DUY TAN UNIVERSITY
INTERNATIONAL SCHOOL

PHAN NGOC TRUC QUYNH

RESEARCH TO EXPAND CONSUMER LOAN OPERATION AT
KIEN LONG BANK - DA NANG BRANCH 2017-2019

BACHELOR OF FINANCE AND BANKING THESIS

Da Nang, 2020


DUY TAN UNIVERSITY
INTERNATIONAL SCHOOL

UNDERGRADUATE THESIS

RESEARCH TO EXPAND CONSUMER LOAN OPERATION AT
KIEN LONG BANK - DA NANG BRANCH 2017-2019

MAJOR: FINANCE AND BANKING

MENTOR

: MBA. TRAN DINH UYEN

STUDENT

: PHAN NGOC TRUC QUYNH

CLASS

: K22 PSU QCD

ID NUMBER

: 2210719181

Da Nang , 2020


DISCLAIMER
Certify that the attached thesis is my original work. No other person’s work
has been used without due acknowledgement. Except where I have l clearly stated
that I have used some of the this material , it has not been presented by me for
examination in any other course or subject at this or any other institution. I
understand that the work submitted may be reproduced and/or communicated for
the purpose of detecting plagiarism. I understand that should this declaration be
false, I am libel to be penalized under the Duy Tan University regulations.


Signature: _____________________________ Date: ______________________

TABLE OF CONTENS
Y
DISCLAIMER.........................................................................................................3
TABLE OF CONTENS...........................................................................................4
LIST OF ABBREVIATIONS................................................................................54
PREAMBLE............................................................................................................1
CHAPTER 1. OVERVIEW OF CONSUMER LOANS'S THEORY BASIC

COMMERCIAL BANK..........................................................................................5
1.1. CONSUMER LOANS OVERVIEW...............................................................5
1.1.1. Concept of Consumer Loans............................................................................5
1.1.2. The basic feature of a consumer loan...............................................................6
1.1.3. Types of consumer loans..................................................................................7
1.1.4. Consumer loan process..................................................................................11
1.1.5. The benefits of consumer lending..................................................................14
1.2. CRITERIA TO EVALUATE CONSUMER LENDING ACTIVITIES......15
1.2.1 Loan sales:......................................................................................................15
1.2.2. Debt collection:.............................................................................................15
1.2.3. Odd debt:.......................................................................................................16
1.2.4. Bad debt.........................................................................................................16
1.3 FACTORS AFFECTING CONSUMER LENDING.....................................16
1.3.1 The objective factors.......................................................................................16
1.3.2 Subjective factors...........................................................................................19
1.4. EXPERIENCE OF CONSUMER LENDING OF COMMERCIAL BANKS
IN SOME COUNTRIES AROUND THE WORLD AND LESSONS FOR
COMMERCIAL BANKS IN VIETNAM............................................................20
1.4.1. Consumer lending experience in some countries A, Consumer loan activity in
................................................................................................................................. 20
1.4.2. Lessons learned from commercial banks in Vietnam.....................................21


CHAPTER 2. CURRENT SITUATION OF CONSUMER LOANS AT KIEN
LONG COMMERCIAL JOINT STOCK BANK - DA NANG BRANCH........23
2.1. OVERVIEW OF KIEN LONG COMMERCIAL JOINT STOCK BANK DA NANG BRANCH............................................................................................23
2.1.1. Introduction about Kien Long Commercial Joint Stock Bank - Da Nang
Branch..................................................................................................................... 23
2.1.2 Organizational Structure.................................................................................24
2.1.3. Functions and duties of departments..............................................................24

2.1.4. Consumer loan credit process at Kien Long Bank - Da Nang Branch...........25
2.1.5. Business performance of KienlongBank - Da Nang Branch in recent years. .27
2.2. CURRENT SITUATION OF CONSUMER LOANS AT KIEN LONG
BANK DA NANG BRANCH...............................................................................32
2.2.1. The situation of consumer loans at KienLongBank-Da Nang Branch in
the period of 2017-2019.........................................................................................32
2.3. EVALUATION OF CONSUMER LENDING ACTIVITIES AT KIEN
LONG BANK - DA NANG BRANCH.................................................................53
2.3.1. Achievements of NH Kien Long - Da Nang Branch......................................53
2.3.2. Shortcomings in consumer lending at NH Kien Long - Da Nang Branch......54
2.4.3. Competitiveness in consumer lending at Kien Long Bank - Da Nang Branch.
................................................................................................................................. 56
CHAPTER

3.

