<span class="text_page_counter">Trang 1</span><div class="page_container" data-page="1">

GROUP PRESENTATION

TOPIC 02:

LENDING POLICY FOR VIETNAMESE COMMERCIAL BANKS

Ho Chi Minh City, March 19, 2023 SUBJECT: ADVANCED COMMERCIAL BANK

LECTURER: DR. NGUYEN THUY MAI NATIONAL UNIVERSITY OF HO CHI MINH CITY

UNIVERSITY OF ECONOMICS AND LAW BANKING AND FINANCE DEPARTMENT

</div><span class="text_page_counter">Trang 2</span><div class="page_container" data-page="2">

SUBJECT: ADVANCED COMMERCIAL BANK LECTURER: DR. NGUYEN THUY MAI

4 Nguyễn Hoàng Khánh Huyền K204041230 5 Nguyễn Việt Hương Ly K204041233

NATIONAL UNIVERSITY OF HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW

BANKING AND FINANCE DEPARTMENT

</div><span class="text_page_counter">Trang 3</span><div class="page_container" data-page="3">

2.4. The role of the State Bank of Vietnam...4

2.5. The impact of recent changes in regulation...4

3. ANALYZE THE EFFECTIVENESS OF LENDING POLICIES IN SUPPORTING ECONOMIC GROWTH AND FINANCIAL STABILITY IN VIETNAM...6

3.1. Impact of lending policy on the economy...6

3.2. Lending policy of banks in Vietnam...9

3.3. The impact of lending policies on different segments of society...10

4. CASE STUDY ANALYSIS...12

4.1. Green Credit...12

4.2 Microfinance lending programs...15

5. CHALLENGES AND OPPORTUNITIES OF LENDING POLICY IN VIETNAMESE COMMERCIAL BANK...19

5.1. Challenges...19

5.2. Opportunities...23

6. RECOMMENDATIONS...25

REFERENCES...27

</div><span class="text_page_counter">Trang 4</span><div class="page_container" data-page="4">

INDEX OF TABLE

Table 1. Statistics on some basic indicators (to October 31, 2022) Table 2. Ranking comparison table of the credit access index in 2020

INDEX OF FIGURE

Figure 1. Growth of monetary indicators in the period 2015-2019 Figure 2. Scale of consumer loans in the period 2012-2020 Figure 3. NPL coverage ratio of banks at the end of September 2022

<b>Too long to read onyour phone? Save</b>

to read later on your computer

Save to a Studylist

</div><span class="text_page_counter">Trang 5</span><div class="page_container" data-page="5">

1. INTRODUCTION

Credit has come to play an increasingly important role, both as an instrument in the financial planning of households and as an asset on the balance sheet of financial institutions. Especially in the banking industry, the lending policy of the Central Bank has now been effective in operating monetary policy to achieve macroeconomic objects. Furthermore, the lending policy has a positive impact on the markets such as financial, real estate, labor and commodity markets.

First of all, the credit policy promotes and develops the commodity market. Specifically, the regulations on deposit interest rates are helpful for enterprises to increase business manufacturing, but achieve monetary policy aims. With thematic credit programs for a number of sectors that are the driving force of economic growth along with appropriate mechanisms and policies in each period has made an important contribution in supporting businesses, supporting sectors of the economy to overcome difficulties, maintain, recover and grow, especially during Covid-19 pandemic. Moreover, the credit policy through credit orientation focuses on production and business sectors, making an important contribution to supporting and promoting economic growth.

Secondly, lending policy contributes to ensuring sustainable growth of the financial and real estate market, promoting the role of bank credit capital, which is essentially to meet the short-term capital needs of the economy. Accordingly, the adjustment of credit policies of the Central Bank in order to concentrate capital for production and business is appropriate, not only promoting the role and efficiency of bank credit sources, but also meeting the requirements of economic growth recovery after pandemic, which in the medium and long term also makes an important contribution to the financial market and real estate market to grow and develop sustainably.

Thirdly, lending policies create conditions for the labor market to develop by meeting the capital needs of the economy. At the same time, through the policy credit program, job creation loans; student loans... have created jobs and created jobs, generating income for policy beneficiaries. That not only contributes to ensuring social security but also creates conditions for the labor market to develop sustainably across regions and sectors of the economy.

According to the above importance and growth of lending policy in Vietnam, we will provide an overview of lending policy in this presentation.

