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SWOT Analysis

Base on Improve Loan Approval Process

Group: TTTM - Feb 2012 MGMG694 CP Banking Management

Objective
To Develop loan approval process to be more effective and cover to SME loan from related agriculture business.
Effective mean: 1. Process time is comparable to the competitors (1 month for agriculture loan and 15 days for SME) 2. Approval criteria must focus in both collateral and business feasibility (reduce NPL and support opportunity for SME loan) 3. Credit Analyst or Officer must have at least basic financial knowledge as well as the market/business environment data should be available to used at all time

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SWOT - Analysis
STRENGTH WEAKNESS

1. Computer structure in the system 2. Agriculture database 3. Customer relationship. 4. Knowledge in agriculture

1. Knowledge and experience. 2. Resistance in change from age. 3. Many approval level require when change 4. Online application. 5. Using Outsource 6. Insufficient officer 7. High NPL

1. ASEAN Economic Community (AEC) 2. Knowledge exchange 3. New technology 4. Credit bureau system

1. Abnormal situation such as disaster, protest, revolution, etc 2. Hacker 3. Change in Government cabinet

OPPORTUNITY

THREAT

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Strength Computer Structure


1. BAAC already applied computer structure into the loan approval system. From the BAAC website, BAAC invest in 3 core system to develop their service which are: Financial Management Information Systems (FMIS) - is installed for timely, relevant and accurate information to support better business decisions Core Banking System (CBS) to manages financial transactions Data Warehouse to keep customer information

Source: www.baac.or.th/content-about.php?content_group_sub=17

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Strength Agriculture database


2. BAAC already have large agriculture database as their client which will useful to improve the loan approval process especially when they change to SME business

Source: BAAC 2010 Annual report page 129

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Strength Customer Relationship


3. BAAC maintains the good relationship with their customer (client) for a long time as their concept of Service at Door Step . So, it will be more easier to collect additional data (when required). Moreover, BAAC have many branches around the country which can be the information channel.
BRANCHES BAAC SCB KTB BBL KBANK BAY TMB 1131 1096 1024 981 833 587 459

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Strength - Knowledge in agriculture


4. Many of BAAC officer has background on agriculture degrees. So, it will help officer to valuate the SME project which result in faster approve. The BAAC s mission was to extend credit more widely, directly to individual farmers as well as through farmer institutions.

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Weakness

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Weakness

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Weakness

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Weakness

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Weakness

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Weakness

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Weakness

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Opportunity - AEC
1. Thailand prepare to join ASEAN Economic Community (AEC) in 2015. Due to mutually agreement of each member able to hire and rotate skilled worker from other countries to fulfill their lack.

Source: www.thaifta.com/thaifta/Home/tabid/36/ItemId/4374/ctl/Details/Mid/582/Default.aspx

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Opportunity - Knowledge exchange


2. BAAC have support by Thailand government. So, it will have opportunities to exchange the technology/knowledge among country
According to (Asia Pacific Rural and Agricultural Credit Association : APRACA Co-operate and fulfill strength to each others for sustainable development Agricultural Promotion Bank
Source: http://apb.com.la/index_en.php

The Agricultural Promotion Bank (APB) of Laos signed a memorandum of understanding on mutual cooperation with the Bank for Agriculture and Agricultural Cooperatives (BAAC) of Thailand in Vientiane. The two banks began cooperating in 1997, exchanging experiences in human resources development and staff upgrading. The banks decided to enlarge their cooperation due to their similar responsibilities, financial business operations, and customer bases. EC-FAO Food Security Programme & Dailynews 3 Dec 2011
Source: http://foodsecuritylink.net/laopdr/index.php?option=com_k2&view =item &id=269:lao-thai-agricultural-banks-extend-cooperation&Itemid=36 http://www.dailynews.co.th/article/223/1437

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Opportunity - New technology