SOLUTIONS

AND

RECOMMENDATIONS

FOR

ENHANCING OPERATION FOR CONSUMER OPERATION AT KIEN
LONG COMMERCIAL BANK - DA NANG BRANCH....................................59
3.1.

ORIENTATION


OF

THE

BANK'S

CONSUMER

LENDING

ACTIVITIES.........................................................................................................59
3.2. SOLUTIONS TO EXPAND CONSUMER LENDING ACTIVITIES AT
BANKS................................................................................................................... 59
3.2.1. Capital source solutions.................................................................................59
3.2.2 Service solution..............................................................................................62
3.2.3 Solutions to conditions and process of credit credit........................................63


3.2.4 Marketing solutions........................................................................................65
3.2.5 Technology solutions......................................................................................68
3.2.6 Human solution..............................................................................................69
3.3. SOME RECOMMENDATIONS...................................................................71
CONCLUDE..........................................................................................................73
LIST OF REFERENCES......................................................................................74


LIST OF ABBREVIATIONS
Cl
Bank
Officer

Employees
SB
SC
WTO
ASEAN

Consumer loans
Bank
Officer
Employees
State bank
Stock Commercial
World Trade Organization.
Association of South East Asian

APEC

Nations
Asia-Pacific Economic

CL
Collateral
GM

Cooperation
Contact labor
Collateral
General manager



LIST OF TABLES
Table 2.1 Basic financial indicators.........................................................................29
Table 2.2 Capital mobilization situation..................................................................30
Table 2.3 Credit structure of KienlongBank - Da Nang Branch..............................33
Table 2.4 General Consumer Loans.........................................................................33
Table.2.5 Secured Loan...........................................................................................36
Table. 2.6 Category lending.....................................................................................41
Table. 2.7 Consumer lending by loan method..........................................................47
Table. 2.8 Consumer lending by loan method .........................................................49
Table 2.9 Lending by Purpose.................................................................................53

LIST OF FIGURES
Figure 2.1 General Consumer Loans.......................................................................34
Figure 2.2 Secured Loan..........................................................................................37
Figure 2.3 Category lending....................................................................................43
Figure 2.4 Consumer lending by loan method.........................................................50
Figure 2.5 Lending by Purpose................................................................................55

LIST OF DIAGRAM
Diagram 1.1: Direct consumer loan...........................................................................8
Diagram 1.2: Indirect consumption loan...................................................................9
Diagram2.1: The organizational structure of Kien Long Commercial Joint Stock
Bank - Da Nang Branch...........................................................................................25


1

PREAMBLE
1.1. The reason to choose the topic:
The speed of globalization and trade liberalization in recent years has created

many major changes in the international economic environment. In that condition,
Vietnam's economy is integrated with the world economy through its accession to
major economic organizations: Association of Southeast Asian Nations (ASEAN),
free trade area. ASEAN (AFTA), Asia-Europe Economic Cooperation (ASEM),
Asia-Pacific Economic Cooperation (APEC), WTO (World Trade Organization),
Economic Partnership Agreement Trans-Pacific (TPP). In this dynamic and
competitive economy, effective exploitation and use of capital sources for socioeconomic development has always been one of the most important issues in
economic strategy and policy. economy of each country. As a financial intermediary,
an important capital channel for the entire economy, in order to be able to stand
firmly in the financial and financial market, commercial banks need to constantly
improve themselves. the rules of general development.
In the trend of regional and international integration, each locality as well as
the whole economy needs to exploit and use effectively domestic capital through
lending activities of commercial banks to promote economic and social
development, industrialization and modernization of the country. Therefore, the
need to expand lending activities is inevitable in the current period.
Along with the development of society, human consumption demand is also
increasing and finance becomes a very important issue to finance those needs. If
only lending a lot of production but cannot be sold because people do not have the
need to buy such goods or have a need but cannot pay, it will inevitably lead to
oversupply, inventory. . warehouse and capital stagnation. From that fact shows
that, when the society develops, not only companies and enterprises are objects that
need capital to do business and expand markets, but now individuals are also the
people. need capital and consumer lending activities are born to meet human
consumption needs. Consumer lending on the one hand creates more income for the


