STATUTORY DECLARATION

I herewith formally declare that I have written the submitted Bachelor Thesis
independently. I did not use any outside support except for the quoted literature and
other sources mentioned at the end of this paper.
I marked and separately listed all the literature and all other sources which I
employed producing this academic work, either literally or in content.

Ha Noi, 09/05/2021

Signature
 ACKNOWLEDGEMENTS
First of all, I would like to thank the Administrators of National Economics
University, the teachers of the Excellent International Business division and the
Center for Advanced Educational Programs for supporting me to complete my
graduation thesis.
I would like to express my deep and sincere gratitude to Dr Nguyen Anh Minh
for allowing me to conduct the research and providing invaluable guidance throughout
this study.
At the same time, I am extremely grateful to my friends, colleagues and family
for helping and offering useful information for the research.
Despite being serious and trying hard in the process of implementing the thesis,
my research ability is modest; therefore, my shortcomings cannot be avoided. I hope
to receive constructive comments from teachers and people interested in the topic so
that the topic can be completed and effectively applied in practice.
 TABLE OF CONTENTS
ABBREVIATIONS ..................................................................................................1
LIST OF TABLES, LIST OF FIGURES ................................................................2
INTRODUCTION ...................................................................................................1
1. Rationale of the research ..............................................................................1
2. Objectives and research questions ...............................................................2
3. Methodology of the research ........................................................................2
4. Subject and Scope of the research ...............................................................3
5. Structure of the research ..............................................................................3
CHAPTER 1: THE THEORY OF TRADE FINANCE FOR IMPORTERS OF
COMMERCIAL BANKS .........................................................................................4
1.1.Overview of international trade finance of commercial banks ...............4
1.2. Trade finance of commercial banks for importers .................................9
1.3. Factors affecting trade finance of commercial banks for importers ....17
CHAPTER 2: TRADE FINANCE FOR IMPORTERS AT MILITARY
COMMERCIAL JOINT STOCK BANK DURING 2015 - 2020 PERIOD ............ 23
2.1.Overview of Military Commercial Joint Stock Bank ............................ 23
2.2. Factors affecting trade finance for importers at Military Commercial
Joint Stock Bank during 2015 - 2020 period ................................................ 33
2.3. Analyzing trade finance for importers at Military Commercial Joint
Stock Bank during 2015 - 2020 period ......................................................... 36
2.4. Overall assessment of trade finance for importers at Military
Commercial Joint Stock Bank during 2016 - 2020 period........................... 46
CHAPTER 3: SOLUTIONS TO PROMOTE TRADE FINANCE FOR
IMPORTERS AT MILITARY COMMERCIAL JOINT STOCK BANK UP TO 2025
............................................................................................................................... 55
 3.1.Direction to develop trade finance for importers at Military Commercial
Joint Stock Bank up to 2025 ......................................................................... 55
3.2. Measures to promote trade finance for importers at Military
Commercial Joint Stock Bank up to 2025 .................................................... 58
3.3. Recommendations to the government and State Bank of Vietnam ......64
CONCLUSION ......................................................................................................67
REFERENCES .....................................................................................................68
 ABBREVIATIONS

Full name Abbreviation

1 Trade finance TF

2 International trade finance ITF

3 Military Commercial Joint Stock Bank MB

4 State bank of Vietnam SBV

5 Letter of credit L/C

6 Telegraphic transfer reimbursement TTR

7 Import financing IF

8 Usance payable at sight UPAS

9 Vietnam dong VND

 LIST OF TABLES, LIST OF FIGURES
Figure 1.1: MB Bank’s organizational chart
Table 2.1: Mobilized Capital of MB Bank
Table 2.2: Analysis of loan portfolio by quality
Table 2.3: Total loans of MB Bank
Table 2.4: Net Gain from trading of foreign currencies
Table 2.5: Net gain from service activities
Table 2.6: Business performance results in MB Bank
Table 2.7: Business results of ITF activities at MB Bank during 2016 - 2020
Table 2.8: Business results of Import financing at MB Bank during 2016 - 2020
Table 2.9: Import L / C activities at MB Bank during 2016 - 2020
Table 2.10: Import TTR activities at MB Bank during 2016 - 2020
Table 2.11: Import collection activities at MB Bank during 2016 - 2020
 INTRODUCTION
1. The rationale of the research
Since globalization is in vogue, a strong correlation between local and
international countries cannot be denied. In the cut-throat world of economy, a
country’s prosperity can be attributed to extensive diplomatic and commercial
relations with others. Therefore, import-export activities have been regarded as the
main factors, which enhance international economics.
The role of commercial banks in supporting the operations of import and export
enterprises is extremely important, especially for Vietnamese importers. Not only
acting as a financial intermediary to pay for goods and services to overseas import-
export enterprises, but commercial banks also support importers by financing business
capital, ensure the supply of foreign currency or use the bank's reputation to ensure
businesses in many different forms, which are responsible for the smooth running of
their international business activities.
Concerning commercial banks, trade finance in general and financing activities
for importers, in particular, have brought significant income sources to the bank,
reducing the dependence on business activities results in risky lending activities.
Besides, commercial banks also have the privilege of diversifying their products and
services, which enhances their competitiveness with others credit institutions. Thus,
this activity is being prioritized in commercial banks.
In 2020, according to the Asian Banker's assessment, MB leads among
Vietnamese banks in digital transformation journey thanks to its large and methodical
investment in information technology systems - this is the foundation for MB to
pioneer in digital transformation. However, the speed of increasing customers in trade
finance is not growing largely due to the fact that MB does not provide diversified
products for small corporation in angricultural field. In addition, the number of
customers paid through the account of MB is modest as compared to other Big 4
banks. Most of the staff are not knowledgeable, boldly advising, flexibly using
specialized products and still prioritize to encourage customers to use traditional
methods such as letter of credit, documentary collection, or TTR. Last but not least,

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during processing the documents, Trade finance specialists cannot detect mistakes,
announce the customers about the potential risks of payment methods and lose track
in checking the solvency of customers.
Consequently, it is necessary to properly assess the current situation, thereby
proposing appropriate solutions to develop trade finance activities for import
enterprises in Vietnamese commercial banks in general and Military Commercial
Joint Stock Bank in particular. Against this background, it is important to analyze and
propose solutions to “Promote trade finance for importers at Military
Commercial Joint Stock Bank”.
2. Objectives and research questions
- Objectives:
Analyzing the current situation of international trade finance activities for
importers at Military Commercial Joint Stock Bank, thereby evaluating the
phenomenon, offering effective solutions to develop it.
- Research questions:
To determine the correct situation, propose appropriate solutions to develop trade
finance activities for importers at Military Commercial Joint Stock Bank, the topic
identifies the following research tasks:

• Research using armchair knowledge of trade finance activities for importers at

commercial banks.
• Analyzing and evaluating the current situation, from which draw the achieved
results and limitations in international trade finance activities for importers at
Military Commercial Joint Stock Bank.
• Proposing a host of solutions and recommendations to develop international
trade finance activities for importers at Military Joint Stock Commercial Bank.
3. Methodology of the research
To accomplish the research tasks, the thesis is expected to use the following groups
of research methods:
a) Theoretical research methods:
• Theoretical analysis and synthesis method
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 • Methods of classification and systemization
b) Practical research methods:
• Methods of analysis, synthesis and comparison based on statistics
• Case study method
• Analyzing method, summarizing experience to find effective solutions
4. Subject and Scope of the research
- Research subject: Promoting trade finance for importers at Military
Commercial Joint Stock Bank
- Research scope:
• Space: Military Commercial Joint Stock Bank
• Time: Statistics collected from 2015 to 2020
5. Structure of the research
Apart from Introduction, Abbreviations, Table of contents, List of tables and figures,
Conclusion, References and Recommendations, the contents of the thesis are
organized into 3 chapters:
Chapter 1: The theory of trade finance for importers of commercial banks
This chapter introduces the basic information of trade finance of commercial banks,
how it benefits the importers and factors affecting trade finance.
Chapter 2: Trade finance for importers at Military Commercial Joint Stock Bank
during 2015-2020 period
This chapter gives information about the overview of Military Commercial Joint
Stock Bank, analyze its trade finance performance of the bank and factors affecting
that operation, then make an assessment.
Chapter 3: Solutions to promote trade finance for importers at Military Commercial
Joint Stock Bank up to 2024
This chapter gives direction and measures to develop trade finance for importers at
Military Commercial Joint Stock Bank up to 2024. In addition, recommend to the
government and State Bank of Vietnam.

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 CHAPTER 1: THE THEORY OF TRADE FINANCE
FOR IMPORTERS OF COMMERCIAL BANKS
1.1. Overview of international trade finance of commercial banks
1.1.1. Definition of international trade finance of commercial banks
Due to the economic development of countries, the social division of labour
takes place. This division beyond national borders leads to specialization and
cooperation among companies of different countries, leading to an increase in not only
domestic goods but also the exchange of goods and services. Additionally, this also
solves the differences in economic conditions between countries such as land, climate,
minerals ... giving each country an advantage in the production of certain types of
products. and they work with each other to balance the redundancies of one product
with the shortage of another. At the same time, participating in the process of
international cooperation and division of labour will boost a country’s development
due to the application of achievements in science, technology and technology in the
world, solving problems in terms of capital, human resources, and management
qualifications ... That requires expanding the scope of international exchange and thus
meeting the increasing consumer demand of each country.
Thus, international trade is the process of exchanging goods and services
between countries in the form of buying, selling or exchanging compensation at an
equal price to satisfy the demand for goods or services that each country cannot
produce. International trade is of paramount importance to facilitate the participation
of countries in the international division of labour, economic development and
enrichment for the country. The development of international trade is an objective
factor leading to the formation of the need for international trade finance.
“International trade finance is an objective economic phenomenon, which is a
combination of direct or indirect financial assistance policies or solutions for
businesses trading internationally in one or some or all of the stages of from
production to consumption of products or services provided in the marketplace. (Dinh
Xuan Trinh, International payments in International trade finance 2012, p.460).

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 Based on donors, it can be classified into international trade finance of the
Government, the Central Bank, financial intermediaries, but mainly banks and
enterprises. In developed countries, commercial banks account for about 70% of
financial intermediaries while in Vietnam this proportion can be up to 90%. Therefore,
commercial banks will be the main sponsor for international trade activities in
Vietnam.
For commercial banks, international trade finance is the business of providing
capital and support services to meet the specific financial needs and reputation of the
business of import-export enterprises in the process of international commercial
transactions. The international trade finance of commercial banks comprises the
preparation of financial means and financial alternatives (credit loans) to fulfil
payment and production obligations in external economic relations as well as ensure
the related payment process. The scope of international trade finance of commercial
banks includes sponsorship for exporters and importer in the short, medium to long
term. Banks that are in the areas of international operations and exchange provide
diversified assistance to customers, helping them ensure profits while minimizing
risks.
In international trade, importers may have to deal with exporters that they do not
know, far from the border, language barrier, unfamiliar customs ... Thus, importers
and exporters cannot grasp with certainty each other's financial ability, prestige and
ability to perform the payment responsibility, so it is difficult to predict the risks that
may occur. With the unique technical measures of international trade, the advantage
of information along their reputation, commercial banks can ensure fast and accurate
payment. In addition, the bank also helps importers and exporters to eliminate risks
through hedging operations, sales contracts or foreign currency conversion,
depending on customers' choices. Since then, the bank has become an important
bridge between the buyer and the seller, making the trade process more convenient.
1.1.2. Forms of international trade finance of commercial banks
1.1.2.1. Trade finance for exporters
Trade finance for exporters means that commercial banks provide loans to help
businesses do the production, trading and processing of export goods. The purpose of

