UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM 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) BQ GIAO D~C E>AO Tl;\0 TRUONG Dl;\1 H9C KINH TE TP.HCM THUVIEN • 1 A THESIS PRESENTED BY DOHONGNGOC 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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail.com 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. solve the d~mand 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 TIEU LUAN MOI download : skknchat@gmail.com TABLES OF CONTENTS. C ertl 1cat1on.iv List of tables and figures. ix CHAPTER I·: INTRODUCTION .1 Prob-em statement.2 Objectives ofihe stlldy .macy on rese8.rch· methQdology- and data .5 ·The organization of the thCsis ···~····················································································3 CHAPTER II: LITERATURE REVIEW .1 TheOry ba~kground.
4 Household Credit Borrowing Household credit market 2. 4 Credit management Credit analysis and loan decision. Issues in credit market 2.2' Experiences of housing development in some Asian countries ••. 10 iv TIEU LUAN MOI download : skknchat@gmail.3 Theoretical models and empirical studies for house demand .Determinants of loan amount.
16 The basic models. 16 :The extended models .5 Empirical models applied in previous studies. 17 CHAPTER III: RESEARCH METHODOLOGV.2Detenninants ofthe probability .3 Determinants of loan amount .4 Specific empirical models. 22 Description of the model1.
22 Definition and explanation of variables of the model 1. 22 Expected signs of the variables' coefficients. 24 Description of the model 2. 24 ·Definition and explanation of variables of the model2.
24 Expected signs of the variables' coefficients .2 Data source· aild sa~pling. 26 Where is data source? .What-Is When are they collected?. 27 v TIEU LUAN MOI download : skknchat@gmail.!Statistical tests for descriptive analysis .3 Statistical tests for validity of specific models. 30 CHAPTER IV: ~SU~TS AND DISCUSSION .1 Situation ofhousingcreditprogram for urban household in Ho Chi Minh City .1 Housing demand of urban household .2 National strategy on housing up to the year 2010 .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 .4 HCMC Housing development program .2 IiCMC Housing D-evelopment Bank ·························~······-············································35 ·4~2.2 Housing credit program ofHDBank .4J~1Analysis ofborrower' characteristics .3 Statistical tests for validity of specific models .4 Description collecting data and choosing suitable method .Results ·of ~odels ~esting and explanation .1 ·:Empirical result- Model I .2 Backward LR method. 50 vi TIEU LUAN MOI download : skknchat@gmail.3 Analysis the factor affect to the probability to get housing loan for household .2 Backward LR method .3 Analysis the factor affectto the probability to get housing loan for household. 54 CHAPTER V: CONCLUSION AND IMPLICATION .1 Conclusion on the applied methodology and limitation .2Conclusi0n On the studie.licy impli~ation in.4 Policy implication for HDBank as well as housing credit program •.
59 References Annex vii TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES .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 TIEU LUAN MOI download : skknchat@gmail.com ·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 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: INTRODUCTION 1.1 Problem statement The world is flat on all fields by globalization, information technology development especially in the economic field. Viet Nam also follows this tendency by joining econoinic organizations in area as well as in the world such as AFTA, WTO. Economic development and reforms in the sector has brought increased urbanization. Urban population is expected to increase further with a rise in the urbanization levels and in the population.
In a research of JBIC (1999) stated that VietNam has been experiencing rapid urbanization owing to economic development after the Doi Moi policy, and urban population is predicted to increase to 46 million in 2025 from 15 millionin 1995, · Urban development and housing sector, especially in Hanoi and HCMC, is urgently challenged by swelling migration from rural· areas, expanding informal settlement, emerging .relocation needs by inner-city redevelopment, accelerating reform of SOEs that provided their employees with houses. This implies demand for housing would increase at a faster pace in urban VietNam in the short term to medium _term. To solve urban development and housing problem for the resident, Viet Nam is learning valuable lessons from other country's different models 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 in 1998 in Hanoi; These funds mobilized capitals primarily from the sales revenue of the former state-owned houses, and are used for housing finance. Another facility named HIFU was set up in HCMC in 1997. HIFU mobilizes capitals from bank loans, equity and trust fund entrusted by the People's Committee, and it invests in urban development including housing projects of the public developers.
Besides that, housing loan activities are chiefly supplied by state-owned commercial bank, private joint-stock bank, municipal fund. This study just concentrates to analyze housing finance especially housing credit program for household. In real, a large of the urban population lacks access to affordable finance for housing construction or improvement, so they have to resort to informal sources such as moneylenders, friends, relatives and credit associations. So investigating the determinants of access to credit and the determinants of loan amount 1 TIEU LUAN MOI download : skknchat@gmail.com 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 project will set up a facility to provide 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 General objective Analysis of housing credit program for urban households by analysis the probability of credit for household and. the deteirninants affeCt to loaiiamomil 1.
, The demand of house and housing system in urban VietNam. -- - The demand of housing loan of urban household. - The_ ~eterminants of housing credit program for urban household including· 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 to borrow, loan amount.
"' Enrich our knowledge on credit market and borrowing by household in Viet Nam, particularly in housing credit program. - The effective of the housing finance project to the low-income and poor · people artd contribute the economic growth in VietNam. - In addition, housing finance project do strengthen and capacity building to develop VietNam's housing finance system.3 Research Questions _ How is 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 TIEU LUAN MOI download : skknchat@gmail.4 Summary on research methodology and data The method is used, including statistical and descriptive analysis, review of historical ·trends, and·. Apart form, quantitative method is extensively used; Data is used in the analysis from the core banking of HCMC Housing Development Banlc 1.5 Strcuture of the thesis The thesis consists of five chapters, following chapter 1, the rest of the structure as follow:.
Chapter 2: Literature review Chapter 3: Research.methodology Chapter 4: Result arid discussion Chapter 5: ·Conclusion and Implication 3 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER II: LITERATURE REVIEW 2.1 Major concepts Household is area of concern in social science. Concept of household is defined and discussed by economists, feminists and anthropologists. Ringen (1991) defines of household that as is a group of at least two people pools their incomes and uses income collectively. In house holds, income is not split up.between household members for each to use his or her · share, at least not all of it.measure, household members cooperate on the use of income and thereby get more out of their income than they could if each had been on his or her own.
However, there is much controversy over the boundary of this definition. Generally, economists view household as an essential unit of analysis and develop theory based on modeling behavior of household. There are two themes of economi~ model of household behavior. The first treats consumption and produce separately or simultaneously in an integrated model.