2

bank itself, on the other hand helps individuals get capital to improve their lives,

contribute to socio-economic development, and promote the implementation of
stimulus policies. Government demand, creating jobs, helping workers to have
higher incomes and improved social life.
In the context of economic transformation, the banking sector, with its position
in the economy, has played a very important role in promoting that process. The
social economy is developing day by day, human living standards are on the rise,
the demand for consumer loans is also growing. In recent years, consumer lending
has played an important role in banking services, and consumer lending has
contributed a large part of profit in the bank's lending activities. Consumers with an
increasingly stable and improved income, along with a high level of education and
living standards, promises to promote the development of consumer lending.
Recognizing the importance of consumer lending activities in the social life in
general and for the whole banking system in particular, why do some internship at
Kien Long Commercial Joint Stock Bank - Da Nang Branch, conclude In
accordance with the knowledge in the learning process, I have chosen "Research on
expanding consumer lending activities at Kien Long Commercial Joint Stock Bank
- Da Nang Branch for the period 2017-2019" as my research topic.
1.2. Research purposes
The research purpose of the topic is on the basis of analyzing and pointing out
emerging problems that need to be solved in the consumer lending sector at Kien
Long Commercial Joint Stock Bank - Da Nang Branch, the topic proposes the
solutions to help Kien Long Commercial Joint Stock Bank - Da Nang Branch to
expand consumer lending services, contribute to the development of banks as well
as improve the competitiveness of Kien Long Commercial Joint Stock Bank - Da
Nang branch in the next period.
1.3. Research objectives
- Clarify theoretical bases for consumer lending at commercial banks.
- Analyzing the development of consumer loans at Kien Long Commercial
Joint Stock Bank - Da Nang Branch, especially assessing the results and limitations
of consumer lending activities at this bank.



3

- Proposing a number of solutions and recommendations to improve the
efficiency of consumer loans at Kien Long Commercial Joint Stock Bank - Da Nang
Branch in the coming years.
1.4. Research Methods
The research method used is mainly the method of information collection and
analysis method. Information collected through many channels such as direct
internships at branches, interviews with the bank's employees, annual financial
reports, credit reports ... Analytical methods used These information, combined with
the method of comparing, comparing and synthesizing information, then made
comments on the situation of consumer loans at Kien Long Commercial Joint Stock
Bank - Da Nang Branch.
1.5. Research hypothesis
Hypothesis
Chapter 1: Consumer lending activities of Kien Long Commercial Joint Stock
Bank - Da Nang Branch
Chapter 2: Influence of consumer lending activities Kien Long Commercial
Joint Stock Bank Da Nang Branch
1.6. Research question
- What are the contents of consumer lending activities and evaluation criteria
for consumer lending activities?
- What is the current situation of consumer loans of Kien Long Commercial
Joint Stock Bank - Da Nang Branch?
- What are solutions to expand consumer lending activities, Kien Long
Commercial Joint Stock Bank - Da Nang Branch?
1.7. Scope of research
- About space: Kien Long Commercial Joint Stock Bank - Da Nang Branch

- About time: From 2017 to 2019
- The course focuses on in-depth research on the consumer lending situation
at Kien Long Commercial Joint Stock Bank - Da Nang Branch to know the
successes as well as the unsolved shortcomings of the bank in this activity. From
there give ideas and solutions to overcome and develop it in a more effective way.


