculture and Rural Development in order to clarify the matters Research scope Scope of research: the real situation and performance improvements of mobilizing capital in VBARD Hoan Kiem branch from 2007 to 2010 (expected) Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 10 Research structure The thesis is constituted by three parts: Introduction, Body, and Conclusion In which the body include three chapters: Chapter 1: The basics definition of commercial banks and mobilizing capital in the banks Chapter 2: Status of the work of raising capital in the VBARD - Hoan Kiem Branch Chapter 3: Solutions to motivate capital mobilization at the VBARD - Hoan Kiem Branch Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance CHAPTER 1: OVERVIEW OF COMMERCIAL BANKS AND MOBILIZING CAPITAL IN THE BANKS Commercial banks - the role and functions in the economy 1.1 Over view of Commercial History and development of commercial banks 1.1.1 1.1.1.1 History to form banks The first bank is bank of gold craftsmen, of usury, the lending to individuals are mainly rich people as officials, landowners to serve consumers Form of loans mostly for customers spending more than the amount deposited in the bank, this is a form of loans carry more risk Due to profit from lending is very high, many banks had abused the dominance of deposit certificates (instead of gold or silver circulation) certificates of deposit issued to control lending This situation has caused many banks to take place solvency and bankruptcy This collapse makes it difficult for the payment activities, adversely affect trading activity Moreover, high interest rates, so the merchants can not use these loans Under these circumstances, many merchant banks have established themselves as commercial banks 1.1.1.2 History of development CBs are formed from the movement of commercial capitalism Its conducted the business of traditional banks such as mobilizing capital, taking deposits, payments, household storage, household lending Major activities of commercial banks serve the merchants loans as commercial paper discount form This is a short-term loans based on the movement of goods with a lower interest rate profits generated by the use of loans To ensure safety, the Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 39 - Make profits for the bank and benefits to customers - To strictly observe the regulations of State Bank of Vietnam on the interest rate that the - Interest expense for the VBARD - Hoan Kiem branch is shown in the following table: Table 2.7 – the cost of mobilizing capital Unit: million VND Time Item Total cost 2007 78,364.00 2008 2009 expected 2010 85,921.00 91684.96 100421 Cost of interest 73,129.00 77,413.00 Ration of cost of interest on total 93.32 90.10 cost (source: statement of financial and accounting department) 79446.53 85351.72 86.65 84.99 Interest costs are high proportion of total costs, but this percentage increased through 2006 to 2008 to reflect the actual reduction in interest rates and banks tend to expand service business activities out of lenders in Traditional mobilization Through the year 2009 to 2010 the rational of cost of interest rate is decrease reflex that this branch have other cost for operation Revenues raised from residents and businesses in the form of deposits with lowest interest rates Because it have the lowest risk Although for loans from other credit institutions have higher interest rates Besides interest costs, the bank also must calculate that the reasonable costs of capital raising activities, such as salary, cost of printing the issuance of debentures, other papers; costs facilities, facilities for the department in charge of raising capital from banks and so on These costs are less likely to change because norms were available, potentially saving is mainly based on the maximum exploitation of available human resources Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 40 So decrease the extra costs not affect the total cost as the cost of bank interest rates These costs significantly more important if banks expand their operations to a new branches, new subsidiaries Table 2.9 – Balance of mobilizing capital for medium and long term loan Unit: million VND Time 2007 2008 2009 190,137 18,630 162,080 285,916 570,411 167,670 9.80 176.40 29.39 92.95 171,507.00 (123,836) 402,741.00 52,879.00 Item 1.Mobilizing Making loans Utilization coefficient (%) The different 1- ex2010 750226 697347 (source: Agribank Hoan Kiem) In the first two years of operation, capital and long-term mobilization of the branch always meet the demand for loans Coefficient of utilization remains low is shown: in 2006, accounting for use of coefficient of 44.84% However, by 2007, the coefficient of utilization has been dramatically reduced (up 9.80%) 29.39% in 2009 and about 92.95% for 2010 In 2008, the situation appears imbalance mobilizing and working capital for medium - long term Outstanding ability to far exceed supply from secondary sources mobilized - the bank's long-term The reason is that the total amount of household bills raising the central bank has been transferred to decrease this source of medium and long term In general, medium - long term Loans from short-term funds have been created for the branch are entitled to profit from interest rate differences, besides the branch also allows more active in reducing the output rate is basis for competition and in particular branch of the VBARD in general Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 41 2.2.3 Assessing the work of raising capital in the Vietnam BARD - Hoan Kiem Branch 2.2.3.1 The achievements - Implement marketing clients effectively develop and maintain good