UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS =======oOo======= VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS AN ANALYSIS OF HOUSING CREDIT PROGRAM FOR · URBAN HOUSEHOLD CASE STUDY IN HCMC HOUSING DEVELOPMENT BANK (HDBANK) A THESIS PRESENTED BY DOHONGNGOC BQ GIAO E>AO Tl;\0 TRUONG Dl;\1 H9C KINH TE TP.HCM THUVIEN • 1 IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF ARTS IN DEVELOPMENT ECONOMICS SUPERVISOR DR. TRAN TIEN KHAI Ho Chi Minh City, February 2009 CERTIFICATION "I certify that the substance of this study has not already been submitted for any degree and is not being currently submitted for any other degree. I certify that to the best of my knowledge any help received in preparing this thesis, and all sources used, have been acknowledged in this dissertation." Ho Chi Minh City, February 2009 Do HongNgoc i ACKNOWLEDGEMENT i would like to express deeply my appreciation and many thanks to the following individuals and organization helped me to finish this thesis. Doctor Tran Tien Khai, the academic supervisor who has spent much time to give me his guides, comments, assistance in this research. All lecturer and staff of Viet Nam-Netherland master program which is helpful program . for me to obtain the knowledge and the method of science studying with international standard. All my classmates, especiaily my group have encouragement, cooperation and help during my stUdying and doing the thesis. All ofmy family members have help and encouragement for me to try my best to finish this research. ii ABSTRACT VietNam is going on the way of modernization, industrialization and especially of globalization with the purpose of economic development and enhancing the life standard of the resident. This implies· to· increase further with a rise in the urbanization levels and in the population along with increasing the demand for housing in urban of VietNam. To . solve the of urban household, the government has many policies to support the resident such as housing finance system from bank or other financial institution, housing program for low inconie : This study only concentrates to analysis housing credit program from bank for urban household on two major aspects. The first is the determinants of probability to get a housing loan. And the second is the determinants of housing loan amount. SO the household should improve their character and capacity to be able to borrow housing loan from bank. Conversely, the bank also should have-suitable . credit policy and condition for the customer to speed up effective and sustainable credit development. iii TABLES OF CONTENTS C .·fi . . ertl 1cat1on. 1 Acknowledgement : ii Abstract iii Contents :······· .iv List of tables and figures viii ··Abbreviation ix CHAPTER I·: INTRODUCTION .• · ! . . 1.1 Prob-em statement I 1.2 Objectives ofihe stlldy l 1.2.1 General objective 2 1.2.2 Specific objective 2 · 1.3 Research questions ·1.4 SuJi:J.macy on rese8.rch· methQdology- and data • 2 1.5 ·The organization of the thCsis CHAPTER II: LITERATURE REVIEW 4 2 1 TheOry 4 2.1.1 Major concepts 4 Household Credit Borrowing Household credit market 2.1.2 Banking theory · 4 Credit management Credit analysis and loan decision . Issues in credit market 2.2' Experiences of housing development in some Asian countries •• • •• ; 7 2.2.1 In Singapore ; , 8 2.2.2 In China , 9 2.2.3 In Thailand 10 iv 2.2.4 In Korea 11 2.3 Theoretical models and empirical studies for house demand 12 2.3.1 General observations 12 2.3.2 Determinants ofhousingloan 13 2.3.3.Determinants of loan amount 15 2.3.4 Theoretical models 16 The basic models 16 :The extended models ; 16 2.3 .5 Empirical models applied in previous studies 17 CHAPTER III: RESEARCH METHODOLOGV 20 · 3·.1 AnalyticiJJ· framework 3.1.1 Hypotheses , 20 3.1.2Detenninants ofthe probability 20 3, 1.3 Determinants of loan amount • 21 3.1·.4 Specific empirical models • 22 Model1 _ 22 Description of the model1 22 Definition and explanation of variables of the model 1 22 Expected signs of the variables' coefficients 23 Model2 24 Description of the model 2 , • ; 24 ·Definition and explanation of variables of the model2 24 Expected signs of the variables' coefficients 25 3.2 Data source· aild 26 3.2.1 Data source 26 Where is data source? : 26 Wh . . • d. ? 26 . at-Is Its va I Ity _ . When are they collected? 26 . Population : : ; 26 3.2.2 Sampling • 27 v .sample size 27 Sampling method 27 3.3 Analysi-s methods 3.3 .!Statistical tests for descriptive analysis 29 3.3 .2 Correlation analysis 29 3.3.3 Statistical tests for validity of specific models 30 . . . . 3.4 Analysis· too1 _ 30 CHAPTER IV: AND DISCUSSION , 31 . 4.1 Situation ofhousingcreditprogram for urban household in Ho Chi Minh City 31 4.1.1 Housing demand of urban household : 31 4.1.2 National strategy on housing up to the year 2010 31 4.1.3 The overview of urban finaricial system, borrowing by urban households and .housing finance project. 32 Financial system and source of credit to urban households in VietNam 32 Overview ofborrowing by urban households 32 · 4.1.4 HCMC Housing development program 35 4.2 IiCMC Housing D-evelopment Bank ofHDBank 35 4.2.2 Housing credit program ofHDBank 38 4.3 HCMC ·aousing D.eveloprri.ent Bank ofborrower' characteristics .40 4.3.2 Correlation.analysis 44 4.3.3 Statistical tests for validity of specific models .47 4.3 .4 Description collecting data and choosing suitable method .48 ·4.4 .Results ·of and explanation 49 4.4.1 ·:Empirical result- Model I ; 49 4.4.1.1 Enter method ; 49 4.4.1.2 Backward LR method : ; ;· 50 vi 4.4.1.3 Analysis the factor affect to the probability to get housing loan for household : 50 Empiricalresult- Mod.el2 : 54 4.4.2.1 Enter method 54 4.4.2.2 Backward LR method 54 4.4.2.3 Analysis the factor affectto the probability to get housing loan for household , 54 CHAPTER V: CONCLUSION AND IMPLICATION 58 5.1 Conclusion on the applied methodology and limitation • • •.••.•.