4

1.8. Study overview Literature review
Primary data source:
Primary data is data that a market researcher collects directly at the data
source and processes it for his / her research. Primary documents used include:
annual reports, financial statements, reports of general planning department,
accounting department ... of Kien Long Commercial Joint Stock Bank - Da Nang
Branch.
Secondary data source: Secondary data is derived from primary documents
analyzed, explained, and discussed as the source of data collected and processed for
a certain purpose, by researchers. re-use market for your research. Secondary data
of the thesis are taken as scientific researches related to consumer lending activities
such as doctoral dissertations, dissertations, articles, scientific reports such as:
Master Thesis " Analysis of the consumer lending situation at Phuong Dong
Commercial Bank, Trung Viet Branch, Da Nang City ”, author Le Ho Tuyet Minh,
2011; Master Thesis "Solutions to promote consumer lending activities at Vietnam
Joint Stock Commercial Bank for Industry and Trade, Da Nang branch, author Le
Thi Hong Anh, 2011; Master thesis "Development of consumer loans at the Joint
Stock Commercial Bank for Foreign Trade of Vietnam", author Le Minh Son, 2009;
Master thesis "Consumer lending development at the Saigon Hanoi Branch of Da
Nang," by Dinh Thi My Le, 2013.
1.9. Structure of the thesis

In addition to the introduction and conclusion, the main content of the topic is
divided into 3 chapters as follows:
Chapter 1: Overview of the rationale of consumer loans of commercial banks
Chapter 2: Current situation of consumer lending activities at Kien Long
Commercial Joint Stock Bank - Da Nang Branch
Chapter 3: Solutions and recommendations to improve operations for
consumption at Kien Long Commercial Joint Stock Bank - Da Nang Branch


5

CHAPTER 1
OVERVIEW OF CONSUMER LOANS'S THEORY BASIC
COMMERCIAL BANK
1.1. CONSUMER LOANS OVERVIEW
1.1.1. Concept of Consumer Loans
While the market economy is developing day by day with a variety of models
and types of goods, consumer loans have been started by retailers due to the need to
promote consumption of goods. Some firms have to borrow from banks to
compensate for the shortage of working capital.
First, in terms of the basis to conduct consumer loans, we are based on 2
dimensions:
- From a consumer perspective, the demand for consumer loans is increasing
strongly, associated with the expanding demand for durable goods (houses, vehicles,
furniture or tourism calendar). At the same time, consumers have a stable income to
repay bank loans. When the income level reaches a fair or high level, consumers
tend to want to improve their standard of living (consuming good quality products,
good food, good clothes, a fully equipped and modern life. ) or increase the ability
to train yourself to help you find more jobs with higher income than now.
- From a banking perspective, many businesses and organizations finance

themselves mainly by issuing shares and bonds, many financial companies compete
with banks in lending as market share for their businesses. goods down. This has
forced banks to expand the consumer lending market to increase income. Thus,
people have introduced a specific concept of consumer lending activities: Consumer
lending is a form of financing for individual household spending purposes.
Consumer loans are an important source of funding for consumers to meet the needs
of life: housing, transportation, living facilities, study, travel ... before they have
enough financial ability to enjoy.


6

1.1.2. The basic feature of a consumer loan
- Subjects of consumer loans are individuals and households. Their borrowing
needs depend on their financial situation. For low-income individuals and
households, the credit needs are often not high, just to meet the family needs to
create a balance between income and expenditure. For middle-income individuals
and households, the demand for consumer credit develops strongly because the
desire to borrow to buy consumer goods is greater than their provision. For highincome earners, the need for consumer credit arises to increase solvency or to
finance a very flexible expenditure when their capital is already in the investment
account.
At the same time, these individuals and households must be those with full
legal capacity and clear borrowing purposes. The loan purpose of customers must
serve their consumption needs, such as: building or repairing houses, purchasing
household items ...
- A consumer loan is cyclical: The customer's demand for consumer loans not
only depends on the financial situation but also depends on the economic situation
at specific periods.
In the stage of economic development, people feel optimistic about the future,
especially they expect their income to be improved. Therefore, it is inevitable that

they will increase the demand for enjoyment so consumer loans tend to increase.
In a period of economic crisis, people feel no confidence in the future and
unemployment increases. Therefore, people will inevitably limit consumption at the
present time.
- The cost of a consumer loan is high: Consumer loans are usually not large
while banks spend a lot of time and manpower to investigate and collect
information of borrowers. Besides, banks also have to manage small loans which
account for quite a large volume. Therefore, the cost of lending to interest-bearing
consumer loans is often greater than that of commercial lending.