3. As the technology keep development. So, the new technology (tools) for support and enhance the loan approval process are update all the time. The benefit of using new technology can be in form of: Faster & More Secure Convenience & paperless Double checking and able to track back the historical trail.
RSA Offers New Security Tokens for Online Banking. The latest in EMC s RSA security includes hardware tokens and software tokens to suit mobile banking customers. Bank System&Technology
Source: http://www.banktech.com/riskmanagement/209400667

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Opportunity - Credit bureau system


4. Establish the alliance with National Credit Bureau. Enhance the useful database of credit bureau to mapping with BAAC s client ( Especially in group of agriculturist) In order to reduce the time to manage and process the loan approval.

Source: www.ncb.co.th/

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Threat Abnormal situation


1. Abnormal situation such as flood, earth quack, protest, revolution may effect to loan approval process when some branch need to closed during the event.
Thirteen commercial banks, two retail banks and a financial firm reported that they had now temporarily closed a total of 620 branches in flood-stricken provinces, the Bank of Thailand said Monday. Of the total, 333 outlets are in Bangkok, 149 in Pathum Thani, 68 in Nonthaburi, 31 in Nakhon Pathom, 22 in Ayutthaya, 11 in Samut Sakhon, five in Nakhon Sawan and one in Chai Nat. Bangkok Post 7 Nov 2011
Source: www.bangkokpost.com/business/news/265136/m ore-bank-branches-atms-closed

After two months of protests that ended in an arson spree, Thailand is counting the economic cost and financial toll of a crisis. The country's second-largest lender, Krung Thai Bank KTB.BK, said 39 properties had suffered fire damage, including many bank branches. Markets and banks were closed on Thursday. Reuters 20 May 2010
Source: www.reuters.com/article/2010/05/20/thailand-businessidUSSGE64J0F520100520

Prime Minister said the government is looking for 2 million rai of land to use as areas to hold flood water - given the likelihood that wet-season flooding this year could be as severe as last year. "I am confident that if the measures can be implemented as planned, the flood problems will be less serious than last year." Yingluck said The Nation 12 Feb 2012
Source: www.nationmultimedia.com/national/Govt-seeks-2-million-rai-tohold-flood-water-30175684.html

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Threat Hacker
2. Hacker, they can hack into the system and make the system down for several day which effect directly to the loan approval process
Police have arrested a 23-year-old hacker who allegedly stole more than 500,000 baht from internet bankers. Officers from the Technology Crime Suppression Division (TCSD) arrested Akaphan Gummanoi at a house in Soi Maiyalap on Rarm Intra Road late on Friday night for allegedly robbing Siam Commercial Bank accounts. Police confiscated two computers from the house. Bangkok Post 24 July 2011
Source: www.bangkokpost.com/news/local/248490/suspected-internetbank-hacker-held

Hackers have stolen data from thousands of Citibank customers in the US, the bank has confirmed. The breach exposed the names of customers, account numbers and contact information, the bank said in a statement. Citigroup is the latest in a string of high profile companies to be targeted by cyber criminals. BBC 9 June 2011
Source: www.bbc.co.uk/news/technology-13711528

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Threat Government Cabinet


3. As the data in the annual report stated that the chairman of BAAC is the ministry of Finance. So, in term of any change in cabinet may have effect to BAAC policy and plan. The data from annual report show that chairman has been change for more than 6 times during 2007 2012 (especially in 2008 that 3 times)
Under the Section 14 of BAAC Act B.E. 2509 (1966) amended in BAAC Act (Fifth Amendment) B.E. 2542 (1999) and (Sixth Amendment) B.E. 2549 (2006) stipulated that BAAC Board of Directors be consisted of the Minister of Finance as ex officio chairman of the Board, a vice chairman and up to twelve other board members appointed by the cabinet. BAAC 2009 Annual report page 176