2. OVERVIEW OF LENDING POLICIES 2.1. Types of loans

a. By maturity

According to Circular 39, a credit institution shall consider granting a decision to offer a loan to a customer which is divided into the following categories:

Short-term loan, defined as loans having the maximum loan term of 1 year.

Medium-term loan, defined as loans having the loan term between above 01 year and 05 years at the maximum.

Long-term loan, defined as loans having a loan term of more than 05 years. b. By loan methods

1

</div><span class="text_page_counter">Trang 6</span><div class="page_container" data-page="6">

By methods, loan is divided into the following categories:

1. One-shot loan: The credit institution and its customer implement lending procedures and conclude a loan agreement each time when a loan is needed.

2. Syndicated loan: At least two credit institutions are together offering a loan to a customer for the purpose of implementing one fund borrowing plan or project.

3. Loan for crop season interval: The credit institution extends a loan to a customer in order to cultivate or raise seasonal plants or livestock used in the next production cycle within a given year, or plants of which roots are retained and industrial crops which are annually harvested. Accordingly, the credit institution and its customer shall agree that the outstanding amount of debt existing in the previous production cycle can be used for the following production cycle, but shall not be allowed to exceed the time length of 02 consecutive production cycles

4. Line of credit loan: The credit institution determines and agrees with its customer on the maximum outstanding amount of debt maintained during a specified time period. Within a credit line, the credit institution will extend a one-shot loan. At least once a year, the credit institution will consider redefining the maximum outstanding amount of debt and duration of

maintenance thereof.

5. Provisional line of credit loan: The credit institution undertakes that fund is available to be lent to the customer and the amount of that fund is restricted to the agreed amount of provisional credit. The credit institution and its customer shall agree on the effective period of provisional line of credit which is not allowed to exceed 01 years.

6. Current account overdraft facility: The credit institution approves an overdraft limit within which the customer is allowed to spend more money than the amount available in the current account in order to render payment services on that current account. The overdraft limit is maintained within the maximum period of 01 years.

7. Revolving loan: The credit institution and its customer agree to extend a loan to meet the demand for fund used in the business cycle which is less than 01 month and the customer is allowed to use the outstanding amount of principal incurred in the previous business cycle for the following one provided that the loan term remains fewer than 03 months

8. Rollover loan: The credit institution and its customer agree on a short-term loan under the following conditions:

a) On the payment due date, the customer is entitled to repay debt or extend the period of repayment of part or whole of the outstanding amount of loan principal for another specified time period;

b) Total loan term is not allowed to exceed 12 months from the initial disbursement date and one business cycle;

c) On the date when a loan application is considered, the customer does not incur any bad debt owed to credit institutions;

d) In the process of a rollover loan, the customer owing any bad debt to credit institutions shall not be given any extension of the agreed period of repayment.

2

</div><span class="text_page_counter">Trang 7</span><div class="page_container" data-page="7">

2.2. Interest rates

A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers

A credit institution and customer shall agree on the interest rate on short-term loan denominated in Vietnamese dong but shall not allow it to exceed the maximum interest rate decided by the State Bank’s Governor over periods of time in order to meet certain demands for borrowed fund as follows:

Loans taken out to support the agricultural and rural development sector under regulations of the Government on credit policies for agricultural and urban development;

Loans taken out to implement the export business plan in accordance with the Law on Commerce and other instructional directives thereof;

Loans taken out to finance business activities of small and medium-sized enterprises under the Government’s regulations on support for development of small and medium-sized enterprises;

Loans taken out to develop ancillary industries under the Government’s regulations on development of ancillary industries;

Loans taken out to finance business operations of high technology application enterprises under the provisions of the Law on High Technology and other instructional directives thereof.

If a customer fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the customer shall be obliged to repay loan interest as prescribed hereunder:

The amount of interest on principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;

If a customer fails to make due payment of interest as prescribed by Point a of this Clause, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment;

Where a debt has become delinquent, the customer owing a delinquent debt must pay interest on the outstanding amount of principal which is overdue in proportion to the period of late payment for which the interest rate charged is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such debt becoming delinquent.

2.3. Condition of loans

A credit institution shall consider granting a decision to offer a loan to a customer who meets the following requirements:

If that customer is a legal person, it must have civil capacity in accordance with the civil law jurisdictions. If that customer is a natural person, (s)he must be aged exactly 18 years or older and have full capacity for civil conduct in accordance with the civil law jurisdictions, or must be aged between exactly 15 and nearly 18 years and must not have his/her incapacity or restricted capacity for civil conduct as provided by laws.