7

- Interest rates on consumer loans are high and quite rigid. The interest rate on
a consumer loan is the fixed rate. Customers are less sensitive to interest rates, they
are only interested in the monthly interest payable rather than the interest on the
contract. However, interest rate is not an important factor for individuals and
households to care about when deciding to borrow more or less. The factors that are
considered more important are the level of income and education level, in
particular: people with high income levels tend to borrow more than monthly
income; And for people with high educational attainment, borrowing is to achieve
the desired standard of living, not just an option to use in an emergency.
Because of the large costs and risks of consumer loans, most banks often set a
rather high interest rate on consumer loans. This includes the risk premium to the
point where the costs and losses have to be significantly increased for new
consumer credits to be unprofitable.
- The source of customer debt repayment can fluctuate greatly: When the loan
is for business, the source of debt repayment is the result of production and business
activities. When the loan is for consumption, it is the customer's income.
- High risk due to the quality of customers' financial information is often not

high, customers are cheating or interest rate risks when the cost of raising capital
increases.
In terms of interest rate risk, we know that the "rigid" rate is applied to
consumer loans while today's business loans usually apply rates that vary with
market conditions. Therefore, an increase in the cost of raising a bank also exposes
interest rate risk.
In terms of risks from customers, it can be divided into two types: subjective
risks and other important risks. Subjective risks are when customers are not willing
to pay debts to the bank and provide untruthful and accurate information. The
objective risk is that when customers die, get sick, or lose their jobs, banks will
immediately have difficulty recovering their debts.
- The size of consumer loans is usually small, but the number of these
consumer loans is very large.


8

1.1.3. Types of consumer loans
Consumer lending is divided into several categories according to different
criteria.
1.1.3.1. Based on the relationship between the bank and the customer
- Direct consumer loan is a form of lending in which banks and customers
meet directly to carry out borrowing procedures.
3

Bank

Retail company

5


2

Consumers
1

4

Diagram 1.1: Direct consumer loan
1. Banks and consumers sign loan contracts.
2. Borrowers pay a part of the purchase amount in advance to the retail
company.
3. The bank pays the remaining balance to the retail company.
4. The retail company hands over assets to consumers.
5. Consumers pay off loans to banks.
- Indirect consumer lending is a form of lending in which banks and customers
do not meet directly to carry out borrowing procedures but through a third party.
The bank buys sales coupons from retailers of goods (this is actually a form of
installment financing).


9

Bank

1

Retail company
4
5


2
6
Consumers

3

Diagram 1.2: Indirect consumption loan
1. Banks and retail companies sign debt sale and purchase contracts. Bank
contracts typically state terms on who the customer can bear, the maximum amount
to be sold, and the type of asset to be sold.
2. The retail company and the consumer enter into a sale and purchase contract
to bear the goods, the consumer usually pays a portion of the value of the property
upfront.
3. The retail company hands over assets to consumers.
4. The retail company sells the documents for sale to the bank.
5. The bank pays the retail company.
6. Consumers pay installments to banks.
1.1.3.2. Based on the purpose of the loan
- Real estate consumer loans are loans intended for real estate purposes such
as buying, repairing or building houses and land. The average size of a real estate
consumer loan is often larger than the average size of a regular consumer loan, with
a much longer term so the risk of a real estate consumer loan is also large. than.
- Consumer loans are usually loans for the purpose of financial support for
essential activities and needs in people's lives, such as: studying abroad loans,
buying cars or traveling, ...