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export trade finance is to promote domestic production, encourage exports. It solves
the temporary shortage of capital needs of customers in the export business (the
process of collecting goods as well as processing goods prepared for export). In
addition, this is also a channel for foreign currency regeneration to serve the bank's
import activities.
1.1.2.2. Trade finance for importers
Import financing is a crucial part of commercial banks' international trade operations.
The import finance operation is to provide financial support and related paperwork so
that the importer can fulfil its obligations in the sales contract. The value of finance is
usually ranging from medium to large. The object of import finance is the importer's
money demand for payment to the exporter in the sales contract. The financing period
is usually short term. Importing organizations that want to receive financing must also
have certain conditions such as import business license, permitted imported products
in accordance with the law and some requirements for financial capacity to ensure the
repayment of the loan.
Although both import and export finance play a fundamental role, import financing is
now generating more income for commercial banks. There are also more diversified
modes of import financing. This is because most of the importing enterprises need
financing both in terms of credit, payment methods and foreign currency needs. Base
on that, banks can launch diverse product packages, which are suitable for the needs
of each business, thereby maximizing income from services. Details of the forms of
trade finance for the importer will be stated in section 1.2 of this thesis.
1.1.3. Role of international trade finance
Trade finance in general and import financing, in particular, have created the
conditions for businesses to participate more effectively in international trade, which
is one of the activities that enhances business activities. of the bank, while at the same
time promoting economic growth.
1.1.3.1. For importers
- One of the most important issues for importers is capital.
Since both parties are in different countries, it takes a great deal of time from signing
the contract to delivering goods. Therefore, importers are oppressed with an
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abundance of capital. Another phenomenon is that advance payment is required to
prevent risks without receiving products. By providing international trade finance
services such as providing credit, supporting international payment methods,
customers can use short-term and immediate financial resources to compensate for
the shortage of capital or increase capital turnover and the ability to use capital,
especially in international trade deals that require huge capital.
- The bank's involvement also reduces the risk of import activities for businesses.
Import and export activities usually take place in two different countries. Therefore,
the understanding between the importer and the exporter is not adequate and accurate.
Thanks to authentic knowledge of the international market as well as particular
professions of commercial banks, importer and exporters will feel more secure to
receive their correct amount of money and goods through intermediary banks.
- The role of a payment intermediary in commercial banking activities helps the
payment process at the request of customers to be processed quickly,
accurately, safely, and conveniently and at maximum fee savings.
During the payment process, if the customer cannot afford the bank's financial
support, the bank will discount the export documents. The bank can also monitor the
business situation of the business to advise customers and adjust customer strategies,
and disburse to the exact object on the right schedule, ensuring whether import
customers use loans for the right purposes and do sound business activities.
1.1.3.2. For commercial banks
- Significantly increase revenue and enhance the reputation of commercial
banks.
Trade finance for importers of commercial banks is diverse in terms of forms and
customers, so promoting the development of international trade finance can help
commercial banks earn huge revenue from interest rates and service fees to
significantly improve their business operations. Depending on the different forms of
international trade finance, banks can set different fees such as payment service fees,
guarantee service fees, discount rates, lending rates ... These earnings are often of no
small profit because the value of international trade finance contracts is always quite
high.
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 - Promote the general development of other services of commercial banks such
as credit operations, international payment operations, foreign exchange
trading…
International trade finance for importers has a strong relationship with others services.
Since then, activities are smoothly coordinated to boost profit owning to internal
cohesion among departments. Commercial banks will have the ability to supply
diversified products and services to customers, then improve the quality of services
to satisfy their needs. Above all, it is essential to focus on enhancing competitiveness
and business performance.
- Expanding the partnership with foreign commercial banks and accessing the
global financial and banking markets.
Since then, commercial banks have had the great privilege to level up their position
as well as promote their reputation, which are determining factors to participate in the
process of liberalization of the financial and banking market and the trend of
international economic integration.
1.1.3.3. For the economy
International trade finance brings a huge financial source to the country,
encouraging enterprises to improve their technology, supporting economic
restructuring, promoting production.
Trade finance for importers helps to expand the supply of inputs for production,
contributing to raising domestic production capacity and the dynamism of the
economy as well as stabilizing the market.
Through trade finance activities for importers, enterprises are supported in
capital to modernize production lines, import modern machinery and equipment,
expand production scale to achieve competitive advantage. Thus, import finance has
contributed to the modernization of the national economy, which promotes economic
development.
Moreover, due to the trend of trade liberalization, the development of each
country no longer depends only on itself, but also on the relationship with other
countries, domestic and foreign market. Trade finance for importers makes the

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domestic market more attached to foreign markets, creating pressure and also a
driving force for manufacturing enterprises in the face of fierce competition. To be
able to stand firm in the market, undoubtedly domestic enterprises have to improve
their production and business capacity and efficiency. Thus, the international trade
finance for importers is one of the bridges to tighten the link between the national and
the international market.
1.2. Trade finance of commercial banks for importers
1.2.1. Concept of international trade finance of commercial banks for importers
Trade finance for importers means that commercial banks provide capital and support
services to help businesses carry out import activities. At specific points in the
production and business process, the importer may arise the need for financing on
many fronts. The Bank can undertake import financing in a variety of forms and
several contract execution phases:
- Contract negotiation phase:
(1) Consulting on appropriate payment conditions, payment methods,
documents to ensure benefits and avoid risks for importers; (2) By its
reputation, to guarantee to sponsor/support the contract performance of
the importer for the exporter.
- Contract execution phase:
(1) Provide credit to the importer based on a credit contract between the bank
and the importer, closely follow the rotation of goods and documents to
disburse directly to beneficiaries, thereby ensuring that importers use the loan
for the right purpose; (2) Implement international payment methods as required
by importers.
1.2.2. Forms of international trade finance of commercial banking for importers
1.2.2.1. Forms of international trade finance during the contract negotiation
phase
(1) Consult about payment conditions, payment method, payment documents
During the contract negotiation phase, the commercial bank plays an important
role in advising the importer on the terms of payment, the method of payment to be
used and the required payment documents. Thanks to its experience in international

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trade finance, the commercial bank has a certain understanding of business sectors,
the market of the exporting country as well as the possible risks that the importer and
exporter are not aware of. From there, there is appropriate advice to both help
minimize risks and ensure the interests of buyers, and create favourable conditions for
exporters in preparing documents for payment, thereby the trade was run smoothly.
One of the most common cases is that the importer and the exporter cannot agree
on the payment method because the exporter requests the importer to pay in advance
100% of the value of the goods to ensure that the importer will comply. Meanwhile,
importers are afraid of the risk of losing or stagnating capital. The importer's
commercial bank may advise the mode of payment guarantee or documentary credit,
in which the importer's bank acts as an intermediary undertaking payment on behalf
of the importer (Payment guarantee method). It will prevent the worst-case scenario
if the importer refuses to make payment under the contract, or pays the exporter
according to the delivery schedule (for documentary credit). Thus, thanks to the
knowledge of payment methods, commercial banks can advise on appropriate
payment methods to both limit risks and ensure economic benefits for both importers
and exporters. The importer banking specialists can even participate in the negotiation
process with the exporter, clarify the contents related to the future payment so that the
exporter also feel more secure and agree with the payment methods recommended by
the importer and its bank. Shortly, with its reputation, experience and expertise, the
commercial bank has created a better position for the importer in the process of
signing a foreign trade contract.
(2) By its reputation, the bank ensures to finance/assist importers to perform
foreign trade contracts with exporters.
Because international trade is characterized by a host of risks arising from
geographical and legal barriers, exporters are often very careful in choosing partners
to transact with. Especially with foreign trade contracts, the exporter does not want to
deal with an importer that is not renowned or able to afford the payment. It is risky
when the exporter has prepared the goods according to the contract but the importer
declined or delayed payment due to lack of capital. At this time, the role of the
importer's bank is of paramount importance. By committing to sponsoring the
project/business plan of the importer, the commercial bank can ensure the exporter
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that this transaction has been financed by a reputable bank. Thanks to that, the contract
negotiation process took place more quickly and smoothly. In some cases, the exporter
and importer may even designate the issuing bank of the guarantee/letter of credit in
the foreign trade contract by name (payment guarantees/letters of credit must be
issued by Bank X) to minimize risks.
1.2.3.2. Forms of international trade finance during the contract execution
phase
(1) Issue a guarantee
Guarantee issuance is a form of a commercial bank pledge to honour an obligation
on behalf of the Principal if it fails to perform or fulfil its commitment to the
Beneficiary. In foreign trade, sometimes the exporter does not aware of the payment
capacity and the credibility of the importer. Therefore, the exporter will require the
importer to use an organization, usually a bank, to guarantee payment. It is the
importer's bank's responsibility to comply with its commitment to the exporter in case
the importer cannot follow the terms of payment as stated in the foreign trade contract.
The guarantee has two forms: a letter of guarantee from a bank (Letter of
Guarantee) and a letter of backup credit (Standby L / C). In this method, the bank is
the Guarantor, committing to pay the beneficiary a certain amount if the Principal
violates its obligation specified in the letter of guarantee or the backup credit. Only if
a break of duty occurs do the bank must honour the pledge. Therefore, the bank must
not pay the Beneficiary in all cases of guarantee.
Guarantee issuance request can come from the Principal or a Bank. In case of
receiving a request for the guarantee from a customer, the bank must consider and
evaluate the financial capacity, the business reputation of the customer and the
feasibility of the project. At the same time, there must be measures to ensure solvency
such as deposit, collateral charge mortgages ... If the bank issues a counter-guarantee
letter on the basis of a request from another bank, it is necessary to evaluate the
financial capacity and reputation of the proposed bank together with the terms of that
bank's repayment. In this case, if there is a claim of guarantee from the Beneficiary,
the guarantee issuing bank must pay immediately based on presenting several
documents, usually a written claim of the Beneficiary due to the breach of the

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obligation by the Principal. In turn, the guaranteeing bank must be entitled to claim
reimbursement from the bank requesting the issue of the counter-guarantee.
Therefore, the proposed bank's commitment is of utmost importance. If the issuing
bank does not carefully review the proposed bank's commitments prior to the
issuance, a non-refundable risk may be encountered.
(2) Issue a Letter of Document (L/C)
A Letter of credit is an agreement in which an Issuing bank (letter of credit) at the
request of a customer (the Applicant) pays a certain amount for another person (the
Beneficiary), which is equivalent to the amount of the letter of credit. The bank can
accept a bill of exchange within that amount by the drawer if they make a proper
presentation.
Conditions for opening L / C at commercial banks:
+ Must have import and export business license, for entrusted import units must have
entrusted import contract. The unit must have a stable financial status and credibility
in the credit relationship. The entity must have collateral as a guarantee for the value
of the L / C or guaranteed by a trustworthy organization.
+ For the imported goods on the State's list, the unit must present the import license
issued by the Ministry of Industry and Trade.
+ L / C of imported goods must have a reasonable price and simultaneously prove
their legal, be appropriate production plan of the business and ensure the solvency of
the goods.
+ For deferred L / C, the guaranteed balance must be within the foreign loan limit
approved by the State Bank.
Appraisal of L / C opening documents: On the basis of appraisal, the bank decides
the margin L / C level. L / C escrow is considered a compulsory form at commercial
banks to ensure customers receive goods and pay L / C. High or low margin level
depends on the following factors:
+ Customer's solvency: the higher the solvency of the customer, the lower the margin
level, and vice versa.

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+ Target customers: The deposit level is low with loyal customers and vice versa.
+ Type of L / C: With the deferred payment of L / C, the deposit rate is usually lower
than the L / C at sight, because the purpose of deferred L / C is to borrow from foreign
capital. A high margin level will lead to the customer’s capital stagnation.
+ Type of imported goods, consumption of the goods and fluctuations of prices in the
commodity on the market. For items that are easy to consume, the market is stable
and the price is less volatile, the margin level can be low.
On the basis of a combination of the above factors, the margin L / C norms of banks
will determine the specific margin level. Deposits are made by deducting Vietnam
dong equivalent account to transfer into the escrow account.
Letter of Credit method professional process:
(1) Importers submit an application to their bank requesting a letter of credit open to
the exporter.
(2) Based on this application, the Issuing bank will open a letter of credit. Through its
correspondent bank in the country of the exporter, the bank announces the opening of
the letter of credit and deliver it to the Beneficiary.
(3) Upon receipt of this notice, the Advising bank will notify the Beneficiary of the
full contents of the notice regarding the opening of the letter of credit. When receiving
the original of the letter of credit, the Advising bank immediately forwards it to the
Beneficiary.
(4) If the Beneficiary accepts the letter of credit, he/she will deliver the goods,
otherwise request the bank to amend the letter of credit in accordance with the
contract.
(5) After delivery, the Beneficiary creates documents according to the request of letter
of credit presented through the Advising bank notifying the Issuing bank for payment.
(6) The Issuing bank checks the document set if it matches the letter of credit, then
proceed to pay the exporter. If it seems inappropriate, the bank refuses to accept the
documents and sends them back to the Beneficiary.

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(7) The Issuing bank asking for the importer's money and transfers the documents to
the importer after claiming or accepting payment.
(8) The importer checks the document, if it conforms to the letter of credit, then refund
the money or accept the payment.
This method gives the importer a massive advantage. The importer will only
have to pay upon receipt of a set of documents in accordance with his requirements
specified in the L / C. The importer will not have to pay for the goods if it does not
comply with the requirements shown in the documents.
For banks, this method brings the most income since service fees for this method
are always higher than other methods. Being an intermediary, the bank takes primary
responsibility for the transaction.
However, this method still poses some risks to the importer and the bank because
it is an elaborate method of making documents. This cannot be completely avoided
because the payment depends only on the documents represented, so the correctness
of the documents is tremendously important. There is a phenomenon that the goods
presented by the document set to the bank are consistent in both quantity, quality and
time, but in reality, the goods received are not the same as in the commercial contract.
In this case, the importer was put at risk because of a cheating partner.
The risk is also higher because the bank has attached its responsibility to this
method as the Issuing bank, the Confirming bank will have to pay for the perfect
document set despite the importer’s insolvency. This is also a complicated method
that requires high professional skills of the executing staff, involving customary
practices and international law that easily lead to errors in operations, which damage
the interests of the bank.
There are different types of L / C based on: bank obligations; validity for the
beneficiary; transfer calculation; cyclic or not cyclic. However, people do not treat
each type of L / C individually because in practical use they are often combined.
+ According to the bank's responsibility: In terms of bank liability: Irrevocable L / C
can only be modified or cancelled with the consent of the beneficiary and the bank,
irrevocable L / C can be confirmed or not. If the exporter is unable to ask the importer

14
to issue a confirmed L / C, they will usually ask their bank, or a reputable bank in
their country, to confirm the L / C and commit to paying them. This confirmation is
called "silent confirm".
+ According to validity: In terms of validity, there is usually a difference between L /
C at sight, deferred payment, accepted or negotiated. In the case of an L / C at sight,
the issuing bank undertakes to pay immediately, based on the presentation of
documents in accordance with the terms and conditions of the L / C, directly to the
Beneficiary or through the bank. Conversely, when a deferred L / C is issued, the
Beneficiary gives the Applicant a period to delay the payment. In the case of
acceptance L / C, the exporter also grants the importer a deferment of payment, in
exchange for accepting the payment. If the payment goes into effect through
negotiation, the Beneficiary can request the Nominated bank to negotiate L / C, by
presenting required documentation in accordance with the L / C's terms and
conditions. If the Nominated bank accepts the negotiation (It has no obligation if the
L / C is unconfirmed), with L / C at sight, will pay the Beneficiary immediately.
+ By transfer calculation: A negotiable L / C must be requested by the opening and
authorized by the Issuing bank. In this case, the Beneficiary is entitled to request the
Nominating bank to transfer that L / C in whole or in part to one or more third parties
(second Beneficiary) under the terms and conditions of the original L / C. Transferable
L / Cs are often used by trading companies to avoid using their capital by transferring
L / Cs, opened by the importer to pay for the goods and to their suppliers. (usually
sub-suppliers).
+ Revolving L / C is often used in consumer goods trading when loading will be
carried out over a scheduled period. Thus an L / C opened for a certain amount
automatically recovers after the value of the L / C has been used up called the
Revolving L / C.
Other special types of L / C:
+ Commercial L / C: When a commercial L / C is issued, it is notified by the Issuing
bank directly to the Beneficiary. The commercial L / C is described as the Issuing
bank's formal commitment to the Beneficiary. The validity of a commercial L / C is

15
based on the so-called "Honest term", in which the Issuing bank undertakes to pay
anyone who holds the Bill of Exchange.
+ Back-to-back L / C: The sub-suppliers often require security for their revenues,
while a transferable L / C cannot afford it for the following reasons:

• The intermediary cannot persuade their importer to issue a transferable L / C.