Demonstrate that customer’s demands for a loan to be used for legally accepted purposes.

3

</div><span class="text_page_counter">Trang 8</span><div class="page_container" data-page="8">

Establish that customer’s plan for effective use of borrowed funds. Prove the customer’s sound financial capability to repay debt owed.

Where that customer obtains a loan from a credit institution on which the interest rate is prescribed by Clause 2 Article 13 in Circular 39 hereof, it shall be rated transparent and healthy in its financial status by a credit institution.

2.4. The role of the State Bank of Vietnam Stabling macroeconomic

To measure macroeconomic stability, people often refer to short-term fluctuations of macroeconomic variables such as GDP, inflation, balance of payments deficit, budget deficit. Therefore, 2 solutions that the State Bank implements are (1) Controlling and keeping inflation low and stable (2) Stabilizing the money market, the foreign exchange market.;

Ensuring the safety of banking operations

For a market economy to develop sustainably, the banking system must always ensure safe, healthy operations and maintain legal discipline in the banking sector. The State Bank enforces safety regulations for the operation of the banking system, including lending policies. Especially:

Minimum capital adequacy ratio to ensure the ability to cover unforeseen losses with own capital

Debt service coverage ratio to ensure the bank has enough liquidity when risks arise from the imbalance in terms of term, source of capital and use of capital

Limit credit extension to a customer and related persons to limit risks caused by credit concentration

Limit capital contribution and share purchase to ensure that the bank does not expand its operations into non-financial sectors.

Regulations on classification of debts, setting up of risk provisions to assess the quality of “Credit”, supplemented with management and reasonable adjustment of investment portfolio structure; ensure adequate provision of financial resources to cover losses, determine the financial capacity and soundness of credit institutions.

2.5. The impact of recent changes in regulation

With recent regulations, credit growth of 8.15% in 2022 compared to the end of 2021 and an increase of 17.09% over the same period in 2021, consistent with more positive developments of the economy. As a result, it has contributed to strongly activating economic activities, creating momentum for the recovery of macro indicators, thereby helping the economy gradually recover and grow.

The State Bank has implemented many preferential credit programs, subsidized interest rates, contributing to the implementation of the general economic recovery program, the banking industry continues to implement drastic solutions to remove difficulties for people and businesses. affected by the COVID-19 epidemic, ensuring to meet the demand for credit capital for production and business. Moreover, circulars amend and supplement: reduce lending interest rates for customers; loan program to pay wages to stop working and pay wages to restore production; solutions on exemption and reduction of payment service fees…

According to the results of exploitation in the central reporting system of the State Bank, by the end of April 2022:

4

</div><span class="text_page_counter">Trang 9</span><div class="page_container" data-page="9">

Accumulated debt value that has been structured since the issuance of Circular 01/2020/TT-NHNN is more than 695,000 billion VND for over 1.1 million customers.

The outstanding balance of the debt group remains unchanged at more than 198,000 billion VND of nearly 680,000 customers.

The accumulated value of debt that has been exempted, reduced interest and fees, and kept the same debt group is nearly VND 91,000 billion for nearly 490,000 customers.

The outstanding balance of interest exemption and reduction remained the same at nearly VND 18,000 billion for more than 166,000 customers.

E-commerce transactions in the first 4 months of 2022 achieved a high growth compared to the same period in 2021. In which, commercial transactions increased by 69.7% in quantity and 27.5% in value; via the Internet increased by 48.39% and 32.76% respectively; via mobile phones increased by 97.65% and 86.68%; via QR code increased by 56.52% and 111.62%

The total number of activated e-wallets increased by 10.37% compared to the end of 2021.

In 2017, the credit grew high and the quality was improved. Specifically, credit growth continued to maintain a high growth rate, maintaining a stable growth rate for three consecutive years, from 2015. Specifically, credit growth credit reached 18.17%, approximately the growth rate of 2016 (18.71%), although not yet reaching the target set by the Government, credit quality has been gradually improved, credit structure has been improved. allocation focuses on priority areas, especially agricultural production and high technology. For 5 groups of industries and priority fields, loans to support SMEs accounted for the highest proportion, reaching 98,442 billion VND (accounting for 64.4% of total outstanding loans); agricultural - rural credit increased by 22.1% compared to the end of 2016; credit for high-tech enterprises increased by 20%...