relationships with other agencies, prestigious institutions - The work of raising capital is increasingly concerned, especially in more developed capital from the population and economic organization - Apply good customer policies and measures to raise capital in line with the requirements of the economy - Increasing service quality improved, officials and employees to deal directly with customers is good service attitude, enthusiastic, warm Although Hoan Kiem Branch in the new operation, has a certain prestige for its customers with the advances in recent times Total resources as well as total outstanding debt of the branch through the years continued to increase This is an encouraging good sign for the economy in our country today Branch has been continuously expanding and developing relationships with clients with traditional as well as new customers in order to mobilize idle funds from the customer organization Besides, the branch has regularly capture the changes of the market (interest rate or application of new types of services) to be able to just meet the competition requirements for capital mobilization, ensuring requirements business accounting needs of the branch 2.2.3.2 The limitations and shortcomings Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 42 As a branch in the new operation so It has limited customers Therefore, the branch should take specific plans to attract customers Besides, the professional qualifications of staff, the development of customer service is still limited, facilities, though the bank has improved but has yet time to meet development demand of this bank Planning between the capital and the capital is used to authenticate or waste which falls into the passive in the business On the other hand the branch lacks of information on policies, markets, risks As result this bank be limited in the expansion and avoid risks in the banking business In addition to subjective reasons just mentioned above, there are objective reasons such as: the policy of the law has not been fully completed, due to the current economy, due to market conditions and competition, by characteristics of customers In summary, the impact of these factors on the quality of banks raising capital are carrying two aspects: positive and negative aspects To survive and thrive in the market economy with stiff competition today, Hoan Kiem Branch should clarify the advantages and thread to have appropriate measures in order to maximize the advantages and overcome the limitations to the work of raising capital to achieve strategic success in raising capital from banks CHAPTER 3: SOLLUTION TO IMPROVE MOBILIZING CAPITAL IN VBARD – HOAN KIEM BRANCH 3.1 Activities Orientation in the future of Agribank - Hoan Kiem Branch 3.1.1Orientation in the work of raising capital Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 43 - Expand the form of raising capital and expanding sources of resident deposits, other economic organizations, credit organizations, maintain and extended relationships of banks in and overseas - Increase the quality of the funds mobilized by increasing the attraction and longterm capital, especially residents’ idle capital, the investments of the economic organizations 3.1.2 Orientation in the use of capital - Promote international payments, strengthen credibility and encourage clients to invest to enhance the export potential of foreign currency in the foreign activities of the branch - Promote work experience in the years 2007, 2008,2009 to market and expand the borrowers are large corporations, business efficiency, corporations located in Hanoi - Conducted to expand investment in economic sectors with non-state business conditions which have enough legal documents Business-oriented bank must always following to the goals that Vietnam BARD were assigned to Hoan Kiem branch In which direction is increasingly mobilizing capital renewal towards improving the quality and efficiency, restructuring the development of reasonable size to better serve the capital needs of the economy 3.1.3 Some targets expected to be achieved in the coming years Branch has been striving to complete the implementation-oriented indicators in the coming years, period 2015, 2020 as follows: - Total capital mobilized from 20 - 25% over the previous year - Ensure the safety of business assets Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 44 - Make sure the business to comply with the law and comply with the direction of the superior bank 3.2 Solutions to enhance capital mobilization of the VBARD - Hoan Kiem Branch 3.2.1 Solution to the bank 3.2.1.1 Diversifying the form of raising capital Bank deposits to comment on aspects of capital to revenue on capital income Each kind of mobilizing capital is a opportunity to invest of the customers The benefits that the diversification of forms of capital mobilization provides are:  Bank can attract maximum funding from all subjects without increasing costs Furthermore, each account submitted under every form capable of conversion into the different money, serve the needs of different currencies in the future of the sender  Banks can reduce the difficulty and pressure to issue payment of money which amount of money was drawn In the payment operations, the sender can draw a large amount of money, so will cause pressure on payment to the bank Instead, if the bank has many different forms, reducing the proportion of deposits alone, the amount of capital banks will be able to adjust the stability and flexibility with a new structure more diversified reduce settlement risk The measures to diversify * Develop the tools of mobilize capital - The number of these tools at Kiem