• Transfers cannot be made due to the use of different currencies; terms of
delivery or payment; documents ...
In that case, the intermediary may request their bank to issue a back-to-back L / C to
his sub-supplier. The intermediary's bank will now receive a negotiated L / C on its
own, which is considered as a means of securing its obligation to issue L / C to the
sub-supplier. Since the back-to-back L / C is a separate L / C, the intermediary is the
only person responsible to the bank for the payment obligations.
(3) Bill of Exchange Acceptance
This is a form of bank credit for the importer that the bank commits to accept the
draft payable by the importer. Therefore, the exporter is guaranteed to do payment
until it is due. This method is often used when the exporter lacks confidence in the
solvency of the importer and request the buyer’s bank to pay the Bill of Exchange
drawn by them. This is only a form of financial security for the importer.
If the importer has enough money to pay when it comes to the maturity date, the
bank will receive an acceptance fee. The bank must not make any advance payment.
On the contrary, the bank must bear the loss if the importer cannot fulfil the payment.
Financing through the acceptance of the Bill of Exchange offers massive
advantages for import and export activities. For exporters, with the importer's
acceptance, they have a certain guarantee of the solvency of the Bill of Exchange and
can discount it at any bank. Bank acceptance has created the circulation of Bills of
Exchange and also provides exporters considerable benefit of preferential discount
rates. For the importer, this form will create a reputation if they can afford to pay the
exporter when it is due. On the other hand, the importer can also discount a Bill of
Exchange at another bank with a lower discount rate and obtain a favourable purchase
price if paid before maturity.

16
 (4) TTR
After signing a sale contract with the exporter, if the importer lacks payment
capacity, they can apply for a bank loan by asking the bank to pay the exporter through
its correspondent bank.
In case the importer is capable of paying and using the form of telegraphic money
reimbursement, the bank shall only carry out the normal form of services and collect
fees.
In order to ensure that the importer uses the loan for the right purpose, commercial
banks usually disburse in foreign currency or VND based on the value of the
respective foreign currency purchase contract, carry out the foreign currency purchase
and sale and immediately transfer direct payments to the supplier.
1.3. Factors affecting trade finance of commercial banks for importers
1.3.1. External factors
(1) Macroeconomic policy of State: By setting policies and regulations, the State
establishes a legal environment to regulate the activities of enterprises, so it has a great
influence on import and export activities.
- Tax policy: The competitiveness of import-export enterprises is directly affected by
tariff and quota, so the State's tax policies have a great influence on import and export
business activities. Import duties tend to reduce imports and thus increase the
country's foreign currency income. Currently, in our country, numerous goods are
subject to import duties to limit imports to protect the domestic manufacturing of
homogeneous goods. But in the current period, by executing the policy of integration
with the world, our country is moving towards the gradual elimination of some forms
of import tax protection. Therefore, this policy encourages the activities of importing
goods, thus requiring the role of commercial banks as payment agents.
- Foreign exchange management policy: The main responsibility in foreign exchange
management and money laundering prevention belongs to the SBV. If the State
always pays attention and strengthens the foreign exchange management activities for
money transfers to abroad, it will always ensure about the payment source of
enterprises without being checked, temporarily detained or even lost from foreign

17
partners due to violation of regulations on prevention of international money
laundering.
(2) The impact of the world socio-economic situation
A stable economic environment and political security to create trust for import-
export payment enterprises, attract foreign currency sources, and create a driving
force for economic development. A country, an area whose economy falls into crisis
or is always in turmoil, with strong economic and political fluctuations, easily leads
to shrinking credit activities as well as trade finance operations. Typically, the global
financial crisis in 2008 resulted in a series of banks in the US going bankrupt, followed
by Europe, the Eurozone, opening up a prolonged financial crisis. In many cases,
banks went bankrupt because they could not collect their debts, and could not lend to
cover costs when the demand for credit fell.
(3) Customer
Business performance, financial capacity, business professional qualifications,
ethical behaviour of customers are considered to influence the activities of trade
finance. As analyzed above, compared to other types of loans, trade finance in the
import-export sector is more complicated, requiring both customers and banks to have
a certain level of international practices and markets. When signing a contract,
customers must have non-detrimental terms to easily receive the bank's acceptance.
Customers may forge money-claiming documents. Therefore, the element of the
ethical behaviour of the customer also significantly affects the development of this
payment method. When customers cannot pay due to inability to recover capital,
cancel the contract or intentionally delay payment, the bank will lose its solvency and
influence on the business operations of the bank in general and import-export
businesses in particular. Therefore, with a sense of payment attitude, a deep
understanding of business expertise will promote overall development in trade finance
activities of the bank.
(4) International payment method
In the international sales of goods, revenue and expenditure of goods are the basic
rights and obligations of the two parties buying (importing) and selling (exporting).
Therefore, when negotiating about a payment method, the parties try to agree on
18
payment terms in their favor. Usually, depending on the relationship as well as the
payment product that banks finance differently, for new customers, first-time
transactions with sensitive markets, the financing method of telegraphic transfer is
less than letters of credit (L / C), because the risk of losing capital for TTR is higher,
so ensuring the payment method is one of the contributing factors in the development
of trade finance operations.
(5) Rivalry
In the market economy, competition is a certain factor that must have to make a
leap to the development of society. Commercial banks are growing in numbers and
they are constantly learning from each other, grasping psychology of and offer diverse
trade finance products. Each bank must determine the competitor's strengths and
limitations in order to analyze and put the right strategy for them. In addition, capture
the limitations to create their strengths, and trade finance products that banks have not
yet acquired, constantly create specialized products to create opportunities for
customers to participate in international trade, so that the bank will increasingly attract
customers and create a solid source of potential customers.
1.3.2. Internal factors
(1) Reputation of commercial banks
Currently, a series of similar products are offered from commercial banks,
customers' variety of choice will depend on many factors, of which reputation will
also become the criteria for comparison. in choosing cooperation objects from the
customer side. A bank with great reputation will be a bank that creates trust from
businesses, is a solid strength for banks to develop activities such as raising capital,
lending and in that has trade finance activities. Prestige is assessed based on financial
capacity, media reputation and customer satisfaction with the bank's products and
services. The prestige has captured the hearts of customers, the brand is thanks to the
prestige and also the prestige that makes the brand. In trade finance, a bank's
reputation and brand name play an extremely important role, not only within the
country, but also by international credit rating institutions and classification to require
their partners to choose transaction banks for international payment and money
transfers. Under the selection of foreign partners, it will make an important

19
contribution to the development of shopping centers as well as other operations at the
bank. Therefore, commercial banks need to build their own reputation and brands such
as: diversifying product categories, increasing solvency, building reasonable policies,
fast technical processing, training. The expertise and service attitude of the bank staff
are getting better.
(2) Banking technology
Banking technology includes all facilities and communication and payment
networks. Computer network systems and software, which support the rotation of the
application process, directly affect the quality of operations and products of trade
finance. Because trade finance activities have unique characteristics of serving cross-
border payments, requiring fast and accurate information transmission, thus the
quality of banking technology can ensure the premise to promote trade finance
operations.
(3) Employee qualification
Professional qualifications, foreign languages, and practical experience of the
direct staff will be important factor in attracting customers to the bank. Trade finance
activities in the import and export sector require professional staff to have a certain
degree. Therefore, staff must constantly improve their expertise, foreign languages as
well as their knowledge of international laws and practices to meet the needs of
customers. Besides, trade finance is relatively complicated, requiring not only banks
but import-export enterprises to have a certain understanding of international payment
operations. The bank staff play a very important role in consulting and exchanging
information with businesses to ensure the most convenient and effective international
payment. When customers are advised by bank staff with good professional
qualifications and meet all the most complex requirements, they will feel satisfied,
secure and want to work long-term with the bank. On the other hand, a high-qualified
staff will handle professional techniques correctly, limit risks for the bank, improve
and the quality of operations.
(4) Network of correspondent banks
In the recent period of Vietnam commercial banks, a number of banks have
actively taken steps to improve their competitiveness, in which Vietnamese
20
commercial banks have also actively developed the number of banks. agent aims to
increase the presence in foreign countries to improve service quality for domestic and
foreign customers.
The development of correspondent banks is very necessary, all banks when
performing international payment operations need correspondent banks abroad and
have an agreement between them in the trade. Establishing a good relationship will
help banks develop international payment services, minimize commission costs and
transaction processing time. Therefore, when customers transact with banks that have
wide agent relations with foreign countries, they will receive benefits and incentives.
When banks have a agency relationship, correspondent banking is greatly simplified
compared to services where other banks do not have an agency relationship and are
also a reliable place to transact information exploration, mutual support. Therefore,
correspondent banking is an important factor important in developing trade finance
activities in attracting customers as well as financing businesses through goods import
and export, more reliable when transactions are done through The bank has an agent
relationship with each other.
(5) Trade finance policy and products
Under competition stemming from the deepening economic liberalization, the
number of partners not only domestically but also abroad is increasing. In order to
meet the demand between buyer and seller, the payment method is one of the basic
conditions of the agreement between the trading parties. Thus, flexible payment terms
have become An inevitable part of every transaction. When participating in
commercial activities, businesses always want to receive support from many sides to
improve their competitiveness. Therefore, trade finance is indispensable, and trade
finance policy as well as product portfolio. is an important factor in making
sponsorship rules and regulations. Based on flexible products that meet the needs of
customers from time to time and different transaction situations, careful preparation
in policy making is the availability of financial means and financial replacements
(credit loans) to fulfill billing and production obligations in external relations as well
as to ensure payment processes related to customer solvency. The bank applies a
reasonable and effective trade finance policy, creating trust for customers, bringing

21
satisfaction in the use and selection of products. products and services at the bank will
be the key to maintaining and developing stronger customer relationships.
(6) Capacity of lending
When banks have strong financial capacity, they will ensure stable business
operations, to meet the needs of borrowing from customers so that the economy will
also Solid growth, the most important financial factor of a commercial bank depends
on many factors such as legal capital, reserve funds, ability to mobilize capital from
outside.
If businesses have a need to borrow capital for production and business,
especially capital financing to import and export goods, banks always face
competition and require an effective capital mobilization policy and Especially, it is
necessary to have sufficient sources of foreign currency to meet the overseas payment
demand for the import of goods and services for the production and trading of export
goods of enterprises. Commercial banks always have to ensure the capacity and ability
to give loans to always timely meet the needs of customers, which is of primary
concern at banks today.

22
 CHAPTER 2: TRADE FINANCE FOR IMPORTERS
AT MILITARY COMMERCIAL JOINT STOCK
BANK DURING 2015 - 2020 PERIOD
2.1. Overview of Military Commercial Joint Stock Bank
2.1.1. General information of Military Commercial Joint Stock Bank
Hanoi-based Military Commercial Joint Stock Bank (Transaction name: MB
Bank), an affiliated enterprise of the Ministry of National Defence, was established in
1994. The current principal activities of MB Bank are to perform remarkable banking
services encompassing making short, medium and long-term loans, mobilizing and
receiving deposits from organizations and individuals, providing settlement services
and other banking services approved by the SBV. Besides, MB also conducts
international trade finance services, foreign exchange transactions and discounting of
commercial papers, bonds and other valuable papers.
Enterprise registration certificate of a joint-stock company:
Business Code: No. 0100283873
Registered for the first time on 14 September 1994
License for establishment and operation: No. 100/NH-GP
Charter capital: VND 23,727,323 by 31 December 2019
2.1.2. Operational network and employees of Military Commercial Joint Stock
Bank
As of 31 December 2019, the Head Office is located at 21 Cat Linh street, Dong
Da district, Hanoi, Vietnam. MB has one (1) Head Office, one hundred and one (101)
branches (including branches in Laos and Cambodia), one hundred and ninety-eight
(198) transaction offices (including one (1) overseas transaction office), and one (1)
representative office in Russia and 15,691 employees in total.
2.1.3. Development and history of Military Commercial Joint Stock Bank
For the better part of the last 25 years, Military Bank, whose efficiency indicators
are always leading, has been one of the most industrial giants in Vietnam.