Besides, capital mobilization continues to increase. Deposits from economic organizations and individuals continue to maintain a high growth rate, with an estimated increase of 19% compared to 2016. Mobilization through the issuance of valuable papers also increased strongly, estimated to increase by 38%. Deposits by VND continue to account for a large proportion of total mobilized capital, with nearly 90.5% of total mobilized capital, partly due to the attractive interest rates compared to 0% interest rates if deposited in USD.

Credit structure is becoming more and more reasonable. The proportion of short-term credit tends to increase, while medium- and long-term credit decreases to 53.7% of total credit, down 1.4 percentage points compared to the end. 2016, reflecting the current situation of capital mobilization in Vietnam (short-term deposits account for a higher proportion than medium and long-term capital). Credit structure by currency was maintained stable, in which credit in VND accounted for 91.6%. In addition, in 2017 the market structure has shifted towards reducing dependence on credit sources from credit institutions, increasing the role of the capital market, representing a rational capital mobilization structure shift. , in accordance with the law of production and business development of enterprises. The proportion of capital supply to the economy from the capital market reached 35.4% at the end of 2017, an increase of nearly 15 percentage points compared to 2012, while the proportion of capital supply to the economy from the credit institution system decreased to 64.6% from 78.4%.

5

</div><span class="text_page_counter">Trang 10</span><div class="page_container" data-page="10">

The liquidity of the banking system is abundant and stable thanks to the reasonable management of monetary policy through the intervention of the State Bank (the SBV has bought a large amount of foreign currency and has a net money supply of nearly 124 trillion dong since the beginning of the year). The system's average credit/deposit ratio increased from 85.6% in 2016 to 87.3% in 2017.

Interest rates continued to decline, supporting production and business development. IInterbank interest rates in 2017 reached the lowest level in the past 5 years (average overnight interbank interest rates in 2017 were about 2-3%). Besides, deposit and lending interest rates continued to remain stable (As of the end of 2017, VND deposit interest rates were common at 0.8 1%/year for demand deposits). term and term less than 1 month; 4.5 -5.4%/year for term deposits from 1 month to less than 6 months; 5.4 - 6.5%/year for term deposits term from 6 months to less than 12 months; term over 12 months is at 6.4 -7.2%/year Popular lending interest rates for priority sectors are at 6 - 6.5%/year for short-term, at 9 - 10%/year for medium and long-term loans.. Loan interest rates for normal production and business sectors are at 6.8 - 9%/year for short-term; 9 ,3 - 11%/year for medium and long term).

Moreover, bad debt handling has been accelerated. Legal difficulties encountered in the bad debt settlement process have been gradually removed through the promulgation of Resolution 42/2017/QH14 of the National Assembly on piloting bad debt settlement of NPLs. credit institutions. Credit institutions, foreign bank branches, bad debt trading and settlement organizations have been given the right to seize security assets, and a financial handling mechanism for credit institutions when selling bad debts has been created. The implementation of Resolution 42 initially achieved positive results when the whole system handled about VND 70,000 billion of bad debts in 2017, an increase of 40% compared to 2016, bringing the bad debt ratio The balance sheet of the credit institution system decreased to 2.3% from 2.46% at the end of 2016. The bad debt ratio decreased mainly due to potential bad debts in restructuring debt, corporate bonds and other loans. external receivables that are difficult to collect decrease.

In addition, the exchange rate was stable. The USD/VND exchange rate remained stable throughout 2017 in the context of constantly fluctuating international markets. As of the end of December 2017, the central exchange rate is estimated to increase by 1.5-1.7% compared to the beginning of the year, although more than the increase of 1.23% in 2016, but still much lower. compared with an exchange rate adjustment of 5% in 2015, when the central exchange rate mechanism was not applied. Meanwhile, the commercial bank rate decreased by about 0.2%, the free market rate decreased by about 1.5% compared to the beginning of the year.

