Tóm tắt Luận án The development of microfinance operation in Vietnam credit institutions

1 THE DEVELOPMENT OF MICROFINANCE OPERATION IN VIETNAM CREDIT INSTITUTIONS Chapter 1: Introduction and overview thesisresearch 1.1. Necessity of the study Microfinance is one of the characteristic forms of finance for developing countries, focused on the goal of poverty reduction and sustainable development. Approach to microfinance (MF) differs from conventional finance and gets more attention from donors, policy-makers in many countries around the world. In Vietnam, Microfinance has developed in recent years, both in terms of legal framework and basic operations. However, the participation of finance institutions providing Microfinance service is low. Microfinance operation in Vietnam Credit institutions is assessed as limited in quantity and poor in quality. Corollary is that many customers can not access to the benefits of microfinance operations, credit institutions are difficult to improve profit. Therefore, the study "The development of Microfinance operation in Vietnam Credit Institutions" is needed. 1.2. Oveview of related studies The process of this thesis follows these issues (i) The concept development of microfinance of organizations providing microfinance services, (ii) Criteria for evaluating the development of microfinance operations, (iii) The relationship between the outreach to microfinance and sustainability of the organization provides, (iv) Developing microfinance operations in credit institutions (Cis), (v) Factors affect the development of microfinance operations. Through the course of the review study found no overall study on the development of indicators to assess microfinance operations of credit institutions and evaluate the factors affecting the development of the microfinance operations of credit institution (CI) combining qualitative and quantitative methods in the perspective of the organization and the customer interest this is the space for this research. 2 1.3. Research objectives The overall objective of the thesis: Study the development of microfinance in credit activity. The overall objectives are detailed into the following specific objectives: (1). Codify the basics of microfinance operations and development operations of microfinance in credit institutions. (2). Summary of international experience in developing microfinance operations of credit institutions, and lessons for Vietnam. (3). Assessment of the situation developing microfinance operations in Vietnam credit Institutions. (4). Inspection the relationship between the stability of credit institutions and the outreach to microfinance in credit institution in Vietnam with case study Lien Viet Post Join Stock Commercial Bank. (5). Inspection of the factors affecting the level of customer access to microfinance operations of Vietnam credit Institutions (6). Proposed a number of recommendations for relevant parties to develop microfinance operations in Vietnam credit Institutions. 1.4. Research questions The main research question of the thesis: The decisive factors in the development of microfinance operations of Vietnam credit institutions? This question will be addressed by answering the following specific questions: (1). What are concepts and features of microfinance operations in CIs? (2). What is concept development of microfinance operations in CIs? (3). What are the assessment criterias developed microfinance operations in CIs? (4). What are factors affecting the development of microfinance operations in Vietnam Credit Institutions? 3 1.5. Subject and scope of research 1.5.1. Subject of research Study subjects of the study is the development of microfinance in credit institution. 1.5.2. Scope of research Space of study: Research into the development of microfinance operations, primarily lending small amounts, of credit institutions. Time of study: Secondary data on the credit institutions and Lien Viet Post Join Stock Commercial Bank and elecommunications were collected during the period 2010-2014. 1.6. Method of research In the thesis, the author has used a combination of the two methods of quantitative research and qualitative research, and case studies were typically Lien Viet Post Join Stock Commercial Bank. The software used was SPSS 20 and AMOS 20 software. 1.7. New contributions of the thesis 1.7.1. New main theory contributions of the thesis Based on the study of theoretical and practical contributions thesis new academic as follows: (1) The development of microfinance (MF) has been studied mostly in term of social objectives. However, this thesis aims to study the development of microfinance in credit institutions (CIs) as a mean to obtain profit for CIs. This thesis focuses on clarifying the relationship between financial sustainability of CIs and the development of microfinance operations of CIs. (2) Based on the indicators to assess the development of microfinance operations in MFIs, the author has selected two groups of indicators to evaluate the development of microfinance in CIs: (1) indicators of financial sustainability include: the profit after tax on average total assets, profit after tax on equity and NPL ratio (2) indicators related to the level of outreach specified by (i) the breadth of outreach (number of customers, size of deposits and loans, number of microfinance 4 products and services) and (ii) the depth of outreach (average loan value). (3) Applying the model of the relationship between the outreach and sustainability of microfinance institutions of Christen et al (1995), Thys (2000), Olivares-Polanco (2005) as well as the theoretical basis to be suitable to the Vietnamese CIs, the thesis analyzed the proposed model exploring the factors affecting the average loan value with the independent factors: Operating time, sustainability, the breadth of outreach and two additional factors are labor productivity and credit risk (Model 1). (4) The thesis adds the factors affecting the development of microfinance in credit activities through the level of customer interest based on consumer behavior theories of Kotler (2001), the trend of choosing credit institutions of Khazeh and Decker (1992), Mokhlis (2009) and proposes model reflecting the dependency relationship between the loan value factors to the level of customer interest to convenience, quality service, brand, price, promotions of CIs and demographic factors (Model 2). 