23
During 1994-2004 period
On November 4th, 1994, Military Bank was established with 20 billion capital,
25 employees and one transaction office at 28A Dien Bien Phu, Hanoi. Within the
first ten years, MB stressed the orientation towards business activities, development
strategies and brand awareness. Consistently focusing on the long-term goal and
vision, it successfully overcame the Asian financial crisis in 1977. Additionally,
mobilized capital increased 500 times in 2004 as compared to the past ten years, which
resulted in total assets by 7000 billion and revenue over 500 billion. It also launched
a new office in No.3 Lieu Giai, Ba Dinh, Hanoi.
During 2005-2009 period
The foundation for strong development was created during this period. This
period marked an essential turning point when MB adopted a vast array of radical
reform solutions to expand its operational scale, network, technology investment.
Moreover, the management function of the Head Office was segregated from the
business function of its branches. Also, MB decided to reorganize the business units
by the individual client, SME client, capital and money exchange, etc. Overall, the
period lasting from 2005 to 2009 could be said to lay a firm foundation for MB to
implement a sharp acceleration in strategic initiatives, which enabled itself to grow as
one of the Vietnamese leading financial organizations.
MB’s 15 years of development was marked in 2009 when it won the Third-Class
Labour Medal government grant.
During 2010-2016 period
In this new period, MB began to employ a strategy to win the high-ranking
position in the top 3 list of joint-stock commercial banks. Unfortunately, due to the
pernicious effect of the world economic crisis, the banking sector was drastically
restructured. Several banks witnessed a significant decrease in profits and even went
bankrupted. However, MB persisted in its sustainable development strategy to
become a dominant bank in the top 3 as planned. Because it was quite an achievement
in 2014, MB received the signal honour of winning the First-Class Labour Medal.
During 2017-2019 period

24
 Thanks to the vigorous implementation of strategic projects, MB has stimulated
rapid growth and breakthroughs in business activities. The most notable success was
a marked shift to digital banking such as upgrading the MB Bank app functions and
developing digital marketing activities.
2.1.4. Organizational structure of Military Commercial Joint Stock Bank

GENERAL MEETING OF SHAREHOLDER

HIGH-LEVEL COMMITTEE BOARD OF DIRECTOR CREDIT BOARD

INTERNAO CONTROL OFFICE

CEO RISK MANAGEMENT DIVISION

• Risk manangement
• Debt management
• Credit management
BUSINESS SUPPORT
SYSTEM MANAGEMENT
• International payment
• General plan
• Payment center
• Legislation
• Business support
• Media
• Accounting and financial ADMINISTRATION
BUSINESS DIVISION
• Information technology • Administration
• Treasury
• Human resource • Equipment & property
• Big business and
• Political bureau management
financial institutions
• South office • Quality management
• SME
• Contact center
• Personal customer
NETWORK DEVELOPMENT • Investment
• Branches
• Digital network
Figure 1.1: MB Bank’s organizational chart
(Source: MB Bank annual report 2019)

25
 Main functions and duties of a number of divisions and titles of Military
Commercial Joint Stock Bank is shown in Figure 1.1:
- General meeting of shareholders
As the highest authority of Military Commercial Joint Stock Bank, to decide on
matters related to the Bank's development orientation and direction in the medium and
long term, investment programs, and other issues. Issues related to banking operations
beyond the authority of the board of directors.
- Board of Directors
Elected by the shareholders, the Board of Directors decides the issues under its
authority and is authorized by the General Meeting of Shareholders to perform. The
Board of Directors appoints a permanent Board of Directors to regularly monitor the
operation of Military Commercial Joint Stock Bank and immediately handle matters
beyond the authority of the General Director (for example: loans, guaranteed loans
beyond the powers of the General Director, decisions related to issuing bonds,
investments not included in the business plan, and budget investments exceed 10% of
the annual budget). The Board of Directors consists of 6 members: 1 chairman, 2 vice
chairmen and 3 members.
- Control Board
It is the agency to inspect the financial activities of the bank, supervise the mortgage
operating the system of accounting, system operation, internal inspection and audit of
Military Commercial Joint Stock Bank.
Its mission is to regularly inform the board of directors about the situation of its
activities. The Supervisory Board has 4 members: 1 leader and 3 members
- Board of manager
Including 1 general director, 6 deputy general directors and 1 financial director.

• General Director
Appointed by the Board of Directors, who is responsible before the Board of
Directors, before the law for operating activities.
26
daily banking.

• Deputy General Director

The person who assists the general manager in working Operational or some areas of
operation of the bank as assigned by the General Director.
2.1.5. Business performance of Military Commercial Joint Stock Bank
2.1.5.1. Mobilized Capital
As can be seen from Table 2.1, we can see that the capital mobilization activities
at MB have strongly developed. With a nationwide branch network, attracting capital
in various attractive forms, MB's mobilized capital has grown continuously over the
years. By the end of 2019, MB's total mobilized capital was VND 250,000 billion, an
increase of 13.49% compared to 2018, and 1.5 times higher than 2016
In terms of capital structure: capital mobilized from economic organizations, the
citizens account for the largest proportion, in addition, capital from businesses and
organizations also accounts for a large proportion (over 40%). ). MB has a privilege
as compared to other credit institutions in mobilizing deposits from defence units and
the military, which is a large source of stable deposits with low cost of investment,
thereby bringing in significant benefits for the bank.
Table 2.1: Mobilized Capital of MB Bank
Total mobilized capital
Year Growth rate
(Billion)
2016 181,751 -
2017 195,148 7,73%
2018 220,277 12,88%
2019 250,000 13,49%
2020 275,000 10%
(Source: MB Bank annual report 2016-2020)

Thus, MB's capital mobilization has achieved good growth over the past 5 years,
promptly meeting the demand for credit and investment activities. In particular, with
the efficient operation quality and healthy financial situation and increasing prestige,
the amount of capital mobilized from the Bank's residents in recent years has
27
increased rapidly although the mobilizing interest rates are not at the highest level in
the group of joint-stock banks.
2.1.5.2. Investment and loans
Credit is one of the main profitable activities of MB, income from credit
operations on average accounts for over 70% of the total income of the whole system.
Over the past five years, MB can boast that credit has fundamentally changed in a
positive direction in both quantity and quality: its outstanding loans have grown
relatively steadily and steadily over the years. According to Table 2.3, by 2018, total
outstanding loans reached VND 180,257 billion, an increase of 21.07% compared to
2017 and more than 1.5 times of total outstanding loans in 2015; The year 2020
witnessed the highest outstanding loans of MB so far, doubling compared to 2018.
Credit quality was also managed better when the NPL ratio decreased from 1.64% to
1.16%.
Currency trading is a high-risk field, with uncontrollable risks, so according to
legal regulations, banks must make provisions for these possible risks. . At MB, the
Bank's provision expenses always ensure a minimum of> = 80% of NPL (by the end
of 2019, this ratio will be 123%). The biggest goal of MB is to grow sustainably,
increasing provisioning helps MB to be more proactive in banking management. MB's
level of provisioning for risks shows that MB is always prudent and capable of
handling bad debts, firmly protecting MB's business results. The above results, once
again confirm the Military Bank's efforts to strictly control credit quality in parallel
with credit development.
Table 2.2 elucidates that qualified debts have increased over the years, it can be
seen that MB's lending activities are better and better managed by risk management
and thereby also see the quality of loan appraisal. and the management of MB has also
been perfected over the years to achieve the above results, MB has introduced
appropriate credit policies, strictly complied with safety regulations in banking
operations. Focusing on reviewing loan portfolio including remote monitoring and
on-site monitoring, prudent credit development based on strengthening debt
restructuring, appropriate loan portfolio, MB minimized At the same time, MB
regularly directs, inspects and controls branches to ensure strict compliance with

28
 banking policies in the whole system, so that MB always strictly controls debt. out of
date.
Table 2.2: Analysis of loan portfolio by quality

2016 2017 2018 2019 2020

(Billion) (Billion) (Billion) (Billion) (Billion)
Current 115,624.100 144,555.920 176,179.134 214,847.313 205,868.128
Special 2,381.530 1,904.761 3,175.093 2,896.273 3,657.858
mention
Substandard 425,343 896,027 735,553 1,380.392 1,099.661

Doubtful 442,136 476,547 668,431 899,344 797,692

Loss 1,082.115 614,623 813,673 617,902 962,335

Margin lending 1,393.406 2,289.824 2,616.258 2,300.284 2,689.399

and advances
to investors of
the securities
subsidiary
(Source: MB Bank annual report 2016-2020)

Table 2.3: Total loans of MB Bank

Total outstanding loans The growth rate of
Year NPL ratio
(Billion) loans

2016 118,617 1.64%

2017 148,883 25.52% 1.33%
2018 180,257 21.07% 1.21%
2019 214,686 19.09% 1.3%
2020 250,331 16.61% 1.16%
(Source: MB Bank annual report 2016-2020)
2.1.5.3. Service activities
Net gain from trading of foreign currencies and services
Foreign business department buys and sells major currencies: USD, EUR, JPY,
CHF ... Thanks to external business, MB's revenue is 159,098 billion dongs (2016),

29
444,568 billion VND (in 2019). In 2019, the exchange rate of USD and VND was
relatively stable, MB has timely grasped the movements of foreign currency rates on
the international and domestic markets, applying many measures to trade foreign
currencies, increasing the exploitation.
Table 2.4: Net Gain from trading of foreign currencies
2016 2017 2018 2019 2020
(Billion) (Billion) (Billion) (Billion) (Billion)

INCOME FROM TRADING OF FOREIGN CURRENCIES

Income from foreign 301.844 380.809 390.305 679.108 897.253

currencies

Income from currency 228.054 259.466 282.993 400.500 649.264

derivatives

Income from trading gold - - (151) 306 1.359

EXPENSES FOR TRADING OF FOREIGN CURRENCIES

Expenses for foreign (227.598) (226.478) (192.012) (164.844) (172.843)

currencies

Expenses for currency (143.252) (300.443) (279.514) (470.410) (727.052)

derivatives

Expenses for trading gold - - (33) (92) (503)

Net gain from trading of 159.048 113.354 201.772 444.568 647.478

foreign currencies

(Source: MB Bank annual report 2016-2020)

30
 As a result, table 2.4 illustrates that MB's profit earned from forex trading in 2019
reached VND 444,568 billion, nearly 4 times higher than 2016. Profit from forex
trading activities, despite fluctuating, increasing and decreasing over the years, but in
general, after 5 years, the profit from this segment has doubled, from 159,048 billion
VND in 2016 to 2020 to 647,478 billion VND. In 2016, the total international payment
turnover reached 614,945 million USD.
By 2020, trade finance activities will continue to maintain the growth rate, so the
total international payment turnover reached 1,747 billion USD, nearly tripling 2017,
MB's international payment activities still ensure impressive growth. Compared to the
previous year, the total turnover of international payment in 2020 is 2.029 billion
USD, up 16% compared to 2017.
Thus, with many diversified and proactive business measures, MB has always
been at the top of banks for many consecutive years. high-profit margins in the
commercial banking systems.
Table 2.5: Net gain from service activities
2016 2017 2018 2019 2020
(Billion) (Billion) (Billion) (Billion) (Billion)
Settlement services 230,453 121,298 493,459 641,600 767,274

Treasury services 7,321 5,410 7,515 14,127 12,104

Advisory services - - 42,830 178,325 324,443

Insurance services - 102,359 362,648 1,520.532 2,465.210

Trust and agency
- - 1,688 13,897 30,504
services
Debt handling,
valuation and Asset 20,758 162,351 106,278 (8,718) 97,820
management
Securities brokerage
97,815 120,111 267,000 334,008 204,970
activities
Selling projects - - - (3,563) -

(Source: MB Bank annual report 2016-2020)

31
 Besides, MB's service activities are diversified, such as guarantee, payment,
securities service, quarterly management service, leasing service ... Through table 2.5,
MB's service activities have also made progress and well developed. In 2019, service
income reached VND 2750 billion, an increase of 12.8% compared to 2016.
MB's service business has also grown well over the years, with growth rates
consistently over 10% per year over the past 5 years. Especially in 2020, MB's net
profit from services increased by 3,536 billion dongs compared to 2016.

2.1.5.4. Business performance results

Table 2.6: Business performance results in MB Bank

Revenue The growth Profit before Tax The growth rate

Year rate of (Billion) of profit before
(Billion) revenue tax
2016 15,768 - 3,220 -
2017 17,971 14% 3,650 13%
2018 13,867 -23% 4,615 26%
2019 19,537 41% 7,767 68%
2020 24,650 26% 10,036 30%
(Source: MB Bank annual report 2016-2020)

According to Table 2.6, MB's business results showed good growth, especially
2020 was the year with the highest growth rate in recent years: MB's total assets
reached VND 411,488 billion, completing 113, 6% of the plan, up 13.6% compared
to 2019; charter capital reached 23,727 billion VND; loan balance reached VND
250,331 billion, completing 118.6% of the plan, up 21.1% compared to 2019. Net
interest income reached VND 18,000 billion, up 23.4% compared to 2019 and
accounting for 81% of the total operating income. of the bank. Net income from
service activities reached VND 3,890 billion, an increase of 41.4% compared to 2019.
MB is currently maintaining in the Top banks in terms of operating efficiency (ROA
is 2.09%, ROE is 21.79%).