3. ANALYZE THE EFFECTIVENESS OF LENDING POLICIES IN

SUPPORTING ECONOMIC GROWTH AND FINANCIAL STABILITY IN VIETNAM 3.1. Impact of lending policy on the economy

Type of credit institution

Ratio of short-term capital for medium and long-term

</div><span class="text_page_counter">Trang 11</span><div class="page_container" data-page="11">

Joint Stock Commercial

Joint Venture Bank, Foreign 41.72 Finance and leasing

companies ^40.59

Cooperative Bank 15.24 64.10 The whole system 25.71 75.82 Table 1: Statistics on some basic indicators (to October 31, 2022) Source: Account balance report, October 2022 statistical report of credit institutions, foreign bank branches (Excluding microfinance institutions)

Looking at the data table, we can see that the ratio of outstanding loans to total deposits (75.82%) is nearly 3 times higher than the ratio of short-term loans to medium-term and long-term loans (25.71%) according to the entire system. system system. The ratio of outstanding loans to total deposits accounted for the highest proportion was state-owned commercial banks (82.04%), followed by Joint Stock Commercial Banks accounting for 77.31%. As for the ratio of short-term funds used for medium and long-term loans, the most important ratio is finance and leasing companies (40.59%) but finance and leasing companies do not have outstanding loans for loans on total deposits. The State Commercial Joint Stock Bank and the Joint Stock Commercial Bank accounted for nearly the same proportion (28.86% and 28.46%). For 2 billion loans to total deposits and the ratio of short-term capital for medium and long-term loans, it can be seen that the State Commercial Joint Stock Banks and Joint Stock Commercial Banks always account for a high proportion and have an important position in the banking sector. banking system.

7

</div><span class="text_page_counter">Trang 12</span><div class="page_container" data-page="12">

Figure 1: Growth of monetary indicators in the period 2015-2019

Looking at the graph, it can be seen that the total means of payment, capital mobilization and credit for the economy have increased and decreased unevenly from 2015 to 2019. As for the total means of payment, capital mobilization approximately the same percentage and from 2015 to 2016, the total means of payment and capital mobilization increased, but in 2017 and 2018 it decreased, but in 2019 it increased again. Credit to the economy increased from 2015 to 2017 but in 2018 and 2019 it tended to decrease.

Unit: trillion

Figure 2: Scale of consumer loans in the period 2012-2020 Source: SBV

From the graph, it can be seen that the scale of consumer lending from 2012 to 2020 tends to increase over the years. This may reflect the growth of the financial sector and the increase in consumer loan demand. Most commercial banks and financial companies lend to consumers, but commercial banks account for a higher proportion.

Lending policies can have a significant impact on economic growth and financial stability in Vietnam. In recent years, Vietnam's government and central bank have implemented various lending policies to support the country's economic development. Here's an analysis of the effectiveness of these policies:

Enable businesses and individuals to access capital for business development and growth: This provision can boost economic activity and increase the percentage of GDP growth. In addition, lending policies can help enhance financial stability by aiding the distribution of financial risk.

Increase output and improve product quality: Signal policies support production and development enterprises, facilitate access to capital and resources to improve product quality and increase productivity and reduce product costs. In addition, it also contributes to the restoration of traditional industries, capital support for workers and production and business establishments to expand production.

8

</div><span class="text_page_counter">Trang 13</span><div class="page_container" data-page="13">

Job creation: Signal policy has created a large number of jobs for people, especially in rural and mountainous areas. This helps to reduce the unemployment rate, increase people's income and improve the quality of life.

Increase investment: Signal policy to support investors in developing business projects, especially large projects, Encourage investment and economic development.

Financial sector development: Signaling policy has also played an important role in developing Vietnam's financial sector, increasing lending and saving electricity, helping to boost economic activity and growth. cellular economy.

Limiting risks: reducing demand for informal application signal services, limiting usury, “black credit”, cleaning and stabilizing financial markets.

3.2. Lending policy of banks in Vietnam a. Type of Loans

Loans can play an important role in supporting economic growth and financial stability. Therefore, lending policies are divided into many different types to suit and meet the needs of borrowers with many different purposes. This is one of the stepping stones, supporting capital for individuals, households and businesses to realize their legitimate loan purposes.