1.7.2. New proposals from the results of the thesis (1) Model 1 showed that the breadth of outreach influence the same way with the depth of outreach and reach different conclusions with findings in models of Olivares - Polanco (2005). Credit risk and labor productivity has affected the same way with depth access. Factors affecting the development of microfinance activities at CIs with decreasing levels as follows: (i) The the breadth of outreach, (ii) Operating time, (iii) Credit risk, (iv) labor productivity and (v) sustainability. (2) Model 2 showed that the factors affecting the development of the microfinance operations of CIs through the perception of customers with decreasing levels as follows: (i) The convenience of credit institutions, (ii) brand of credit institutions, (iii) quality of service, (iv) price, but promotion has no effect. Additionally, demographic factors such as salary, total income, place of living and education of customer has affected the development of the microfinance credit activities. 5 (3) The thesis put forward two group of recommendations to develop the microfinance operations in CIs include: First, for CIs providing microfinance services: (1) Strengthening governance and administration, (2) Design and implement products and services in view of "Customer in the Center "(3) Enhance financial strength (4) strengthen accountability in providing microfinance services; (5) Improve the quality of human resources. Second, for State Bank of Vietnam and concerned agencies: (1) Improve the system guidelines for implementation of the Law on Credit Institutions which have microfinance operations, (2) Expeditiously implement activities within the framework of development strategy for the microfinance sector of Vietnam, (3) create "open conditions" to CIs involved in microfinance, (4) Strengthening the inspection and supervision of microfinance operations of credit institutions. 1.8. Structure of the thesis Chapter 1: Introduction and overview thesis research Chapter 2: The rationale for the development of microfinance operation atVietnam credit Institutions Chapter 3: The situation developing microfinance operational of Vietnam credit Institutions Chapter 4: The model and results of research the development of microfinance operation at Vietnam credit Institutions: Case study –Lien Viet Post Join Stock Commercial Bank Chapter 5: Discuss findings and recommendations Chapter 2: THE LITERATURE REVIEW OF THE DEVELOPMENT OF MICROFINANCE OPERATION N VIETNAM CREDIT INSTITUTIONS 2.1. Microfinance operation of Credit Institutions 2.1.1. Overview of microfinance operation 2.1.1.1. The concept of microfinance operation About microfinance, using concepts thesis: Microfinance is the 6 provision of financial services such as credit, mobilizationpayments, insurance and other services for those with low incomes in society to serve the needs production, business and investment in order to improve the quality of customer’s life. About microfinance customers, the thesis uses the concept of microfinance clients are directed to credit institutions that includes individual customers, small enterprise customers (i) use of financial services on a small scale, (ii) , primarily low or medium income customers and (iii) that the demand for loans to focus on the purpose of manufacturing and trading in order to improve the living conditions. 2.1.1.2. The views of providing microfinance services Three key theoretical points in providing microfinance are: (i) Traditional with preferential interest rates for credit and concentration; (ii) Ohio with high interest rates, the direct intervention of the State; (iii) New institutions. The credit institutions are now focusing apply new institutional perspective to reconcile the existing problems of the previous two views. 2.1.2. Microfinance operation of credit Institutions 2.1.2.1. Features of the microfinance operations of credit institutions Unlike microfinance institutions often provide microfinance synthetic approach, credit institutions mostly minimal approach is to perform financial intermediation activities. In particular, customers, products and services, procedures, requirements of security asset and method of approach differ from MFIs.. 2.1.2.2. Microfinance operation of credit institutions Microfinance operations to credit institutions in accordance with generally minimal approach and implementing financial intermediary role include the following operations: (i) credit activity, (ii) capital mobilization activities, (iii) payment operations, (iv) micro-insurance activity and other services. 7 2.1.3. Credit institutions providing microfinance services 2.1.3.1. Definition and classification of credit institutions The types of credit institutions provide formal SCM area include: (i) Development Bank, (ii) Savings bank and Postal saving bank, (iii) Commercial banks, ( iv) The credit institutions non-bank. 2.1.3.2. Fundamental principles for credit institutions to develop microfinance operations Ledgerwood (1999) provides 12 fundamental principles that credit institutions must follow if they choose to focus activities on microfinance client groups, including some specific principles of microfinance as universal figure out what services customers really necessary, establish appropriate forms of distribution, cover the cost of the loan interest rate reasonably positive. 2.2. Developing microfinance operations of credit institutions 2.2.1. Concept of development of microfinance operations In the thesis the development point of credit institutions operations focused on the perspective of credit institutions are: increase access to microfinance clients and ensure the financial sustainability of the credit institutions. 2.2.2. The indicator assessing the development of microfinance operation With the objective of the thesis, indicators on outreach and sustainability are used to measure the development of microfinance operation of credit institutions. 2.2.3.1. Outreach Indicator of outreach is measured through two angles: the breadth and depth of the outreach. Depth of outreach refers to the average lending rates of microfinance clients are served, while the breadth of outreach refers to the number of clients target of credit institution. 