32
2.2. Factors affecting trade finance for importers at Military Commercial
Joint Stock Bank during 2015 - 2020 period
2.2.1. External factors
(1) Macroeconomic policy of State
Based on the specific situation and fluctuations in the market, the State applies a free
or tight foreign exchange policy. This action will affect the supply and demand of
foreign exchange in the market and thus the entire economy of the country, initially
on the foreign trade and exchange status of the bank. During recent years, there have
been many fluctuations in the world economic situation that affect the exchange rate
fluctuations, which will make it difficult for both MB, foreign currency suppliers as
well as customers to have difficulty in buying and selling foreign currencies for
foreign trade contracts.
(2) The impact of the world socio-economic situation
Entering 2020, the COVID epidemic has disrupted global trade flows, Vietnam's
imports were estimated at $ 162.21 billion, they also slightly decreased by 2.2% over
the same period last year. The reason is the partners in foreign country, which supply
the source of products for importers, for example China, has been facing the
pernicious effect of COVID. They cannot deliver the goods as stated in the contract
on time. MB in this situation, on behalf of the exporters opening L / C, is being put
under pressure and loss because it has to fulfill the payment after 5 days receiving the
documents of the exporters, but the importers do not collect their goods.
(3) Customer
MB has grasped that and has explored the needs of customers, thereby clearly defining
the desires customers are looking for, promptly responding, and building a group of
potential customers to create a solid, long-term relationship. With such a background,
making a significant contribution to foreign currency trading activities for goods
import and export payment, meeting the type of foreign currency needs, customers
are flexible in using international payment methods at Since then, the commercial
finance activities at MB have grown stronger and more sustainable.
(4) International payment method

33
Strong growth in international trade led to an explosion of trade finance products from
banks. Recently, MB also launched online consultancy services on international trade
finance and payment products to help businesses overcome difficulties during the
epidemic season and promote international trade. Accordingly, customers are
consulted on all matters related to trade finance products and international payments
(including import L / C, UPAS L / C, collection assistance, international money
transfer, Receipt/backup letter of credit, discount (L / C, D / A, D / P, TTR),
sponsorship before/after delivery ...). This service will help optimize benefits,
minimize errors in transaction records, save time and costs for businesses.
(5) Rivalry
In Vietnam, Vietinbank and MSB is regarded as the top rivals of MB because they
have reputation and rewards in supplying best trade finance for importers services. By
that reason, MB always updates and learns the method of these banks, spontaneously
invests in marketing and technology to compete with them.
2.2.2. Internal factors
(1) Reputation of commercial banks
MB with great reputation is the one that has diversified operations in both size and
quality, which attracts a large number of customers to the bank. In trade finance
activities, the more important a bank's reputation plays, the more a bank's commitment
will directly affect the performance of a commercial transaction. Due to its own
prestige, commitments issued by MB can easily be accepted, reduce unnecessary costs
for importers and exporters, and build trust with customers.
(2) Banking technology
MB invests in modernizing banking technology to catch up with modern
technology of other countries in the region and around the world. The modernization
of banking technology reduces time, labor, administration and operations, as well as
customer service more quickly and conveniently. Since then, saving communication
costs such as telephone, fax, postage fees, ... and contribute to limiting some
operational risks in international trade activities for importers.

34
 As claimed by VnEconomy magazine, MB has recently become the leading bank
in Vietnam to successfully apply Blockchain by continuously implementing the full
life cycle of two imported letters of credit transactions in the Contour grid. Instead of
processing on many different systems, MB and Bangkok Bank (Thailand) have
pioneered the successful application of Blockchain technology, allowing the entire
business process of letters of credit and documents to be implemented, from issuing
to presenting documents under L / C on the same Contour network. Stakeholders,
including exporter, importer, issuing bank, and advising / presenting bank, are
involved in processing on the same network. The biggest difference compared to the
traditional handling of Letter of Credit is the instant update of transaction status for
both parties. This not only ensures information integrity and transparency among
stakeholders but also significantly improves processing time and saves costs for the
entire cycle. This can be said to be a turning point in the implementation of the most
important service in the field of trade finance.
(3) Employee qualification
MB's international payment staff is known for a team of experienced foreign
languages who have good foreign language skills right from the initial recruitment
stage. Being scrutinized in the international payment market, which is a complex
activity, containing many risks, international payment staff must understand the
regulations on foreign exchange trading to be able to advise customers, as well as
know the knowledge of import and export, holding on to Incoterm. MB’s international
payment officers are the ones who directly handle documents, so if they have deep
professional qualifications, it helps the international payment activities to be carried
out smoothly.
(4) Trade finance policy and products
Military Commercial Joint Stock Bank (MB) has just launched an open LC with
equity capital in order to financially support small and medium enterprises operating
in the import of goods.
The outstanding feature of this product is that MB offers a very preferential policy
on collateral. Specifically, at the time of LC issue, customers only need to mortgage
collateral (including the margin value) at least 30% of the LC at sight to execute the

35
import order. Minimum competitive LC margin is 5%. When LC payment is due,
customers will pay their own money in proportion to the remaining value of LC to
pay the export partner.
In case the customer does not have enough money for LC payment, MB will meet
the short-term borrowing needs with a loan period that is suitable with the customer's
loan payment source. Then, customers can use the imported goods formed from the
loan plan as collateral.
MB is currently implementing a series of improvements to improve the quality of
trade finance products such as pre-shipment export finance under original LC,
discount of export documents, opening LC with equity capital, in order to respond to
meeting maximum short-term as well as long-term capital needs of businesses in the
import-export sector.
2.3. Analyzing trade finance for importers at Military Commercial Joint Stock
Bank during 2015 - 2020 period
2.3.1. Organizing trade finance activities at Military Commercial Joint Stock Bank
MB conducts the market research to find out customers by classifying according
to The resources customers bring to the company:
Priority (VVIP customers): existing customers (those who have relationships for
more than a year or have transacted with the business). Based on the profit to rank the
customers who bring over 5% of the profits for the business are called super
customers.
CIB (Large customers): Subsequent customers accounting for less than 10% of
existing customers are called large clients. VVIP customers and large customers can
bring great value to the business, but the quantity is not as much as small and medium
customers, moreover, this value is only possible in the future. Therefore, it requires
the customer service staff to have the foresight to recognize these customers,
businesses must also be patient to open cooperation in the future.
SME ( Small and medium customers) : 85% of existing customers are called
midsize customers. This customer is not as profitable for the business as a large
customer, but this customer brings great real value to the business.

36
 Categorize customers according to local regions:
- Based on the local area, it can be divided into: local customers, foreign
customers, and international customers ...
- City, town, and rural customers can be divided on the basis of a dependent area.
MB continuously searches for convenient locations for customers' transactions -
densely populated places with many people passing by to place transaction points.
And we can see that MB is always present in main roads, intersections, urban areas in
big cities ... In 2017, MB opened 35 new branches and transaction offices in the North.
MB's transaction offices are always arranged in the direction most convenient for
customers.
MB's organizational model requires a separate commercial finance department
in both the business unit (branch/transaction office) and Operations and Business
Development Division of Head Office:
- Trade Finance Division under the Small and Medium Business Customer
Department (Trade finance specialist in customer relations), under the Branch:

• Trade finance executives conduct direct transactions with customers in all

stages of processing documents: Consulting options, receiving transaction
records, informing about the situation of documents, records, requesting
customers to supply additional documents if necessary, notify the LC due ...
• Processing documents: (1) Directly receive hard copy records from customers
/ from foreign banks, is responsible for keeping hard copy records and scanning
records to provide to the head office in the process. handling records; (2) Check
the first time that the customer file provided is complete and in accordance
with MB's regulations, enter data and transfer the file to HO for further
processing.
• Coordinate with branch credit department to cross-sell trade finance products
- Import and Export Services Department, International Money Transfer Department
under Payment Center, Operations Division:

• Receive swift power from abroad, notify the Branch if necessary, to notify the
Customer

37
 • Quarterly / annually, to check and control the record storage and processing
processes at the Branch
- Trade Finance Department under the Business Development Department of SME
Division:

• Receive scanned documents from the Branch's International Trade Center,

check documents for the second time, request the Branch to supplement
documents / notify the Customer of additional documents if necessary and
directly handle the electricity. swift to foreign banks
• Research and issue trade finance products in line with banking orientation and
customer needs from time to time
• Assist affiliates in promoting sales of trade finance products
This organizational model, on the one hand, helps the bank to be closer to the
customer, on the other hand, helps the trade finance file be processed quickly and
accurately. The Trade Finance Department located at the Branch can work directly
with the Customer, grasp the needs of customers, and have understanding of trade
finance operations to take care of customers. strengthening close relationships with
customers; Meanwhile, the professional units, operating at the Head Office can focus
entirely on professional processing, helping the documents to be processed
effectively, while minimizing operational risks.
2.3.2. General situation of international trade finance activities at Military
Commercial Joint Stock Bank during 2015 - 2020 period
2.3.2.1. Forms of trade finance for importers at Military Commercial Joint
Stock Bank
- Trade finance for importers
(1) Import letter of credit
International trade finance under the L / C is the main financing method at MB
until now. It is still the popular financing method, which makes up a large proportion
of the total sales of international trade finance.
According to Decision No. 1239 / QD-HS dated April 29, 2014, regarding the
issuance of professional procedure for import letter of credit, diverse forms of letters

38
of credit issued by MB at customer's request are: L / C at sight, Confirmed L / C,
Deferred L / C, May add confirmation, Back to Back LC, Revolving L / C,
Transferable L / C, LC appoints the Reimbursing Bank, LC authorizes wire claims
and LC red clauses.
Since the import L / C is a form of requesting MB's commitment to payment, it not
only brings benefits but also risks for banks. Therefore, MB has very specific and
strict regulations on the principle of issuing an import L / C, as following:
Principles of an import L / C at MB:
+ For goods imported under L / C as tangible goods: MB must control the ownership
of the goods (except for the fact that 100% of the L / C value is deposited or pledged
by the Contract of Deposit / Savings released before opening L / C). The ownership
control of tangible goods is carried out in the following forms:
+ Bill of Lading made out to order of MB as the consignee.
+ Goods Receipt (Cargo Receipt) or equivalent documents (for example Handover
Certificate, Acceptance Certificate ... signed by MB.
+ For goods imported under L / C as intangible goods: Comply with approval of
Authority for opening L / C and MB's policy each period.
+ LC margin ratio is interpreted as margin for L / C value including tolerance (if any).
Insurance conditions for tangible goods imported under Import L / C
+ Goods opened under L / C must be insured (apart from the fact that 100% value of
LC is deposited or secured by a deposit contract or savings issued by MB). A special
case that does not require the purchase of insurance or the presentation of an insurance
document is when the LC opening party and the beneficiary deliver the goods directly
to the importer's country. The supporting documents required is Cargo Receipt or an
equivalent document signed by the LC Applicant and the Beneficiary signed by MB.
+ The insurance condition for goods must be the highest relevance, for some items
with special insurance conditions must follow MB's regulations each period.

39
+ The minimum insurance level is 110% of the value of the goods. In case of MB
finances the customer with the shipping fee, the insurance is 110% (shipment value +
shipping fee).
+ For LC with increased tolerance, the customer will have to purchase additional
insurance for the increased tolerance before the goods are delivered according to the
delivery notice provided by the exporter (with specific supporting documents) and
must fulfil their engagements at the time of issuing L / C.
+ Beneficiary of insurance:
In case the L / C Applicant is obliged to buy insurance, they must present the
original insurance package before opening the LC (unless there is an approved
exception). MB must be the sole beneficiary and irrevocable if the shipment is MB’s
secured collateral. If not, the business unit shall negotiate with the customer that the
sole and irrevocable beneficiary is MB.
In case the Beneficiary must buy the insurance and it is one of the documents
presented under the LC, the LC must stipulate the full presentation of the insurance
document. Furthermore, the insurance document must be a type of "Blank
endorsement " or designated by MB as Beneficiary.
Method of issuing an Import L / C:
+ Via Swift or mail, the form of letter issuance is only applied if the Beneficiary is
MB's customer.
+ L / C must contain the following mandatory contents:

• All documents must be written in English and show L / C number and date.
• The time to receive MB's documents is from 8:00 to 15:00. For documents
received after 15:00, the date of receipt will be counted from the next working
day.
• Goods must be delivered after the LC opening date (this content is required
only for the case of the customer - the person requesting the opening of the LC
is the buyer of insurance, and not required if the delivery schedule is rigid and
insurance coverage are effective prior to the earliest delivery time as stated in
the LC); In case the customer refuses to pay, MB reserves the right to consult

40
 customer on the acceptance of the discrepancy and will make payment
according to instructions of the Presenting bank if acceptance from customer
received before instruction from Presenting bank.
• Exceptions to Import L / C issuance will be approved by the General Director
or his authorized person.
Featured Import L / C products:
+ UPAS LC (Usance L / C Payable at Sight) – L / C with deferred payment terms: A
deferred credit payment method, but foreign exporters can receive payment
immediately by negotiation method from foreign correspondent banks. Thus, instead
of MB disbursing to the importer for loans at the maturity date, MB uses its reputation
and relationship with foreign correspondent banks to get loans to fulfil the payment
to L / C beneficiaries. At the time of payment due with the correspondent bank, MB
collects money from the importer to pay the correspondent bank.
In addition to the usual LC opening fees, MB collects the fee for using UPAS LC
service from customers to pay interest on purchasing capital from correspondent
banks and add to MB's business profit.
The advantage of this option is that the import customers can borrow mobilized
capital for their business with a fee equivalent to the foreign currency loan interest
rate (usually much lower than the VND lending interest rate). Meanwhile, MB has an
additional source of income from differential costs.
+ Draft Buy Back - L / C: Similar to Upas LC, LC Draft Buy Back is LC with deferred
payment but a draft of foreign exporters is paid in advance by MB, the payment source
is from MB's foreign currency source instead of the finance from correspondent banks
as compared to Upas LC. The advantage of this product is a faster process than the
Upas L / C because it saves time for loan transactions with correspondent banks,
meeting the progress of importing goods of customers.
(2) Outward remittance
Decision No. 4999 / QD-HS dated 14/06/2012 of the General Director of
Military Commercial Joint Stock Bank issuing "International outward remittance

