MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY TRẦN THỊ HỢP DEPOSIT INSURANCE: A STUDY OF VIETNAMESE HOUSEHOLD’S KNOWLEDGE AND PERCEPTION MASTER THESIS Ho Chi Minh City – 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY --- oOo --- TRẦN THỊ HỢP DEPOSIT INSURANCE: A STUDY OF VIETNAMESE HOUSEHOLD’S KNOWLEDGE AND PERCEPTION MAJOR: FINANCE-BANKING MAJOR CODE: 60.12 MASTER THESIS SUPERVISOR: Assoc. TRẦN HUY HOÀNG Ho Chi Minh City – 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGE This dissertation would not have been able complete without the support of many people. Firstly, I wish to express my deep gratitude to my supervisor, Assoc. Tran Huy Hoang for his valuable guidance and advice.
I would like to express my deepest gratitude to all instructors at Faculty of Finance and Banking, University of Economics Ho Chi Minh City (UEH) for their valuable knowledge during my study in UEH. Special thanks to Dr. Vo Xuan Vinh for his useful advice for choosing a suitable thesis’s research problem, and Master Nguyen Thanh Trung for his enthusiastic support for this study. My thanks and appreciations go to all my classmates, especially Ms.
Pham Thi Xuan Lien and Ms. Nguyen Hong Vinh for their comments in English editing. I also wish to thank my friends in Techcombank, Citibank, BIDV, Maritime Bank, Agribank, my colleagues and interviewers for their great supports. My thanks would also go to the households that agreed to participate in the survey.
Finally, I would like to express heartfelt and deepest gratitude to my beloved parents, my husband and my son who are encouragement for me to overcome all difficulties through the duration of my study. i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT During the global financial crisis, many countries sought to reassure depositors that their savings in financial institutions were safe. If depositors feel unsure about the safety of their deposits, there is a great probability that they will withdraw their funds when they know insured institution encounter the unsound problems. If bank runs become widespread, it can affect the overall economy.
Therefore, public must be well informed about the benefits and limitations of deposit insurance to build and maintain confidence in the financial system. In addition, a well-designed public awareness program is essential in order to prevent a bank run. The objective of this study to investigates the knowledge about existing deposit insurance organization in Vietnam and its basic features among a sample of households. A study of 326 respondents was conducted in Ho Chi Minh City and two nearby provinces.
Statistics and logistic regression techniques were applied to test hypotheses and analyze factors impacting on the public awareness of deposit insurance. The result of the paper shows that knowledge of deposit insurance is not widespread in Vietnam: about 60 percent of the households in the sample are completely unaware of its existence, 30 percent possess the basic knowledge, and only 10 percent give detailed information. The findings highlight the significant determinants of deposit insurance awareness that are internet, education, and bank. Keywords: Deposit insurance of Vietnam, deposit insurance, public awareness ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONTENTS ACKNOWLEDGE.
iii LIST OF TABLES .vi LIST OF CHARTS. vii LIST OF ABBREVIATES. viii CHAPTER 1: INTRODUCTION .6 Scope and limitation .7 Structure of the study. 5 CHAPTER 2: LITERATURE REVIEW .2 Overview of Deposit insurance .1 The Concept of Deposit Insurance.2 Objectives and role of deposit insurance .3 Deposit insurance: the facts .4 Case of Deposit insurance in Vietnam.
11 iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 Deposit insurance and public awareness .2 Other efforts to investigate the public awareness .4 Developing of empirical research hypothesis .1 Target audience selection .5 Data analysis techniques .23 CHAPTER 4: DATA ANALYSIS AND FINDINGS .2 Description of collected sample .2 Characteristic of sample .3 Results and discussions .1 Knowledge about the Vietnam DIS .2 Find out determinants of awareness.3 The negative answers .36 iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.4 Different level of knowledge .6 Review the findings of the study. 45 CHAPTER 5: IMPLICATIONS AND CONCLUSION .2 Implications of the research .3 Limitations of the research and further research .1 Summary of hypotheses .53 APPENDIX 2 - List of financial experts and depositors. 59 APPENDIX 3 - Descriptive Statistics of variables. 67 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 1.1 Outline of Chapter 1 .2 Structure of the study.1 Outline of Chapter 2 .2 The research question and all hypotheses .1 Outline of Chapter 3 .1 Outline of Chapter 4 .2 Knowledge about Vietnam deposit insurance .3 In case of bank failure, are your deposits protected in Vietnam .4 Omnibus Tests of Model Coefficients .7 Variables in the Equation .1 Outline of Chapter 5 .2 Summary of hypotheses.