For instance, if the loans are provided for productive purposes such as investment in infrastructure, education, and innovation, they can boost economic growth in the long run. On the other hand, if loans are given for consumption or speculative purposes, they may lead to instability and increase the risk of defaults.

b. Interest rate policy

The State Bank of Vietnam (SBV) has been using its interest rate policy to encourage lending and investment. The SBV has lowered interest rates to stimulate demand and promote economic growth. Lower interest rates can also reduce the cost of borrowing, making it easier for businesses and individuals to access credit. However, lowering interest rates too much can lead to inflation and currency depreciation, which can undermine financial stability.

c. Credit allocation policy

The Vietnamese government has implemented policies to encourage banks to lend to priority sectors such as agriculture, rural development, and small and medium-sized enterprises (SMEs). This policy aims to promote inclusive growth and reduce income inequality. However, the effectiveness of this policy depends on how effectively the government and the banking sector can identify and support priority sectors.

d. Credit guarantee policy

The Vietnamese government has also implemented credit guarantee policies to support SMEs, which often face difficulties accessing credit due to their limited collateral and credit history. Credit guarantee policies can help reduce the credit risk for lenders, making it easier for SMEs to access credit. However, the effectiveness of credit guarantee policies depends on the quality of the guarantee mechanism and the government's ability to manage credit risks.

Overall, lending policies can play a critical role in supporting economic growth and financial stability in Vietnam. However, the effectiveness of these policies depends on various factors, including the quality of the policy design and implementation, the ability of the government and the banking sector to identify and support priority sectors, and the quality of the guarantee mechanism. In addition, the paper discerns the determinants of probability of

9

</div><span class="text_page_counter">Trang 14</span><div class="page_container" data-page="14">

default across lender types. Default risk of formal credit appears to be strongly affected by formal loan contract terms, e.g., loan interest rate and form of loan repayment, whereas default risk on informal loans is significantly related to the presence of propinquity and other internal characteristics of the borrowing household. Because of asymmetric information problems, a financial intermediary is faced with two types of information problem. One is the hidden information problem and the other is the hidden action problem. The first type of problem is often referred to as an adverse selection problem, while the second type is better known as a moral hazard problem. An adverse selection problem appears when the borrower holds private information before the loan contract is signed. Adverse selection thus refers to a situation where a characteristic of the borrower is imperfectly observed by the financial intermediary. The financial intermediary must attempt to screen the different pieces of information the borrower has before a loan contract is signed and a loan is offered.

Credit policy is an important part of a country's monetary policy, affecting its economic development. In Vietnam, credit policy has played an important role in promoting economic development.

3.3. The impact of lending policies on different segments of society

Lending policies can affect different segments of society in different ways, depending on the nature of the policy and the characteristics of each group.

3.3.1. Small and Medium Enterprises (SMEs)

The lending policy of banks in Vietnam can affect SMEs as follows:

Enhancing access to capital: Lending policies can help SMEs access capital for business development and new investments. This helps to increase the sales and profits of businesses. In addition, the policies also help SMEs enhance competitiveness, create new products and services, expand consumption markets and develop business. Increase the ability to cope with financial risks, protect SMEs from the negative effects of financial crisis or business difficulties. However, if the bank has a difficult lending policy or strict review process, SMEs may have difficulty in accessing capital.

Reducing financial burden: The low-interest loan policy also helps to reduce the financial burden on SMEs, helping them improve cash flow and invest in improving product/service quality or expanding markets. school. If the bank has a low interest rate policy, SMEs can save capital costs and increase debt repayment capacity. Conversely, if interest rates are too high, SMEs may find it difficult to repay loans and maintain business operations.

Lending time: The lending period of banks in Vietnam can also affect SMEs. If the loan period is too short, SMEs may find it difficult to repay their loans and create financial pressure. Conversely, if the loan period is too long, SMEs may have difficulty in managing and optimizing capital.

Lending conditions, and application review process: flexible lending conditions will also help SMEs meet their financial needs and develop business operations more efficiently. However, the SMEs may also face difficulties in carrying out loan application approval procedures at banks, especially when demonstrating the ability to repay loans and the feasibility of the project. Processing time can also be long, causing SMEs to wait and face difficulties in cash flow management.

10

</div><span class="text_page_counter">Trang 15</span><div class="page_container" data-page="15">

In summary, bank lending can have a positive or negative impact on SMEs. To take advantage of the benefits of borrowing money from a bank, SMEs need to carefully study the requirements and conditions of the bank and find ways to meet these requirements to increase their chances of getting a loan and growing their business. In addition, lending policies of banks in Vietnam also need to be properly designed, in order to create favorable conditions for SMEs to access and use capital in the most effective way.

3.3.2. Low-income borrowers:

Lending policies can have a positive effect on low-income borrowers by:

Financial Assistance: Financial institutions may offer financial assistance programs, such as interest-free loans, low-interest grants, or other grants to help low-income families cover necessary expenses, which relieves financial pressure and makes it easier for them to repay their debts. But if the bank considers it a high risk and needs to compensate for that risk by charging a higher interest rate. Lending policies can have high interest rates for low-income borrowers that can get trapped in a debt spiral and fall into misery.