41
process", the method in which MB will send a telegraphic transfer to international
money via Nostro account according to customer's foreign currency payment order".
In this form of financing, if the client has enough capital to pay, MB will only
check whether the international money transfer records are appropriate and comply
with the SBV's regulations on overseas remittance, then process the money transfer
and collect the service fee.
In case the customer asks for a loan and meets MB's credit conditions, after
completing loan procedures, the customer may disburse in foreign currency or VND
of equivalent value based on the purchase contract. MB accounts foreign currency
trading and immediately remits payment to suppliers to ensure proper use of capital
for customers.
(3) Import documentary collection
The process of import collection activities is regulated No. 350 / QD-HS dated
February 18, 2013, of the General Director of Military Commercial Joint Stock Bank
on the promulgation of Professional Procedures of Import documentary collection.
This method of payment in which the bank acts as agent for the seller (exporter), after
delivery, presents the documents to the bank of the buyer (importer) in exchange for
payment of the amount owed or obtains acceptance of Bill of Exchange. In this
operation, MB's customers act as importers, MB acts as a Collecting bank.
At the time of receiving the collection instruction from the exporter's bank, MB
will notify the importer. If the importer requires a loan, meets credit conditions and
has available credit limits at MB, the bank will finance the customer to pay/accept
payment to the exporter.
2.3.2.2. Business results of trade finance for importers at Military Commercial
Joint Stock Bank during 2016 - 2020 period
Development of international trade finance activities at MB are sustainable,
which can be seen in detail through the recent 5-year business data:
Trade finance activities at MB have grown well over the past 5 years, both
revenue and fee collection from trade finance activities increased. From table 2.7,
although in 2018, the sales of international trade finance decreased by 10% compared

42
to the previous year, fee collection is still up 20% in value. In particular, in 2020, the
international trade finance activities at MB saw a sudden development, with sales of
the whole system reached more than 10,031 million USD, up 17%, fee collection
reached about 350 billion VND, up 30% compared to 2019.
Table 2.7: Business results of ITF activities at MB Bank during 2016 - 2020

Sales of ITF Fee of ITF

Value Value
Year Growth rate Growth rate
(Million (Million
(%) (%)
USD) VND)

2016 7,475 183,635

2017 8,512 14% 188,302 3%

2018 7,693 -10% 226,676 20%

2019 8,590 12% 269,687 19%

2020 10,031 17% 350,000 30%

(Source: International Trade Finance department, SME division, MB HO)

Table 2.8: Business results of Import financing at MB Bank during 2016 - 2020
Year Sales of Import financing The fee of Import financing

Value Proportion Growth Value Proportion Growth

(Million of total rate (Million of total ITF rate
USD) ITF value (%) VND) value (%)
2016 3,948 53% 166,455 91%

2017 5,476 64% 39% 169,860 90% 2%

2018 4,958 64% -9% 204,522 90% 20%

2019 5,420 63% 9% 239,882 89% 17%

2020 7,087 71% 31%

(Source: International Trade Finance department, SME division, MB HO)

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 Table 2.8 shows that import finance activities at MB account for a much higher
proportion than export finance. Import finance sales always reach over 50% of the
total value of financing and tend to increase. By 2020, sales of import financing
reached more than 7 billion USD, accounting for 71% of the total payment value at
MB. The fee collected from import financing activities also always accounts for about
90% of the total fees collected from trade finance activities, in 2020, it reached nearly
350 billion VND.
2.3.3. The specific situation of international trade finance activities for importers
at Military Commercial Joint Stock Bank during the 2016 - 2020 period
2.3.3.1. Letter of Credit (L/C)
Import L / C financing is one of the forms providing the highest source of
income in international payment services. Fees collected from this activity always
account for approximately 60% of the total fees collected from import financing due
to the complicated and lengthy implementation process. There are numerous types of
service fees involved (consulting fees and LC opening, bill of lading
endorsement/guarantee issuance, LC payment fee, telegraph fee ...). Although the size
of finance has not increased, fees collected from Import L / C have steadily increased
over the years. According to table 2.9, the sponsorship value was nearly 2 billion
USD, the fee collected was more than 130 billion VND.
Table 2.9: Import L / C activities at MB Bank during 2016 - 2020
Sales of Import L / C The fee of Import L / C

Value The Value The proportion of

Year (Million proportion (Million Import financing
USD) of Import VND)
financing

2016 1,672 42% 112,838 68%

2017 2,866 52% 107,018 63%

2018 2,331 47% 121,130 59%

2019 1,930 36% 130,271 54%

2020 2,056 29%

44
(Source: International Trade Finance department, SME division, MB HO)

Out of the total market value of LC payments made via MB, about 70% of the
payment value made by loans, only about 30% is made with customers' equity
(including the value of collateral when opening LC).
2.3.3.2. Telegraphic transfer reimbursement (TTR)
Besides the Import L / C transaction, import TTR is one of the important
operations, accounting for more than 50% of sales and about 40% of the fee collected
in the total annual import financing value at MB. As mentioned in table 2.10, from
2016 to 2020, import TTR activities at MB grew relatively well in both remittance
value and collected fees. In 2019 remittance revenue reached 3.2 billion USD and fee
collection reached more than 100 billion VND. The price remittance value also
increased 1.1 billion USD over the previous year, reaching 4.4 billion USD.
Of the total value of international outward remittance made via MB, about 70%
is made with customers' capital, 30% is done with MB loans.
Table 2.10: Import TTR activities at MB Bank during 2016 - 2020

Outward remittance (Import TTR)

Sales The Fee The

Year (Million proportion (Million proportion
USD) of Import VND) of Import
financing financing

2016 2,041 52% 50,290 30%

2017 2,371 43% 58,334 34%

2018 2,324 47% 76,705 38%

2019 3,207 59% 101,526 42%

2020 4,379 62% -

(Source: International Trade Finance department, SME division, MB HO)

2.3.3.3. Documentary collection

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 As stated in table 2.11, import collection activities bring about 3% of the total fees
collected from import financing, with the financing proportion of about 5-6% of the
total import financing value in 2019. Despite low proportion, this is also an activity
that offers the premium value of 8 billion VND to MB in 2019, contributing to
diversifying finance products in accordance with the business needs of customers. In
2020, thanks to MB's import income, the import collection service value increased
sharply over the previous years to reach 651 million USD, up 2 times compared to
2019.
Table 2.11: Import collection activities at MB Bank during 2016 - 2020

Import collection
Sales The Fee The
Year (Million proportion (Million proportion
USD) of Import VND) of Import
financing financing

2016 234 6% 3,337 2%

2017 238 4% 4,507 3%

2018 303 6% 6,687 3%

2019 283 5% 8,085 3%

2020 651 9% -
(Source: International Trade Finance department, SME division, MB HO)

2.4. Overall assessment of trade finance for importers at Military Commercial

Joint Stock Bank during 2016 - 2020 period
2.4.1. Achievements
2.4.1.1. Sales and fees collected from import trade finance activities have been
constantly growing over the years
Firstly, MB has increasingly focused on providing banking services, including
international trade services, especially import financing

46
In the context of traditional banking operations such as capital mobilization and credit
are put under intense pressure. It is considered an important strategy to meet diverse
customer needs and increase revenue in addition to loan interest; at the same time
diversifying banking operations.
Secondly, MB's import finance revenue in the past 5 years has grown steadily
Especially in 2019, MB's import finance revenue has increased by 30% compared to
2018, reaching more than 7 billion USD thanks to outstanding import finance products
such as Draft Buy Back, Upas LC.
Thirdly, the development of international trade finance for importers has
contributed to differentiate the bank's products and services
The development of this activity is increasing MB's competitiveness in the market. It
is also a fundamental premise to facilitate the development of other business activities
such as foreign currency activities, agency banking, and especially credit operations -
traditional operations of commercial banks.
2.4.1.2. The quality of import financing products and services has been
improved
Firstly, MB has invested in almost all import financing products
Since its establishment, MB has been focusing on traditional products and services
such as opening letters of credit, money transfer; Up to now, the bank has developed
most of the import financing products available in the Vietnamese market. Despite
difficulties due to its late entry into the market, in recent years, MB has pooled its
resources in the international trade finance segment.
Secondly, MB also launchs new products
During the 2019 – 2020 period, MB was one of the pioneers in providing and
developing successfully new imported financing products such as Draft Buy Back and
Upas LC. The development and expansion of these products and services have
contributed to product diversification and created a closed customer service cycle,
creating a competitive advantage for MB in the market.
Thirdly, the import financing products provided by MB are always of high quality

47
Thanks to strict compliance with international practices, MB transactions are done
quickly and accurately. MB's rates and fees are also assessed to be comparable with
other banks such as Vietcombank, VietinBank, which are taking up the market share
of international trade finance in Vietnam. This cost has a minimum and maximum
rate, which allows affiliates to decide on their discount or free of charge for special
customers according to the branch's customer policy. This is also one of the privilege
to create a competitive advantage for MB compared to other banks.
2.4.1.3. Modern banking technology and high-quality human resources
The technology for international trade finance has been heavily invested by MB.
First of all, MB ensures the smooth flow of documents
Since 2016, the BPM system dedicated to trading finance activities has been deployed
throughout the MB system, whereby LC, TTR, Guarantee ... are transferred from
branches to Head Office through a separate flow of documents (not in the same flow
with credit records) to ensure the speed of processing international payment.
Secondly, MB prioritizes approval credit profile
For credit options with a foreign payment factor, the approval credit profile is also
prioritized. This helps the international trade finance activities to be handled more
quickly and professionally, meeting increasingly high requirements of customers. The
SLA measurement results for the 2019 trade finance processing time is over 90%.
Thirdly, MB puts great effort to train staff
The quality of human resources in international trade finance activities is also
primarily focused on by MB. Head Office and branches of MB are aware of the
benefits of expanding and improving the quality of international trade finance, so this
activity has made positive changes over the years. Staff qualifications have been
improved a lot in terms of professional skills, foreign languages, computing,
transaction style, sense of law observance and international practices, various types
of operations handling and ensuring legal and technical requirements, thereby
improving the quality of international trade finance services at MB.

48
2.4.1.4. The reputation of Military Commercial Joint Stock Bank in Trade
finance both domestically and internationally has been enhanced
Firstly, MB’s professional operations ensure safety for customers
Starting with a capital of more than 20 billion VND with the primary purpose of being
a military bank, MB is mostly known to customers as a bank providing domestic
products and services. Thanks to the promotion of international trade finance,
especially import financing, the MB brand name is truly spread in the international
market. Through the development process, the increasing level of professional
processing of staff along with the strict compliance with international practices to
ensure transaction safety has built confidence for partner banks in foreign countries.
Secondly, MB has been trusted by customers and banks to be a partner and focal
point in a number of large-value co-financing projects
MB is appointed as the bank to issue letters of credit, notify letters of credit, negotiate
and discount documents, money transfer, collection ... of large corporations and
financial institutions in the country.
2.4.1.5. Faster transaction time for processing documents
To begin with, MB applies KPI for each staff to process any documents in a
specified time, so as to supply the fastest service for customers
According to the annual survey statistics at MB, surveying customers about service
quality in each activity, it shows that document processing time is no longer delayed,
congestion due to untimely processing, causing late in the financing process such as
payment, opening L / C, discount ... affect the import-export activities of customers.
Besides, MB has always improved service quality
MB built a payment model that focused on checking documents on a main office
showing expertise. Adđitionally, the form of documents in MB is unified, not leading
to confusion in customers and save time for processing documents.
2.4.2. Shortcomings

49
2.4.2.1. Limited market share structure of the ITF in general and of the IF
activities of MB compared to Vietnamese commercial banking system.
Firstly, the value of payments via MB is small
It accounts for about 2.5 - 3% of the total import and export turnover, the market share
of MB's import financing is higher, accounting for more than 3% of the country. Thus,
MB still plays a modest role in the proportion of international trade finance of the
general economy. Moreover, import trade finance products have not stood out
compared to other banks and the financing structure of import finance operations is
not balanced.
Secondly, the products of trade finance for importers at MB lack unique
With the purpose of meeting capital needs for importers, MB currently provides a
relatively diverse range of imported trade finance products on the market, but the
products are quite similar to domestic banks. Lack of unique will make it difficult to
compete with large banks, expanding market share development in a saturated market
like the banking industry in Vietnam.
Thirdly, MB does not fully exploit Documentary collection method
The import financing structure of MB is focusing on international outward remittance
and import L / C, yet the value and proportion of documentary collection is limited.
2.4.2.2. Errors in the working process
In spite of the fact that MB has had specific regulations on the process of issuing
and handling import L / C to prevent maximum risks arising, in recent years, there
have been some unfortunate errors in policy implementation and products.
For starters, MB cannot control the solvency of customers due to loose policy
In 2019, MB issued a sponsorship product for SMEs, in which regulations for
businesses meeting some credit history requirements at MB will be determined.
Import L / C balance is out of credit limit. Thus, at the time of issuing Import L / C,
the L / C balance is not included in the customer's credit limit at MB. The arising risk
is that by the time of L / C payment due, customers need to borrow capital to make
payments, but the outstanding balance at MB approximately reached the credit limit
and the customer cannot balance the capital to pay the L / C. MB must make
50
compulsory disbursements for these plans to ensure timely payment to foreign banks
and ensure MB's reputation. Thus, building too loose policy for products to aim for
growth leads to MB's inability to control the solvency of customers, causing huge
risks to the system, not only leading to the risk of over-debt, but also affects the
reputation of MB with international banks in the future.
Secondly, operational risks from trade finance specialists
During the financing process, some credit and operational risks still occur, such as the
trade finance specialist does not detect and advise clients on the unfavorable terms of
Import L / C, offering credits for partners in trade finance activities but cannot claim
money, choosing a discredited correspondent bank.
2.4.2.3. The number of customers has increased steadily over the years, but the
growth rate is still modest
The number of transaction customers, mainly large enterprises in the main
industries such as construction, garment industry,.. are growing but there are still
small and medium enterprises producing agricultural products such as potatoes,
cassava ... have not really increased much and received diversified funding from MB.
2.4.2.4. MB's product portfolio has been deployed over the years, but not yet
diversified.
Although MB's product portfolio has always been deployed in stages over the
years to serve customers' needs, it can be seen that sponsorship products are still quite
monotonous. There are still not many products over the years, with only 2 to 3
products on average, showing that the level of product development compared to the
demand for use has not been closely linked.
2.4.3. Causes of shortcomings
2.4.3.1. Subjective causes
Firstly, MB staff's qualifications of international trade finance are not uniform
Many officers are not able to grasp the meaning of many provisions of international
practices, leading to misunderstanding and misapplication of terms of the practices.
Some experts did not respond to English proficiency, leading to errors in the
processing of transaction documents. In addition, the lack of experience and