10


1.1.3.3. Based on the refund method
- Consumer loan installment is a form of consumer loan in which customers
pay debts to the bank in installments (periodically during the loan term, depending
on the bank's regulations), each time paying customers goods will proceed to repay
both principal and interest of that period.
- One-time consumer loan is a form of consumer loan in which the customer
pays debts to the bank only once (loan maturity date), all principal and interest are
paid upon maturity.
- Circulating consumer loan is a form of consumer loan in which customers
are allowed to borrow, repay loans in many periods periodically to banks according
to a certain credit limit (by credit card, issuing checks Overdraft allowed based on
current account).
1.1.3.4. Based on how to secure the loan
- Secured loan is a form of consumer loan in which in order to borrow money,
the customer must pledge or mortgage his / her property to secure the loan. If in
case the customer cannot pay the debt, the bank has the right to confiscate the
collateral to limit its loss.
- Unsecured lending is a form of consumer lending in which customers do not
need to pledge or mortgage their own assets to secure a loan. Banks make loans
based on customers' reputation and ability to repay debts, not on collateral.
1.1.3.5 Based on the loan term
Loan term is the period of time calculated from the time when the customer
begins to receive the loan until the time of paying off the principal and interest as
agreed in the credit contract between the bank and the customer.
Based on the loan term, credit credit is divided into three categories:
- Short-term consumer loans
A form of credit with a term of 01 year or less, used to meet the needs of
short-term targets of individuals and households.
- Medium-term consumer loans



11

Form of credit extension from 01 year to 05 years. This form of loan is often
used mainly to invest in home repair, renovation of equipment, means of
transport ...
- Loans for long-term consumption
Is a form of credit extension from 05 years or more. The purpose of this loan is
often to meet long-term capital needs such as buying a house, building a house and
other big expenses.
1.1.4. Consumer loan process
* Step 1: Receive credit file.
When customers need to borrow, go to the bank to carry out loan procedures.
Here, a credit officer will guide customers on how to prepare a complete and proper
loan application in accordance with the guidelines for implementing the consumer
loan regulations: legal documents, economic records and documents. borrow.
* Step 2: Credit assessment on the identity of the customer and the guarantor
(if any), loan purpose, financial situation and solvency, collateral.
This is an important stage in the consumer lending process, determining credit
quality. If the credit officer does the wrong assessment, it will make the wrong
decision. For example: when customers do not have potential, but credit officers
think they can afford a loan and decide to lend. This credit is easy to fall into risk,
causing damage to the bank.
The stages in credit appraisal include:
- Evaluate the characteristics of the borrowing source: The Bank will conduct
an appraisal to see if the customer's legal capacity, civil act capacity and legal status
meet the requirements set by the bank. This stage is very important because it helps
the bank to identify customers who have a clear sense of their responsibility to
repay their debts fully and on time? To avoid any losses, any bank must be cautious
with evaluating the borrower's characteristics.

- Appraisal of loan use purpose: The borrower's borrowing purpose must be
clear and in accordance with the bank's regulations. In addition, the bank will


12

evaluate and check if the customer has signs of rollover (borrow money from this
person to pay for another) or not?
- Assessment of financial situation and solvency: Criteria to facilitate
customers in consumer borrowing is that customers must have a stable income
source, the higher this income source, the more money they will receive highly
appreciated goods. The credit officer will coordinate with the agency where the
customer works to accurately assess the customer's income. In addition, the bank
will evaluate the customer's average daily deposit balance by contacting relevant
banks. However, not only does the income factor fully assess the financial position
and solvency of the customer, the bank also bases on the stability of customers'
employment and residence. Clients who have only been working at their current job
for a short time (several months) will find it difficult to get loans from banks,
especially for large loans. As for customers who frequently change their
accommodation, they show instability in their life, which will become a detrimental
factor for banks when deciding to lend. Finally, the customer's repayment capacity
is also assessed by the bank based on the criteria: professional age, health, and
ability

to

work

at


the

agency

where

the

customer

is

working.