Loan Term: A loan with a longer term can make it easier for low-income borrowers to repay. It helps them break down their debt and reduce their monthly payments, helping them balance their financial expenses. But if low-income borrowers are unable to repay their loans in full and on time, they may experience increased debt and become indebted. This can make it difficult for them to meet the basic needs of life, such as eating, living, and medical care.

Minimize collateral requirements: To help low-income borrowers meet loan policy requirements, financial institutions may reduce collateral requirements, or strengthen insurance policies for loans. In some cases, low-income borrowers may have difficulty meeting credit assessment requirements in order to obtain a loan. This can make it impossible for them to get the money they need to solve their financial problems.

In summary, lending policies can have both positive and negative effects on low-income borrowers. Depending on how loan policies are designed and managed, they can help borrowers improve their financial status and quality of life, or pose financial hardship and risk to borrowers. Therefore, lending policies need to be carefully designed to ensure that they benefit low-income borrowers without negative effects.

3.3.3. Foreign investor

Lending policies have an impact on foreign investors' decisions and behavior: Interest rates: Low interest rates can make loans attractive to foreign investors, while high interest rates can make borrowing more difficult. An increase in interest rates can reduce foreign investors' interest in investing in a country.

Loan term: The loan term can also influence foreign investors' investment decisions. If the term is too short, the loan may become difficult to repay, while if the term is too long, the investor may be risk averse or worried about borrowing money for too long.

Security requirements: Security requirements (such as collateral) can influence foreign investors' interest in borrowing. If the requirements are too strict, the investor may not want to take the risk, while if the requirements are too low, the loan may become too risky.

Lending conditions and procedures: Lending conditions and procedures may influence foreign investors' decision to invest. If the lending process is too complicated or requires too much paperwork, the investor may not want to invest in that country.

11

</div><span class="text_page_counter">Trang 16</span><div class="page_container" data-page="16">

In summary, a country's lending policies can influence foreign investors' investment decisions, including interest rates, loan terms, security requirements, and terms and conditions. continue lending.

4. CASE STUDY ANALYSIS 4.1. Green Credit

4.1.1. What is Green Credit?

Green credit (English is Green Credit) is understood as the lending by credit institutions for consumption, investment, production and business needs without causing risks to the environment, contributing to protecting the system. general ecology.

4.1.2. Why does green credit need to be implemented?

Along with socio-economic development, the environment is increasingly heavily influenced by people's lives and production activities of enterprises. Green credit is a necessary step in the context of global climate change, especially when Vietnam is assessed as one of the countries with the leading pollution levels today. At that time, the role of credit institutions, especially banks, was pushed up with the trend of green credit.

Implementing green credit will help encourage business and production activities that have a positive impact on the environment, while accelerating the transition to clean energy and using advanced technologies to reduce the impact of industries on the environment.

4.1.3. Evidence of green credit implementation in Vietnamese commercial banks Green credit framework - VPbank

VPBank has issued a Green Credit Framework to provide a process for using and managing green loans to lend to projects that meet green criteria. This program is applied to customers who need to borrow capital for the purpose of investing in environmentally friendly plans and projects, which can be mentioned in industries such as: Renewable Energy; Efficient power generation and reduced carbon emissions; Energy Efficiency (Energy Efficiency); Green Buildings (Green Buildings); Water Efficiency (Water Efficiency); Waste treatment; Agriculture, forestry and sustainable land use; Pollution prevention and control;…

VPBank also offers lower interest rates on green projects and provides technical support to their customers. The Green Lending Initiative has brought positive results for the economy and the environment:

They have succeeded in promoting sustainable development and reducing carbon emissions.

Encourage businesses and social organizations to invest in sustainable development projects, in order to minimize negative impacts on the environment and meet international environmental standards.

Improve people's quality of life by investing in green infrastructure projects, improving the living environment and benefiting public health.

Minimize risks for investors and financial institutions by assessing investment projects from an environmental perspective and ensuring the sustainability of loans.

Green Credit - VietinBank

Since 2015, VietinBank has promoted activities to seek global concessional capital to finance green fields. The highlight is the signing of a cooperation agreement between VietinBank and the International Finance Company (IFC). The agreement not only creates a

12

</div>