Branch and other commercial banks in Vietnam is still low, the common types are deposits, promissory notes and bonds Meanwhile our economy on a growth and lead to more demand for new services So Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 45 the next time, banks should actively use the research and development and ways to mobilize additional capital more efficiently * Diversifying ways of raising capital - The diversification can start improving, combining a flexible tool available to raise capital more efficiently by: offering incentives to customers even more confidence and more trust in banks or expand relations with other banks, etc - As a new branch in operation but Hoan Kiem branch has gained encouraging achievements, has created the trust from customers at a certain level Therefore, in the work of raising capital, banks can develop research projects to expand capacity to mobilize capital Tools and methods of raising capital which need to be more diversified to meet the diverse needs of different customers * Develop a reasonable interest rate policy - The setting of interest rates the bank and credit institutions must first comply fully with the provisions on the interest rate was offer by the State Bank of Vietnam In addition interest rates must follow the law of supply and demand in capital markets In this law interest rate input must be followed by interest rate output - On the basis of the VBARD interest rates, branch must come up with a competitive interest rate, attracting customers, creating a comparative advantage that compared to other banks as well as with other branches * Strengthening and management the use of capital - Funds mobilized only really be effective when it is used at the right time, right place, so improving the management efficiency of capital use is significant in improving the quality of the work in raising capital Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 46 - Is a branch of VBARD, Hoan Kiem branch operation based on the implementation of resolutions and orientation of the superior bank capital and capital use, so when the branch was mobilized mass larger plan, that excess capital will be transferred to VBARD to reconcile the different branches in the system and vice versa Thus, the branch must determine strategies to mobilize capital to match the needs and uses of funds in particular branch and VBARD in general • Take care about marketing in the bank To ensure improve fund the ability mobilization to best meet the needs of capital for lending, investment, banks also need to more actively in market research Understanding the needs of their customers is an important element to help the bank make the reasonable policy of raising capital products and interest rates respectively, as well as put into practice the types of services to suit the developmental needs of society Furthermore, early detection of new needs in society also help banks get a potential competitive advantage in attracting customers Besides the above measures, the bank should also improve the operation of services such as: - Simple, clear, fast and efficient procedures, but still ensuring safety for customers - The attitude of bank staff: should have enthusiasm, warm and courteous - The level of bank staff: must have a certain understanding, can ensure that guiding procedures and solve problems and create customer confidence 3.2.2 Solution from expect of government 3.2.2.1 - To improve the legal system and policies relating to banking activities Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 47 Currently we have the Law on Credit Institutions, with many new rules, many new properties to show progress in line with the new situation, creating a favorable legal framework for the activities of the organization credit in the economy market But the law still some unclear provisions as stipulated in the equity of bank regulations, as on the content of capital mobilization These factors are unclear of the Law on Credit Institutions as well as the particular text under Law and other relevant Act by Congress needs further study, modify and supplement accordingly, to ensure fairness in the operation of credit institutions State Bank should also promote the kind of common tools for the control of monetary policy is better than make directly impact on interest rates, causing the fluctuation of no benefit on the investment situation These documents should be issued a more systematic way to ensure that all financial operations, monetary and credit are the laws of creating a stable environment of legal and policy regime for bank 3.2.2.2 Stable macroeconomic environment The macro economy will be stability when commercial bank can enhance mobilizing medium and long term capital in the close relationship.The people also use a large amount of idle money to buy gold, foreign currencies, real estate is also a consequence of the lack of trust and the ability to stabilize the economy Just in terms of inflation was curbed, the exchange rate steady, secure new customers as well as borrowing money to invest in business Besides macro tools use efficiently, Government should has propaganda and education appropriate to change the negative mentality and habits stored above This not only benefits the banks but also contributes to increase the savings rate for the economy further development Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 48 The Government should also take measures to strictly handle cases of negative economic field, making the bank the bank's activities in the clean and strong, strengthen public confidence in the banking system 3.2.2.3 Promote the development of financial and monetary markets