51
knowledge in professional expertise leads to international trade finance experts or
branch's customer relations specialists always tending to agree with customers'
proposals, leading to violations of international practice. Due to lack of understanding
of international practices, customers want to make payments under a signed contract
while the content of the terms violates international standards and does not guarantee
their interests. If the branch staff is not qualified to persuade, but agree with the
customer, it can lead to complicated process from applying for approval to processing
the application.
Secondly, network of MB’s foreign banks is limited
The correspondent banking network of MB has recently developed relatively quickly
but is still small compared to the potential of the bank, and the quality of the
correspondent banks' operation is not high. Specifically, MB has transacted through
its correspondent banks, but in contrast, many transactions of those correspondent
banks are not done via MB even when the customer has an account with the MB
system. In some countries, MB has yet to establish a relationship with a bank, leading
to time-consuming and costly transactions when a transaction goes through a third
bank, leading to a number of cases in which beneficiaries request opening confirmed
L / C.
Thirdly, the audit and inspection work has not been done seriously and regularly,
so detecting errors to correct turns out to be late.
Head Office has not yet done the job of collecting problems arising in the process of
daily transaction practice at branches to figure out and draw the most reasonable
solution, thereby training staff and other affiliates to handle if that situation occurs.
Forthly, Information technology system supporting trade finance is incomplete
Although MB's technology is modernly equipped, it has not fully exploited the
potential of the system to create utilities for customers such as: customers have not
actually made inquiries L / C amount due, balance and credit limit remaining in the
system.
Finally, The trade finance policy is not flexibleThe sponsorship policy has not
encouraged some agriculture-related industries to develop at MB because of seasonal
nature, difficult to recover capital. On the other hand, according to regulations of
52
Ministry of Agriculture and Rural Development in 2016 temporarily imported some
goods from countries such as peanuts, corn, raw cotton, wheat ... from the United
States, Hong Kong, and Ucaina. On that basis, MB has restricted and zoned the
enterprises involved in import and export of the above items in some countries,
including countries not covered by the regulations of the Ministry of Agriculture and
Rural Development. MB also avoids the case that goods are not cleared according to
the provisions of law affecting the development of commercial finance at MB.
2.4.3.2. Objective causes
First, the Policy mechanism is not clear
After more than 10 years of implementing the import-export tax ordinance from the
integration process, a number of provisions of tax laws have also revealed their
existence, limitations, and are no longer practical in comparison to the rapid
fluctuations of the economy , of trade activities and the deeper integration of Vietnam
with other countries in the region and the world. Specifically, the Law on Export Tax
and Import Tax No. 45/2005 / QH11 has clear points such as: Tax exemption for
goods with minimum value or with tax payable below the prescribed level or quota,
tariffs; tax refund conditions; tax exemption ... The tax law has not had a clearer
distinction between the taxable and the non-taxable, the tax policies are unreasonable,
frequently changing, leading to the diversion and adjustment of enterprises. business
production plans could not be kept up with the change of macroeconomic mechanisms
and policies. This has caused a number of obstacles for businesses to participate in
the purchase and sale of import-export goods, restricting access to capital support
from banks.
Secondly, the domestic and foreign economic environment has many
fluctuations
Trade finance activities are also partly limited by measuring the money laundering
violators with relevant information, similar to those involved in export. import,
causing difficulties in the information investigation process, the impact of causing
unpleasant psychology from customers. Some customers do not support to provide
information for the transaction to perform, leading to rejection from the bank of MB.
Thirdly, customers are inexperienced in trade finance operations

53
Customers are not really knowledgeable about shopping mall products, or rely on the
bank even though they have had advice from banks, customers are not honest, provide
insufficient documents. The lack of goodwill in the cooperative relationship with the
Bank causes difficulties in accessing funding sources.
Finally, Competitors increasingly occupy a large market share in Vietnam
Domestic commercial banks as well as foreign banks entering Vietnam are
increasingly developing products with different funding sources, flexibly leading to
competition. fierce competition in the process of gaining market share. According to
the General Statistics Office, the market share of shopping centers at BIDV, Shinhan
Bank, Vietin Bank .... is increasing and accounting for 10% -15% of the market share,
showing that customers are gradually dispersing to use. services at banks, especially
foreign invested enterprises, they will prioritize using services from banks of the same
country.

54
 CHAPTER 3: SOLUTIONS TO PROMOTE TRADE
FINANCE FOR IMPORTERS AT MILITARY
COMMERCIAL JOINT STOCK BANK UP TO 2025
3.1. Direction to develop trade finance for importers at Military
Commercial Joint Stock Bank up to 2025
3.1.1. Operational orientation of Military Commercial Joint Stock Bank
For MB, 2021 is the important year to accomplish the strategic objectives set for
2020-2025.

• The Board of Directors has set the guideline for MB as “Strengthening

foundation, shifting to digital shifting, and growing comprehensively,
efficiently and sustainably”.
• MB sets “Digital Banking” as an important target and a strategic move for the
current period. At the same time, MB continues its principle of the “Rule of
law” with a target to “Maintain in Top 5 Banks of quality and efficiency; and
being leader in digital application”.
• MB is determined to successfully implement the bank development strategy
based on 3 pillars (Community Bank, Sector Specialized Bank, Digital
Banking), 2 platforms (Outstanding risk management, fast execution capacity).
• MB also set its mind to effectively implementing 4 strategic shifts (Digital
banking, Customer relationship strengthening, Risk management capacity
improvement, and Effective management of subsidiaries).
3.1.2. Orientation of developing international trade finance for importers at
Military Commercial Joint Stock Bank
(1) Personal customer policy

• Selectively develop new customers and deeply explore existing ones.

• Strengthen the implementation of cross-selling between customer segments
and units belongs to MB group.
• Ensuring the best quality, time and procedures for customers.

55
 • Monitoring core competencies in business operations: (1) MB is the No. 1 bank
serving military customers and key security and defense projects / programs;
(2) MB is a leading provider of banking and telecommunications products and
services on the channel platform associated with Viettel and its partners.
(2) Orientation for corporations

• Selectively develop CIB, shift small and medium SME development, design
and apply a low-cost exploitation and sales model for micro SMEs.
• Cross-selling between units in the group and MB
• Providing full-package products on multi-channel distribution platforms
• Increase revenue from FDI customers, Viettel affiliate channel
• Develop existing customers, increasing 10-20% of the opening LC / average
outstanding balance
(3) Preferred industry / sector / commodity

• Machinery and equipment for construction and installation funded by MB.

Equipment: telecommunications, electricity, medical, pharmaceutical,
education.
• Raw materials for production: electronic components, plastics; apparel,
pharmaceuticals, paper, chemicals.
• Electronics of major brands in the world
• Completely built-up passenger car, travel car components from Southeast
countries: Asia, Korea, India.
• Consumer goods
(4) Priority customers

• MB's traditional customers; The partners who made regular transactions and
generated great sales with customers
• Supply for large enterprises, large budget projects such as Viettel, Ministry of
Public Security, Ministry of National Defense ...
• Supply international capital projects of international credit institutions such as
World Bank, ADB ...
(5) Priority orientation for Imported L / C
56
 • LC for defence, Ministry of Public Security, L / C with 50% deposit / 50%
guarantee by saving passbooks/deposit contract
• Plan to import goods that are not on the list of goods discouraged from import
and / or the list of machinery, equipment, spare parts, specialized means of
transport, raw materials, supplies, semi-finished products domestically
produced according to current regulations
(6) Restricted customers

• Customers have had unsuccessful transactions (no delivery, insufficient

delivery, wrong quality/type...) in the most recent year up counted from the
time of credit limit/credit extension /L / C issue
• Do not finance trade to countries embargoed by the United Nations / US /
Europe, Blacklisted / alert list of customers.
(7) Implementation mechanism with priority subjects

• 20% discount on SLA for all options that are eligible for funding
• Reduce interest rates and service fees
• 5% increase in the maximum credit extension rate on the value of the real estate
• Prioritize room to open LC/disbursement when the limit MB hits the threshold
• Related Divisions, Departments that design products / policies to enforce,
create favorable conditions for options in the priority sectors.
(8) Exception handling mechanism

• An exception financing plan is an option with different conditions from the

Board of Directors' policy and within the approved risk threshold of MB.
• MB considers exceptions for each loan, customer, and product on the basis of
the risks of the plan that have been compensated and minimized by appropriate
measures and ensuring optimal efficiency for MB. MB restrained the
consideration and grant of exceptional credit, except for: Military customers,
military enterprises, and units operating in the security and defense sector; and
/ or proposed scheme in the credit priority sector and / or problematic credit
processing.

57
 3.2. Measures to promote trade finance for importers at Military
Commercial Joint Stock Bank up to 2025
3.2.1. Diversify products and forms of sponsorship
In 2019 and 2020, MB has made a great stride in developing new trade finance
products such as Draft Buy Back, UPAS LC to significantly increase the profit from
international trade finance activities for importers. MB needs to invest more in
research and application of new products to diversify the portfolio of import finance
products, thereby increasing the bank's revenue, reputation and customer satisfaction.
One of the services that has not been fully exploited at present is factoring service,
although this service is included in the list of services provided by many banks (ACB,
ANZ).
However, Vietnamese enterprises are still unfamiliar with this service, partly
because banks have not invested in promoting and introducing products properly. MB
needs to invest in human resources to build new products, incorporate factoring into
packages and services (closed funding from input to output), and take advantage of a
team of knowledgeable service professionals to advise, support and encourage
customers to use the product. If it succeeds in developing this new product, MB will
have an advantage in taking the lead and dominating the market share of factoring
services.
3.2.2. Improve the quality of human resources
(1) Policies to attract high-quality human resources
Compared to other departments in the bank, the staff handling trade finance
operations not only requires customer care skills, understanding of credit processes,
but also good English skills, consulting competency…However, the common salary
of the trade finance department in the branches is equal to or much lower than that of
the credit business department. Therefore, this salary policy has not attracted human
resources to develop trade finance activities in branches.
MB needs to build a fair and clear salary, bonus and welfare system to avoid
complaints that cause internal disunity. Building a work performance evaluation
system for employees to improve their awareness, their role and their efforts to
achieve the goals set by the Bank, thereby getting appropriate remuneration. The

58
rating system has to highlight the difference between the good and the bad. On the
basis of this rating system, policies are offered to increase employees' salaries,
promote and reward employees in a fair and reasonable manner.
(2) Improve the advanced training of bank staff

• Strict recruitment in order to ensure that international payment officers are

fully trained, really capable and have good ethical qualities to create a stable
source of staff for the bank.
• Standardize staff working in international trade finance by regularly organizing
staff qualification tests, then assigning staff suitable to each person's capacity,
boldly promoting competent young staff, arranging the right people with the
right job according to qualifications and job requirements.
• Conduct training and retraining of staff working in international trade finance
to the right subjects, encouraging the self-study spirit of each person,
organizing training courses on foreign languages and informatics, ensuring the
skills and knowledge of the professionals to meet the job requirements.
• Organize discussions of branches and share good plans at the branch (good
sponsorship options, unexpected risks, share consulting skills, and customer
care...) to create cohesion as well as increase the quality of human resources
equally among branches.
3.2.3. Promote the sale and cross-selling of trade finance products
(1) Develop programs for sales teams in branches and transaction offices to sell
imported trade finance products
Like other products, trade finance services not only need optimal products and
high-quality human resources but also promote sales. In 2019 and 2020, MB had a
reward program for the Draft Buy Back and Upas LC products, which is one of the
factors that helped the product program be effective. However, other products do not
receive full attention to boost sales. Thus, in order to develop trade finance activities
for importing enterprises, sales programs for this segment need to be more focused by
MB through increasing fund for this activity, calling on sales staff at the branch to
participate.
(2) Strengthen cross-selling
59
 Selling products of international trade finance can be carried out effectively if
taking advantage of the available customer files in other services such as credit,
guarantee, VIP individual customers ... because the bank has a good relationship with
this type of customer. If they grasp the needs and advise suitable products, the
possibility of successful cross-selling of trade finance products is high.
For example, an import customer has a demand to borrow money but has not
opened LC at MB due to high-interest rates of VND credit (Customers cannot borrow
in foreign currencies because they have no income from foreign currency, so they
borrow capital for inputs at MB, however, the credit scale is not high). Trade finance
specialists can advise customers to use the Draft Buy Back service that allows
customers to open LCs and borrow VND at a preferential interest rate (almost
equivalent to the interest rate for foreign currency loans), in combination with the use
of the right select or foreign currency maturity to ensure exchange rate risk.
Cross-selling can also be conducted on an existing customer input or output in
the credit segment. For example, an existing credit customer of the corporate customer
department might have the input partner of very large import business. The Bank can
take advantage of the existing relationship with its credit customers to access and sell
the trade finance products to potential customers - this import input partner because
MB is sponsoring an output partner of this business. Thus, thanks to cross-selling, MB
not only increases income from international trade, but also strengthens relationships
with existing customers, expanding customer list in many service segments.
(3) Develop customer care policies

• Developing customer policies for each target customer group

It is necessary to study the needs of each customer in order to offer diversified, self-
contained product packages and meet diverse needs of services. It is the design of
services tailored to the needs of each customer that will help the branch not only
expand the market size but also enhance the loyalty and connection of customers to
the bank. The bank classifies customers, identifies important customers and builds
loyalty programs.

