An investigation into challenges of small and medium enterprises lending in commercial bank - The case of BIDV Binh Dinh

Abstract

It can be seen that the Vietnamese economy in the first decade of the 21st century has a significant development in the banking sector. Commercial banks represent a big role in this development. The banks’ capital rose rapidly and became an important factor in Vietnamese economic growth. Besides, small and medium enterprises are founded and join the economy ebulliently, contribute significantly to GDP of the country. Commercial banks as a group are the main source of external finance for SMEs. However, there are number of internal and external factor which may bias the entire banking system against lending to SMEs. The statement of the problem is that these commercial banks are most often unwilling to increase loan funding without an increase in the security given thereby leading to uneffective exploitation of SME customer segment. Due to this issue, recognizing and limiting challenges in SME lending are hard work for all commercial banks. There is no model of solution for all banks. The objective of this thesis is recognizing risks in SMEs lending and investigating Bank of Investment and Development Vietnam (BIDV) as a case study. The research for this thesis is mainly done in BIDV Binh Dinh Branch with the help of six employees and two managers of Corporate Lending Division, Credit Management Division and Corporate Service Division. This thesis also tries to create a picture of the lending procedure and criteria of BIDV Vietnam. Finally, author will include the conclusion and short recommendation for improving credit risk quality at BIDV.