8 (i) Breadth of outreach Breadth of outreach of credit institution is the level of access to customers across the board, to be assessed through the diversification of supply of products and services; the level of customer growth, the outstanding loans and deposit balances. (ii) Depth of outreach With depth indicators reach an average loan value mean the total average loan balance divided by the number of borrowers (Woller and Schreiner, 2000). This thesis in due consideration of a country, can simply average loan size. The lower this value indicates is a level deeper of outreach of credit institution. 2.2.3.2. Sustainability For credit institutions, there are two indicators of financial sustainability that we can observe in assessing the effectiveness of the credit institution's return on total assets (ROA) reflect the ability organizations to develop productive assets and for organizations sponsoring the return on equity (ROE), which measure the return of investment of the owner. 2.2.3.3. The relationship between the outreach and sustainability of the credit institutions The issues of Outreach and sustainability issues and has close relation. Sustainability is the basis for expanding access to credit, and to expand access, then credit institutios can then be capable to ensure financial sustainability. 2.2.3.4. The ratio of overdue debt / total loans and bad debt / total loans 2.3. Factors affecting the development of the microfinance operations of credit institutions The sustainabilityand the outreach of microfinance operationsofcreditinstitutions depends on many factors, which are divided into two groups: internal factors and external factors. 2.3.1. Factors belong to credit institutions (i) Development strategy and business plan implementation strategies, (ii) Owned properties and operational model, (iii) the potential finance of credit institutions, (iv) Products and Services navigate to microfinance clients, (v) Network of credit institutions, (vi) Human resources of credit 9 institutions, (vii) Risk management capacity (viii) The infrastructure of information technology. 2.3.2. Factors belong to environment (i) The regulatory environment, (ii) Economic and society environment. 2.4. International experiences and lessons for Vietnam to develope microfinance operations in credit Institutions From the successful experience in the development of microfinance operations of credit institutions in the world, three lessons for Vietnam credit institutions as follows: (i) Improving the regulatory environment for microfinance operations of credit institutions, (ii) Select appropriate operational model for Vietnam credit Institutions, (iii) Design various products and services, consistent target customer needs. Chapter 3: THE SITUATION OF DEVELOPING MICROFINANCE OPERATION OF VIETNAM CREDIT INSTITUTIONS 3.1. Overview of the microfinance operations of Vietnam Credit Institutions 3.1.1. Economic environment Vietnam is a very potential market for microfinance services, has about 60 million people (more than 70% of the population) reside in rural areas and 24.4 million people (about 67% of the workforce at a young age and mature) (GSO, 2014 (cited in OECD, 2015)). The 02 decades GDP per capita actual up to three times. Along with the economic development of the country, rural areas are being converted quickly. Demand for capital and financial services for the development of agriculture and the rural economy in general and families in particular are huge. Although Vietnam has a system of microfinance service providers is quite powerful but still not enough to meet the needs of microfinance, especially only a few banks offer microfinance services 3.1.2. Regulatory environment It is the first time in history, Microfinance was regarded as a kind of formal credit institutions, the central bank is managed according to Law No. 47/2010 dated 16.06.2010, which is oriented Microfinance Sector 10 Development Strategy in 2011-2020 (Decision No. 2195 / QD-TTg of the Prime Minister dated 26/12/2011). 3.1.3. Development status of microfinance operations of Vietnam credit Institutions Currently the major Vietnam credit institutions with microfinance operations include Vietnam Bank for social policies, Co-operative Bank of Vietnam and system Central People's Credit Funds, MFIs and commercial banks typically Agribank. - Vietnam Bank for Social Policies (VBSP) has the largest market share, with the best outreach in the main credit provider. - Co-opbank and PCFs system and impressive growth in the period 2012- 2014, with outstanding loans increased from $ 1 billion to $ 1.78 billion - MFIs have very good depth of outreach but not reach good breadth and not achieve sustainability with three new organizations formalized (TYM, M7 and MFI Thanh Hoa). - Agribank has a total size of the largest operations in agriculture and rural areas.However the number of borrowers and saving customers, microfinance loans behind the VSPB, Co-opbank and PCFs systems, the development of microfinance operations in Agribank is assessed through outreach and sustainable criterias:  Outreach  Breadth of outreach Advantage: The highest professionalization level compared with other units on the microfinance market with (i) product diversification, the development potential of modern banking services compared to other banks; (Iii) attract many different types of customers. Disadvantage: Is not "friendly" to customers with poor and low-income loans are usually large-scale, complex procedures and high demands on security assets.  Depth of outreach Agribank selection focuses on the upper market segment, customers are worth relatively big loans and they often have above-average incomes than the living. 11  Sustainability With the advantage of sustainability banks should operate better Agribank main credit institutions providing services microfinance but financial sustainability and institutional sustainability was ensured. The ratio of bad debt and bad debt balance at a high level compared with other credit institutions. 3.2. Developing microfinance operation of Lien Viet Post Join Stock Commercial Bank 3.2.1. Overview of Lien Viet Post Join Stock Commercial Bank 3.2.1.1. Introduction of Lien Viet Post Join Stock Commercial Bank 3.2.1.2. The suitability of building microfinance operation in Lien Viet Post Join Stock Commercial Lien Viet Post Join Stock Commercial Bank has the opportunity to develop microfinance operations in Vietnam as this is a potential market on the basis LienVietPostBank are eligible for deployment of microfinance its advantages through operational network nationwide covering al