• Strengthening customer care activities

60
 Good customer care is the best way to build customer loyalty and connection with
the bank, so that old customers can be maintained and developed, also grab many new
customers. To perform customer care well, the bank needs to build a database system
of customers (old customers, potential customers ...), capture the basic information of
customers such as demand for products, services, personalities, habits of customers,
basic preferences of business owners, understanding the level of satisfaction after
using the product, feedback from customers, frequency of using payment services and
other banking services.
3.2.4 Modernizing infrastructure, information technology to serve
international trade finance activities
International trade finance is a service segment directly related to overseas
payment activities, which have high requirements on the quality of processing
documents accurately and quickly. Technology factor will therefore be a key factor in
the race between banks to attract customers.
Over the past time, MB has upgraded the system of equipment, technology, ... to
increasingly improve the quality of customer service. The current network system has
been upgraded to help improve business operations and build application programs in
a new technology environment with diverse features, convenient for dealing with
customers, and rapid financial processing speed and e-commerce. However, to
actively integrate, the information technology system always needs investment and
development priority. By doing this, MB can catch up with regional standards and be
able to compete with domestic and foreign banks.
Branches in the entire MB network need to upgrade their transmission lines to
avoid the congestion of the flow of documents between the branch and the head office.
In addition, the bank needs to promptly supply computers for the staff, upgrade
software and periodically check computers, and accelerate the internal network
administration to contribute to speeding up the transaction process, limit local network
status error interferes with the progress of the work. MB needs in-depth training in
information technology, as well as improving expertise in modern payment
technology for the team directly handling international trade finance transactions
because of the requirement of electronic payments, system connection, network
processing. Therefore, it is necessary to regularly train the contingent of international
61
trade finance staff so that the human resources can use the banking information
technology system effectively, ensure transaction quality and response to meet
customer needs.
3.2.5. Limiting credit, operational risks
In addition to the objective and subjective risk factors such as in ordinary credit,
there may also be interest rate and exchange rate risks of currencies in the process of
trade finance for importers. To manage the risk of interest rates and exchange rates,
banks can use currency market exchange operations such as forward contracts, futures
contracts, swap interest rate or currency contract, option contract.
Besides, operational risks also need special attention. Due to the nature of import
trade financing involving foreign banks and partners, most of the transaction channels
are via Swift, the precise manipulation of professional professionals is extremely
important. Wrong electrical power can cause great losses for both the customer and
the bank, especially the wrong amount or the nature of the documents. Therefore,
strengthening operational risk management is an extremely essential job to ensure that
the quality of the international commercial center is developing, without causing
damage to the bank's business operations. Identify and strictly control risks in all fields
and apply information technology to management and prevention of risks and increase
the efficiency of independent control of management levels over transactions.
Along with risk management is the operation of the internal control system. This
is a very important part in reducing the risk of international trade finance, thereby
enhancing the reputation and service quality of the bank. Strengthen effective
inspection and control by selecting highly qualified staff, who are familiar with
domestic and international laws related to international trade finance operations and
good ethical qualities. By doing that, the new inspection and control department can
help to early warn the risks that contribute reducing errors, improving the efficiency
and quality of international trade finance in general and trade finance for importers in
particular. The internal control work not only stops at post-inspection, in the form of
organizing each test and detecting the arising mistakes, but also needs to improve the
ability to detect, prevent and manage risks. In addition, it is necessary to enhance the
role of the internal audit department, perform an independent assessment of the

62
operation of the internal audit system, and make recommendations for improvement
in the internal inspection and control system in MB.
3.2.6. Strengthen relationships with correspondent banks and enhance the role of
MB's overseas branches and representative offices
MB needs to build a closer agent relationship with many banks around the world,
enhance its reputation in the international arena, and create favorable conditions for
the development of international trade centers. Moreover, through a long-term and
close cooperation relationship, MB can learn from other banks experiences and know-
how, be more professional in-service supplies. To achieve this, it is not only about
cooperating in quantity, but also strengthening deeper and broader cooperation to
understand partners' strengths, learn and strengthen MB itself.
Develop a network of agents that can promote MB's international trade finance.
Develop an appropriate classification system and agency relationship policy to
enhance international reputation, create the best conditions for transactions in MB
system, expand the market, thereby support the training, taking advantage of business
management experience of foreign banks, and at the same time exploiting the
strengths of correspondent banks to serve the service activities of MB. Periodically
select the list of good correspondent banks, ready to provide services such as credit
limit, confirmation limit, and refinancing limit for MB to better satisfy needs of
customers. Use correspondent banks to provide their services and in turn require them
to use the MB system to supply their products, thereby expanding market share,
increasing customers to transact at MB.
In addition, it is necessary to further enhance the role of overseas branches and
representative offices of MB. Based on the increasingly clear benefits of establishing
branches and representative offices overseas such as saving time, finance and
facilitating information capture and processing. These cases arising in international
trade finance transactions. Since then, conflicts in foreign trade transactions are
resolved quickly and risks occur. However, in recent years, almost foreign branches
and representative offices have not been able to support branches in international trade
finance activities, which are in desperate need of the benefits of their bank
representatives abroad. Therefore, MB needs to specify the support from overseas

63
branches and representative offices, with recognition of the operational branch's
comments.
3.3. Recommendations to the government and State Bank of Vietnam
3.3.1. To the Government
In order for the trade exchange between countries to thrive and the banking
payment operation is increasingly expanding in both the size and quality of the
transaction, it is necessary to have the support of the Government in the following
contents:
- Creating a favorable legal environment for international trade finance
development
International trade center activities are related to domestic relationships as well as
international, with regard to the laws of the countries involved in this activity and
international practice. Therefore, it is necessary to have specific legal provisions to
adjust this relationship in correlation with international practice. It is necessary to
build a system of legal documents in accordance with international practices and
Vietnamese characteristics as a basis for adjusting and creating a legal environment
for international commercial banking activities of commercial banks.
- Strong and radical reform of administrative procedures, creating an open
corridor for import and export activities.
It is necessary to have coordination among ministries and agencies such as customs
and taxation, creating favorable conditions for enterprises to participate in import and
export activities in a closed and sequential cycle, reducing procedures and avoiding
troubles. , save time and cost. Strengthen the State's management role in the
implementation of foreign exchange management policies, proceeding to abolish
import quota management and replace it with tax measures. Timely detecting
deviations in implementation, but need flexibility to create conditions for businesses
to be proactive in business activities but still ensure economic stability of the country.
Limit the criminalization of economic cases that cause serious damage to import-
export enterprises sometimes leads to bankruptcy or if they can be overcome, it is also
extremely difficult and takes a lot of time.

64
3.3.2. To the State Bank of Vietnam
(1) Completing the exchange rate management mechanism
As a central bank, the State Bank currently manages the foreign currency market
mainly through trading interventions, announcing the average interbank exchange
rate, setting ceiling on spot rates, and increased percentages of forward rates and
foreign exchange controls. In the immediate period, these measures are necessary but
gradually need to be loosened step by step so that they do not become a hindrance to
the development of the foreign exchange market. Because the exchange rate is highly
sensitive and has a very wide impact on all activities of socio-economic life, especially
in the field of import and export, the exchange rate policy management must be carried
out according to each. in the immediate future, to gradually loosen the amplitude of
the fluctuation, proceed to remove the amplitude, not directly fix the exchange rate,
but only intervene at the macro level on the foreign exchange market to make the
exchange rate fluctuate in favour of the economy and gradually shifted to a state-
controlled free-floating exchange rate mechanism by using interest rate tools to
regulate the money market.
(2) Strengthening the operational quality of the State Bank Credit Information Center
(CIC)
The collection, analysis, and accurate processing of information about the
financial situation, credit relations, solvency, legal status of domestic and foreign
enterprises is extremely important. to the bank to make international trade finance
decisions. Since its inception, the bank credit information center CIC state-owned
restaurant has actively contributed to the work of State management, ensuring safety
in the fields of money, credit and trade finance. However, the information provided
by CIC currently does not meet the actual requirements because the amount of
information is limited.
In order for risk prevention information to be highly effective, the State Bank
needs to increase the provision of modern communication facilities for the center,
modernize professional processes with strong application of information technology
and the Internet to the center has conditions to collect information fully, accurately
and promptly. In addition, it is necessary to have an incentive and compulsory

65
mechanism for credit institutions to regularly provide information on the situation of
enterprises' outstanding loans at credit institutions.

66
 CONCLUSION
International trade is considered a factor for the economic development of the
country on the basis of choosing optimal labor division and international
specialization. Therefore, international trade finance activities of commercial banks
play an important role not only for businesses, commercial banks but also for the
country, in which import finance plays an important role. role is important because
the large financing demand comes from businesses and is also a profitable business
for the bank.
In the trade finance field, MB has gained remarkable achievements. The growth
of sales and fees has been increasing, contributing to a great percentage of revenue of
MB. Additionally, MB also upgrades quality of services as well as human resources
and banking technology to fasten the transaction time and eliminate the risk during
working process. However, the import trade finance at this bank still has certain
shortcomings. Due to limited market share, faulty in processing documents of staff,
narrow products range, trade finance for importers activities at MB has a disadvantage
of reaching and fully satisfy the customers. The causes of these shortcomings can be
named as different staff qualification, poor foreign network, audit inspection and
imperfect information technology. Moreover, the unclear policy of State and
economic upheavals also adversely affect the ITF activities of MB. In the market, a
large numbers of rivals, which make up a great market share in trade finance also put
the obstacles in the way of MB.
By that reason, Military Commercial Joint Stock Bank has had many solutions
to develop trade finance activities for import enterprises. MB has to diversify
products, strengthen relationship with foreign network and upgrade the staff quality.
Beside the effort of MB, the focus of the Government will boost the speed of
developing trade finance operations at MB. The State and SBV in this situation also
need to provide favorable conditions to support trade finance for importers in legal
environments.

67
 REFERENCES
1. Military Commercial Joint Stock Bank, Introduction,
https://www.mbbank.com.vn/About/ve-mb
2. Military Commercial Joint Stock Bank, Annual report in 2015,2016, 2017,
2018, 2019, 2020
3. Investopedia (2017), Trade finance,
https://www.investopedia.com/terms/t/tradefinance.asp
4. International Chamber of Commerce – ICC (2007), Uniform Customs and
Practice for Documentary Credits – UCP 600.
5. International Chamber of Commerce – ICC (2010), International Commerce
Terms – INCOTERMS 2010.
6. Nguyễn Văn Tiến (2009), Giáo trình Thanh toán quốc tế và Tài trợ ngoại
thương, Nhà xuất bản Thống kê, Hà Nội.
7. Nguyễn Thị Quy (2012), Giáo trình tài trợ thương mại quốc tế, Nhà xuất bản
Thống Kê, Hà Nội.
8. Tạ Văn Lợi (2019), Giáo trình Nghiệp vụ Ngoại Thương, Nhà xuất bản Đại
học Kinh tế Quốc Dân, Hà Nội.
9. Nguyễn Tường Vân (2018), “Phát triển hoạt động tài trợ thương mại tại ngân
hàng Vietcombank”, luận văn thạc sĩ, trường Đại học Kinh tế Quốc dân, Hà
Nội.
10. Đào Thị Hồng Nhung (2008), “Giải pháp phát triển hoạt động tài trợ thương
mại quốc tế tại sở giao dịch Ngân hàng TMCP Ngoại Thương Việt Nam sau
cổ phần hóa”, luận văn thạc sĩ, Trường Đại học Kinh tế quốc dân, Hà Nội.
11. Nguyễn Thị Lan Thanh (2010), “Một số giải pháp nâng cao hiệu quả hoạt
động tài trợ thương mại tại ngân hàng đầu tư và phát triển Việt Nam”, luận
văn thạc sĩ, Trường Đại học Kinh tế Quốc dân, Hà Nội.

68
 NATIONAL ECONOMICS UNIVERSITY
EXCELLENT EDUCATIONAL PROGRAM

BACHELOR’S THESIS
Major: International Business Administration

Topic: PROMOTING TRADE FINANCE FOR IMPORTERS

AT MILITARY COMMERCIAL JOINT STOCK BANK
Student’s name: Nguyen Thao Phuong

HANOI - 2021