Period
JAN 11 present JUN 10 JAN 11 DEC 08 MAY 10 SEP 08 DEC 08 FEB 08 SEP 08 MAR 07 FEB 08 OCT 06 FEB 07

Name
Mr. Kittirat Na Ranong Mr. Thirachai Phuvanatnaranubala Mr. Korn Chatikavanij Mr. Suchart Thada-Thamrongvech Mr. Surapong Suebwonglee Dr. Chalongphob Sussangkarn M.R. Pridiyathorn Devakula

Source: Ministry of Finance (http://www.mof.go.th/home/minister_3.html)

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Suggest Solution
Solution 1 Develop knowledge of employee in term of financial and marketing Prevent the resistance from employee on change in the process Action plan
Conduct the training or workshop to increase the financial and marketing skill to the officer Revised the KPI (or other measurement) to included the training participate. Communicate the company target and benefit from change (may applied Kotter s change model)

Reference: Kotter, John P. (1996). Leading Change.

Develop the online application in order to support live-time activities

Collect data and make decision between make or buy the system Create/upgrade should be step by step which may start with application online module and develop to tracking system. Target to reduce traditional manual work as well as convenience get approval from the bank

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Suggest Solution
Solution 4 Develop the appraisal team which respond for monitor and audit the outsource work for collateral appraisal. Action plan
Set the appraisal unit into the loan approval team. Recruit or develop the existing employee (target at 25% of outsource team) Work with outsource in the first phase as the OJT to develop the knowledge and skill

Develop HR department/system Collect the data and analysis of the current workload for each loan approval process officer. to be able to set the suitable Using ratio analysis to calculate the number of officer require number of employee
to handle client Using sensitivity analysis to support the additional client from SME

Develop credit approval process Revise the verify client information system to screen the black list or potential NPL at the first stage. to be more efficient especially the first stage to reduce nonperforming loan problem

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Suggest Solution
Solution 7 Revise the level of authority to allow branch/province manager to be able to approve the loan with suitable tolerance Create collateral guideline/book to support the appraisal collateral process and faster. Action plan
Analysis the existing data to group the loan into many group as total amount Calculate the proper level of authority for branch/province manager to reduce the approval process step.

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Q&A

Feb 2012 MGMG694 CP Banking Management

Team member
Mr. Thanapol Vachirarojpaisorn Mr. Thana Wattanasak Mr. Teerawat Hungsasut Mr. Chiraroj Angsumalee 5349204 5349211 5349212 5349265

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Suggest Solution
1. Develop knowledge of employee in term of financial and marketing Conduct the training or workshop to increase the financial and marketing skill to the officer as well as revised the KPI to included the training participate. 2. Reorganization structure to set the job to match with age to prevent resistance from old employee (THAM) Applied Kotter change theory 3. Develop the online application to support online activities (make/hire) and easy to track the process and easy to approve from bank (MAN) Used benefit of online system to let the client able to submit the application anytime as well as able to track the process. (example of ME)

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Suggest Solution
4. Develop the appraisal team (25% of outsource) to monitor and audit outsource work as well as work instead of outsource in case of lack of available of outsource. (TEE) Hire or develop the officer to be act as appraisal unit. Appraisal unit will respond for monitor and audit the outsource work for collateral appraisal. Moreover incase of lack of outsource, the appraisal unit can be work instead. 5. Develop HR to be able to get the right number of employee (TOP) Collect the data and analysis of the current workload for each loan approval process officer. Using ratio analysis to calculate the number of officer require to handle client plus using sensitivity analysis to support the additional client from SME 6. Develop credit approval process to be more efficient at the first stage to reduce number of bad application (TOP) Revise the verify client information system to screen the black list or potential NPL at the first stage.

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Suggest Solution
7. Analysis loan amount and calculate the portion to Revise table of authority to allow branch/province manager to able to approve loan with higher amount that large portion of total loan (MAN)

8. Create collateral guideline/book to support the appraisal collateral process and faster. (THAM)

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