The development of the domestic financial market is a very important factor affecting the development of banking activities Domestic currency and foreign currency inter bank market have been operated for many years but still need some management and support from the central bank to boost the inter bank market, increased flexibility in raising capital from banks in order to better meet the demand for capital In market economies, the emergence and development of stock markets is also a tool in the mobilization of capital and circulating capital in the economy Through the stock market, raising capital instruments issued by banks like promissory notes, bonds can be exchanged widely, contributing to a stable volume and diversify the bank's capital structure, especially enhanced ability to mobilize medium and long term funds In Vietnam, the operation of the stock market has not been fully operate its inherent role Vietnam resident hasn’t fully understand about diversify financial instrument in securities market to invest In addition, the Government should continue help banks in expanding international cooperation facilitate the modernization of financial and monetary system of our country 3.2.3 Some proposals for BARD Vietnam - For long-term plan should have a strategy to accelerate BARD Vietnam into a modern bank In the immediate future should plan to expand the types of Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 49 businesses such as capital contribution, joint venture, join the stock market, foreign exchange trading, etc In particular focus on the benefits of banking services to increase the percentage of revenue from the services of bank - There are further plans to help the subsidiaries to train staff in professional computers, foreign languages, international payments, credit evaluation, foreign currency trading, etc to improve the quality their staffs - Adjust the foreign exchange management mechanism to suit the new situation Need more active in the foreign exchange reserves in each period to provide foreign currency for the branch to ensure payment requirements of customers - The guidelines documents must be given timely, specific and avoid overlap each other - Take care about renew ATM system not only in kind of technology ATM card, but also in keep ATM machine in safe with thefts, as well as safe for customer with electricity - There are appropriate mechanisms and policies on physical and spiritual encouragement for staff members to complete the job The things I mention above are my suggest solutions to improve the banks mobilizing capital The solution is effective only when used in combination with an appropriate investment in capital, the bank's human resources as well as the active support of the Government that first created a business environment stable business banking activities and especially the support of Vietnam BARD The solutions mentioned above can not fully and specifically because of the limited time as well as my understanding but I hope that this will contribute to the growth of banks in next time Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 50 CONCLUSION The content of my thesis is work refers to the mobilization and use of funds in commercial banks For every bank in general and VBARD - Hoan Kiem Branch in particular, mobilization of capital always is one of the traditional activities, important and crucial to all other activities bank Along with the volume, the quality of capital is an indispensable factor when analyzing capital raising activity of a bank Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 51 To achieve the desired results, the branch should combined effort between a branch of itself along with the support of the Government, State Bank, VBARD and other branches In order to implementing the strategies good economy and society in general strategy of raising capital a branch of as well as VBARD system Completion of this topic, I wished my research can contribute a small part to improve the quality of capital mobilization Kiem branch I believe that with the efforts of staff members and the leadership of the wise leadership branch to branch while Kiem will get much more successful in business general and in the work of raising capital in particular than before Once again I sincerely thank instructor Dr Ta Loi and Mr Nguyen Xuan Cuong in VBARD - Hoan Kiem Branch has dedicated help me finish this research REFERENCES Vietnamese: Phan Thị Thu Hà (2007) Ngân hàng thương mại Nhà xuất Đại học Kinh tế quốc dân Tô Ngọc Hưng (1993) Tiền tệ, Ngân hàng Thị trường Tài Nhà xuất Khoa học kỹ thuật Tổng cục thống kê (2010) Báo cáo tổng kết năm 2009 English: Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance 52 Peter S Rose (Fifth edition) Commercial bank Management McGraw-Hill Irwin Magazine Website: -http://www.sbv.gov.vn -http://en.wikipedia.org -http://www.vnbaorg.info/ -http://vneconomy.vn/ Income statement of VBARD Hoan Kiem Branch annually Supervisor: Prof Ta Loi Tran Thi Nhung – Advanced Finance ... including the division if the object has the following forms: - Mobilization of the population - Mobilization of the local economic organizations - Mobilizing from other banks - Mobilization of the. .. the bank and benefits to customers - To strictly observe the regulations of State Bank of Vietnam on the interest rate that the - Interest expense for the VBARD - Hoan Kiem branch is shown in the. .. system and the introduction of commercial banks in Vietnam The Agricultural Development Bank of Vietnam was created out of the State Bank of Vietnam (SBV): from all provincial branches of SBV, Agriculture

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