50 vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF CHARTS Chart 2.1 Numbers deposit insurance in the world to March 2011 .2 The factors influence on the awareness .1 Description of collected sample .2 Gender of respondents.3 Age group of respondents .4 An international comparison .5 Isolating the “noes” from the “don’t knows”: age .6 Isolating the “noes” from the “don’t knows”: Education .7 Isolating the “noes” from the “don’t knows”: Residence .8 Isolating the “noes” from the “don’t knows”: Risk aversion .9 Isolating the “noes” from the “don’t knows”: amount of deposit. 39 vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATES DI: Deposit Insurance DIS: Deposit Insurance system DIV: Deposit Insurance of Vietnam FDIC: Federal Deposit Insurance Corporation MDIC: Malaysia deposit Insurance Corporation CDIC: Canada Deposit Insurance Corporation IADI: International Associate Deposit insurance DICJ: Deposit Insurance Corporation of Japan FSF: Financial Stability Forum BIDV: Bank for Investment and development Agribank: Viet Nam Bank for Agriculture and Rural Development Techcombank: Technological and Commercial Joint Stock Bank viii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1.1 Introduction This chapter represents general introduction for the current study by drawing a general picture of the following chapter. Research background, research objective and questions are provided as a rationale for this study. Methodology, scope and limitations of the study are also addressed in the next sections.
The last section of this chapter introduces the structure of the study. The outline of this chapter is shown in Table 1.1 Outline of chapter 1 1.6 Scope and limitation 1.7 Structure of the study 1.2 Research background The stability of financial system is a key factor of a strong economy and contributes to economic growth and development. An effective deposit insurance system is one of pillars of a safe and sound financial system and public confidence in the system. Public awareness of deposit insurance - its existence, and how it works - plays an important role for the activity of deposit insurance.
So public information and awareness often are overlooked in deposit insurance system design. 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Many countries set up deposit insurance systems have broadly publicized the terms and conditions of deposit insurance coverage to ensure that depositors are aware of the existence of the system and to limit the likelihood of bank runs in case of the bank failures. It is important to ensure that depositors are aware of coverage limitations in terms of amount and types of accounts covered in order to avoid presumption that all deposit and other financial products are protected (FDIC – Public awareness). Some significant researches have directed toward examining the public knowledge of deposit insurance.
Among those substantial research in countries that have the longer experience of deposit insurance, it can be listed out some outstanding findings such as Inakura et al (2005) in the Japan case, and Laure Bartiloro (2008) in the Italy case. Inakura et al (2005) find that Japanese is more aware of deposit insurance system. Their results show that households with higher income and educational attainment tend to be more knowledge of deposit insurance system. While Laure Bartiloro (2008) reports that Italian knowledge of deposit insurance is poor.
The research attempted to determine the factors that affect the awareness of deposit insurance as internet, income, and education. Although Vietnam adopted the deposit insurance scheme later than many other developed countries but it has been a remarkable growth. With six regional branches were set up, deposit insurance of Vietnam has made an active contribution to sustainable development of the banking system in Vietnam. The Vietnamese economy and banking sector still face numerous difficulties.
After the recent financial and debt crisis, there are many banks in the world collapsed. This has made to revive the controversy on deposit insurance and its effectiveness. Most of the previous researches on public awareness of deposit insurance focus on investigate the awareness of public and less attention to looking for the determinants positive influence to the awareness. According to the author knowledge, very few studies address the issue of public awareness of deposit insurance in Vietnamese context.
This motivates the present study to test whether 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Vietnamese public have more widespread awareness of deposit insurance of Vietnam. This study attempts to examine the public knowledge of deposit insurance and relationship between the selected variables and the perception.3 Research objective As noted above, for a deposit insurance system to be effective, it is necessary that the public be well informed about the benefits and limitation of deposit insurance system. The recent financial crisis force policy-marker reviewing the deposit insurance activity and changing its policy to enhance the depositors’ confidence to banking sector and ensure the safety of financial system. This study aims to investigate the level of public awareness of deposit insurance in Vietnam.
Simultaneously, it is also searching the determinants that appear to play a large role to the awareness of deposit insurance. This research brings various practical meanings for the policy marker and deposit insurer, insured institution, depositors as well as other researchers who want to study the public awareness of deposit insurance as follows: Firstly, the results of this research support the evidence for policy marker and deposit insurer, insured institution fulfill the suitable policy to maintain or enhance the public knowledge and confidence to banking system. Secondly, the findings help the depositors know the level of security of their deposit. In addition, they will make the right decisions to deposit or withdraw their money to avoid the case of lack of the awareness that can lead to bank runs.
Finally, the research is able to be a reference for researchers, lectures and students in finance and banking.4 Research questions As above discussed, this study addresses the following questions: Q1: How is the awareness of Vietnamese public about deposit insurance? 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Q2: What are the determinants that play a large role to the awareness of deposit insurance? As depositors cannot control the bank’s activities, their deposits protected by deposit insurance system (DIS). Besides protecting depositors, the DIS also aims at preventing panic in the banking system. If depositors believe that their deposits are safe, they could not make a wave of withdrawal of money that lead to collapse of a bank. Moreover, if the depositors know about the existing of deposit insurance, they feel secure about their deposits.
The study uses two different research questions to approach the issue is that the awareness of deposit insurance.5 Methodology This study was conducted in Ho Chi Minh City and two nearby province are Long an and Binh Duong with two phases: a pilot study and main study. Each country has its own characteristics of the deposit insurance scheme as well as finance system. In the first phase, qualitative approach employed to looking for whether the relation factors were suitable in Vietnam. This phase carries out by using group discussion techniques.