• • •• 58 5.2Conclusi0n On the studie.d results 58 5.3 Po.licy in. macro levCI • 59 5.4 Policy implication for HDBank as well as housing credit program • • •• •• 59 References Annex vii LIST OF TABLES . Table 1.1: Compare mean of variable Table 1.2: Correlation Matrix Table L3: Durbin:_ Watson in model! Tahie 1.4: Durbin- Watson in model 2 Table 1.5: Regression result of model 1 from step 1 to step 6 by back ward method Table 1.6: Regression result ofmodel2 froni stepl to step 6 by back ward method LIST OF FIGURES Figure 2.1: Structure ofprobability to get housing loan Figure 2.2: Structure of samples possibility to get a housing loan Figure 2.3: Growth oftotal assets and chartered capital in HDBank Figure 2.4: Growth ofloan outstanding debts in HDBank Figure 2.5: Outstanding ofhousing credit program and total loan outstanding in HDBank Figure 2.6: Regression standardized residual LIST OF ANNEXS: Annex 1: T-Test result Annex 2: The result of model 1- Enter method Annex3: The resultofmodell- Backward method Annex 4:Theresult ofniodel2- Enter method Annex 5: The result ofmodel2- Backward method viii ·ABBREVIATION HDBank: Housing Development Bank ADB: Asian Development Bank SBV: State Bank of VietNam SOB: State Owned Bank · DLH: Department of Land and House ix [...]... The demand of house and housing system in urban VietNam - The demand of housing loan of urban household of housing credit program for urban household including· - The_ probability of credit and loan value - The research analyzes the relationship between urban households and credit market to find -out relation of characteristics and endowment of urban households and characteristics of loan to chance... of housing development Vietnamese authorities clearly organized and exposed a particular plan such as urban development policy, real estate institution, housing development and housing finance With· housing finance, the authority specifies two aspects are municipal housing fund and housing finance facility In municipal housing fund, respective "Housing fundl' was establish in the early 1990's in HCMC. .. and credit associations So investigating the determinants of access to credit and the determinants of loan amount 1 help household and· bank have change to quickly find the common result It means that the household satisfy bank's·loan condition to get the housing loan and the bank has housing creditto the customer safely and effectively Another further issue concerns this study is the housing finance... these papers expose analysis concerned to housing demand These literatures of housing demand prove that housing demand is always burning issue in many countries in the world 2.32 Determinants of housing loan There seem to be· hardly ·any theories on determinants of housing loan for household Instead, there are numerous empirical analyses on households' debt servicing difficulties May and· Tudela (2005)... Collecting sufficient & accurate information Analyzing and processing data collected Predicting ability of repaying seed and interest of household By credit analysis, banks can replace their experiences about household and their project applied for loan with scientifically argument and evidences rely on information and· data processing Therefore,· credit analysis help banks avoiding two types of mistake:... mortgages and loans for urban low-income and poor people to improve their property or build or buy new homes It will also promote institutional strengthening and capacity building to develop VietNam's housing finance system 1.2 Research objectives 1.2.1 General objective Analysis of housing credit program for urban households by analysis the probability of credit for household and the deteirninants affeCt... severity of credit rationing is an explanation for credit constraint of urban households; and high fragmentation of credit market is an explanation for various borrowing behaviors of urban households Borrowing by urban households is substantially determined by condition of credit market so called "supply side effects" Thus, borrowing by urban households is jointly affected by both demand and supply side factors... · Affordable Housing The other principal homeownership-oriented public policy is the development of 'affordable housing' (Jingji Shiyong Fang or 'economic and comfortable housing' ) The policy is designed for lower-middle- and middle-income urban residents and involves ·government subsidies and profit caps for developers 2.2.3 In Thailand In May 2005, Veerachai Veerametheekul, Vice Minister of Finance,... the housing demand of urban household? What are the determinants of housing credit program for urban household? How does the credit especially housing credit program contribute the economic development and economic growth? 2 1.4 Summary on research methodology and data The method is used, including statistical and descriptive analysis, review of historical ·trends, and· comparative methods Apart form,... demand of households for formal loan flows into informal financial sector and put demand for informal loans to rise up Secondly, it is viewed that fragmentation of household credit market is caused by structural and institutional features of credit market in developing countries In addition, fragmentation of credit market may also result from weakness in the infrastructure 6 that supports the financial . housing system in urban VietNam. - The demand of housing loan of urban household. - The_ of housing credit program for urban household including· probability of credit and loan value capital in HDBank Figure 2.4: Growth ofloan outstanding debts in HDBank Figure 2.5: Outstanding ofhousing credit program and total loan outstanding in HDBank Figure 2.6: Regression standardized. public housing- urban poverty nexus. This provides the starting point for the present analysis of the performance of housing development. · Follow by Global urban development magazine in Singapore