- Collateral appraisal: Clients' collateral is usually from many different sources, for
example: real estate, assets of great value, ... Particularly for assets such as real
estate, banks will conduct checks on the legality and value of the property. Real
estate must ensure a certain value for the loan, in case the bank cannot be paid back,
the collateral will be liquidated, which will not provide the minimum source for the
bank's loss compensation. The same goes for high-value assets, the bank checks the
extent to which the asset is left in value, how many years it has been spent. After
completing the credit appraisal process, credit officers will prepare the most general
report about customers and give their assessment whether to lend to customers or
not? If you agree to give a loan, the credit officer will fully write down the attached
information (loan amount, loan term, interest rate and loan conditions).
* Step 3: Review and decide on a loan.


13


After preparing the statement, the credit officer will take it to the credit
manager. The credit manager will review and request the credit officer to explain
and supplement if deficient. The report will then be submitted to the credit board for
review. If deciding to give a loan, a bank must make a written notice to the
customer about the bank's lending decision. In case of not lending, it is still required
to make a written notice to the customer about the bank's decision to refuse credit
extension and in this document clearly stating the reason for the credit refusal.
* Step 4: Complete legal procedures before disbursement.
Below are some of the legal procedures a bank needs to take before
disbursing:
- Signing a credit contract: The bank and the customer formally commit on
paper about the customer's loan, on the terms required by both sides.
Loan agreement agreement: The bank and the customer come up with the most
suitable lending method for both sides, so that this method is not too difficult for the
customer and not detrimental to the bank. .
- Repayment term: Customers can choose their own repayment term: to pay
periodically or at the end of the payment period.
Once the legal procedures have been completed, the bank will disburse to
customers.
* Step 5: Check in the lending process.
After disbursing to customers, the bank must control whether the customer is
using the loan for the right purpose by collecting customer information. This
process takes place periodically of the bank (3 months, 6 months, 1 year or
unexpected check), this process depends on the bank's policies and plans in each
period. The information that banks often conduct checking on customers are: the
financial stability of the customer, the purpose of the loan is correct as in the
declaration contract, re-inspection of collateral and the seriousness in the repayment
process. In addition, the bank will detect whether a client's new needs to serve.
For information collection, the bank stipulates:



14

- All information reflected in a good direction means that the credit quality is
being guaranteed.
- If the quality of the loan is being threatened, the bank should take measures
to handle it promptly.
- The Bank has the right to recover debts before maturity, stop disbursing if the
borrower breaches the credit contract.
* Step 6: Collect debt or make a new credit decision.
Credit relationship ends when the bank collects all debts and interest.
However, besides safe and guaranteed credits (fully and on time), there are always
credits up to the time of repayment but no solvency, forcing banks to find out the
cause. These could be:
- Customers cheat, use money for improper purposes, the goods will
immediately recover the debt.
- If the customer has some difficulties and is delayed in repaying the debt, the
bank can extend the time for the customer.
1.1.5. The benefits of consumer lending
For banks, consumer lending banks will create habits for people to access the
bank's convenient services. This is also a way to diversify investment fields of the
bank in order to increase income and spread risks. Through consumer lending, the
bank expands relationships with customers and thereby increases the bank's ability
to raise capital.
For customers, when provided with consumer lending by banks, they are
entitled to utility services before they have sufficient funding, especially in the
event of an emergency expenditure such as a medical need., education, ... In
addition, customers also enjoy a number of other benefits such as:
- Customers will have a large amount of money right away to spend and be
able to pay back gradually from their future income.

- In urgent cases, customers can borrow from banks with reasonable interest
rates instead of having to borrow "hot" from outside with much higher interest rates.


15

- The bank allows flexible loan terms and repayment methods, all based on the
customer's ability to repay.
- Consumers have a steady income to pay off bank debt. They do not have to
worry that they cannot pay their debts, but they also achieve their desire to improve
their living standards and increase their ability to be trained ... to help them have
more opportunities to find jobs with salaries. higher.
Conditions and procedures for obtaining consumer loans are not too
complicated for customers. They only need to verify that they have permanent
residence or long-term temporary residence in the same province or city where the
branch of the bank they intend to borrow money from. In addition, customers need
to confirm a stable monthly income and ensure the repayment ability and reasonable
loan use purpose.
In terms of economy - society, consumer loans help improve people's lives,
contribute to reducing social transaction costs by saving costs and time for both
banks and customers. Besides, consumer lending is also a lever to stimulate
production development, create conditions to promote economic growth and
contribute to poverty reduction. Currently, the usury problem is becoming a thorny
problem in society, so the bank's promotion of consumer lending with relatively
simple and fast procedures has significantly contributed to repel the usury. On the
other hand, this service with non-cash payment facilities improves the consumer
environment and builds a payment civilization. From a macroeconomic perspective,
retail banking services accelerate currency turnover, take advantage of the great
potential of the population to develop the economy, improve people's lives, and
limit the use of cash. and save money in terms of time and money for society.

1.2. CRITERIA TO EVALUATE CONSUMER LENDING ACTIVITIES
1.2.1 Loan sales:
- Loan sales are the amount of money the bank lends for a period (usually 1
year).
- This indicator shows the growth rate of sales of CL activities in year (n) over
year (n-1). When this indicator increases, it shows that the Bank's sales of credit


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credit activities have increased in relative numbers, and it also shows that credit
credit activities are being expanded.
1.2.2. Debt collection:
An indicator reflecting all debts that banks have collected when they
mature at a certain time, irrespective of the lending time.
This coefficient shows how many dong of business the bank will recover from
1 business coin in a given period. The higher this coefficient, the more beneficial
the bank is.
1.2.3. Odd debt:
- Outstanding balance is the total amount of money that the Bank lends at a
time.
- Total outstanding loans of a bank indicate its liquidity status and its ability to
meet loan demands.
- Outstanding balance to each specific customer indicates the relationship of
the bank and the customer mentioned above.
- This target shows the growth rate of outstanding credit loan balance in year
(n) compared to year 9 (n-1). When this indicator increases, it shows that the bank's
credit portfolio balances over the years have increased in relative terms, and at the
same time, credit credit activities are expanding.
1.2.4. Bad debt

Bad debt (or problem debt, unhealthy debt, bad debt, bad debt ...) is a debt
with the following characteristics:
- Customers have not fulfilled their debt repayment obligations with the bank
when these commitments have expired.
- The customer's financial situation is and tends to be bad, leading to the
possibility that the bank cannot recover both principal and interest.
Collateral (collateral, pledge, guarantee) is assessed as the disbursement value
not enough to cover debt and interest.
- Bad debts include: sub-standard loans; Doubtful debt; Irrecoverable debts


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This is an important indicator to evaluate the expansion of credit credit activity
1.3 FACTORS AFFECTING CONSUMER LENDING
1.3.1 The objective factors
* Factors from the environment
Like other economic institutions, commercial banks operate and are
influenced by the surrounding environment such as socioeconomic environment,
regulatory environment, cultural environment, and economic policies. health sector.
The typical socio-economic environment is the level of economic
development, national income, income per capita, the standard of living of the
population together with the social regime that has a strong influence on the
consumption goals of the population. residential . This stable environment is one of
the conditions that motivates people to consume, thus leading to expansion of bank
lending activities. The legal environment including the system of state legal
documents is another macro factor that has far-reaching effects on consumer
lending activities of commercial banks. The legal environment affects the order and
stability and facilitates smooth consumer lending activities, ensures sustainable
development, and limits troubles affecting the interests of a party to a borrowing

relationship. If the legal system fully regulates consumer lending issues, it will
motivate consumers to turn to banks while also encouraging the activeness of banks
to participate in this field. On the contrary, if all regulations are generic and not
clear, it will make both banks and customers difficult to come to a mutual
agreement.
Cultural environment such as habits, psychology, education level, national
identity (expressed through people's traits such as frugality or enjoyment) or factors
of residence, workplace ... also greatly affects people's spending habits.
Consumer lending is also influenced by the system of state economic policies
and programs, if the state increases investment or introduces open measures to
encourage domestic investment and increase investment. Foreign countries such as
reducing cumbersome procedures, reducing taxes for newly established companies,
creating jobs for workers. This is clearly a favorable premise to develop consumer