Fund mobilization is essential to banks’ success. Recently, banks face with
strong competition in attracting and retending depositors. Many banks fail to mobilize
funds while others are able to understand better depositors and depositors’ behavior in
bank patronage and take advantadge of their knowledge to win the game. In the study,
the researcher would like to address the issue of depositors’ behavior and bank
Background of the Study
Vietnam economy has been in the fast growth track for a decade. Vietnam
GDP growth is mainly come from government capital expenditure and private sector
investment. The fast infrastructure development and urbanization process require
huge source of funding.
One of the engine to lure the growth is the expansion of
credit by banking sectors.
The banking sector in Viet Nam consists of
5 state owned banks, 37
commercial joint stock banks, 53 foreign – related banks, 30 financial companies and
finance lease companies, 1 Central People Credit Fund and 1,057 local people credit
funds (Nguyen C.T., 2011). The number is quite big giving the Vietnam’s GDP per
capital is 1,300 USD by 2011 (Dantri, 2011). The competition is high in the sector,
especially in main economic and political areas like Ha Noi and Ho Chi Minh cities.
The interest income contributes a major part of banks income. Most banks have their
income heavily dependent on lending activities with interest income to total income
ratio of some banks reaching above 90% in 2010 (Quach, 2011). This causes many
banks concentrating on fund mobilization. One of key sources of fund would be the
depositors’ funding. The source of fund is viewed as a stable funding and counts for a
big part in banks’ balance sheet. Many strategies that banks persuad to lure their
deposit growth including branch network expansion, high interest rate offer, attractive
Due to the fact that the banking sector plays a key part in the economic
activities and economic development, and social stability as well, the banking
activities in Vietnam have been highly regulated. There are still many different
experts’ opinions on if the banking sector needs to be moving more deregulation or
regulation. However, taking the reason to prevent banks’ failure, the State Bank of
Viet Nam put in place a very high level on banks supervision. Some regulations that
directly affect banks’ expansion of credit and fund mobilization include control of
capital adequacy, bank liquidity ratio, and the banks’ branch network expansion. Even
though, the State Bank of Viet Nam tries to communicate and act to prevent the
banks’ failure in the future. However, depositors are always facing with risk of losing
their fund in case of banks’ run or bankruptcy. For deposit insurance, the depositors
can receive is 30 million VND at maximum as per law.
To study the depositors’ behavior is always necessary for banks to serve better
their clients. In fact, a few information of depositors’ behavior have been made
available in public sources in Viet Nam. Information is normally in the form of
observation and experts’ opinion. In late 2013, there is a doctorate study on individual
customers’ depositing behavior at banks made by Le Thi Thu Hang, which is
available at the Viet Nam Instiute of Social Science. Le T.T.H (2012) scoped her
study at nationan-wide scale and focused on individuals who had or did not have a
deposit at banks. However, there has not been a similar study of the correlation
between depositors’ behavior and bank patronage in Ha Noi that the researcher could
identify in the public sources. In addition, depositors’ behavior would always reflect
through certain factors. Therefore, the study of the correlation of depositors’ behavior
and bank patronage should be a key success factor for banks to win in the deposit
competition race in Ha Noi and for those who want to get knowledge of the study.
Objectives of the Study
The main objective of the study is to determine and analyse the correlation of
depositors’ behavior and bank patronage in the inner districts of Ha Noi. Besides, the
search aims to achieve the following objectives:
1. To describe the background of the general economic environment and the
banking industry in Ha Noi
2. To determine and analyse comsumer behavior model and to determine
depositors’ behavior model
3. To characterise the profile of the depositors in Ha Noi
4. To identify the factors that influence the depositors’ behavior in selecting
banks in the inner districts of Ha Noi.
5. To determine the correlation of depositors’ behavior and bank patronage in
the inner districts of Ha Noi.
6. To identify the winning strategies for banks in fund mobilization.
Statement of the Problem
Funding mobilization is very ctitical to banks in Vietnam, especially in Ha Noi
as a large number of banks with too high credit growth (Quach, 2011) with the limited
source of owners capital need to maintain their growth and liquidity by seeking
deposits from public. In addition, banks face with stiff competition in deposit
mobilization and this makes banks more difficult in attracting and keeping depositors.
Ha Noi is a big city where all banks have presence and try to gain advantage over
competitors. Understanding depositors’ behavior in Ha Noi would help banks adapt
their funding strategies accordingly. However, there is a very limited knowledge of
depositors’ behavior available in the research or at bank strategists’ desk. Therefore, it
should be an opportunities for researchers to study the depositors’ behavior and make
it useful to all stakeholders.
To understand the depositors’ behavior in bank patronage. The following
questions will be addressed:
1. What is the background of banking industry in Ha Noi?
2. What are the profile of depositors in Ha Noi?
3. What are the implications of depositors’ behavior?
4. How are the depositors’ behavior and bank patronage correlated?
are the factors that influence the depositors’ behavior in selecting
6. How do depositors prioritize the factors?
7. What are the winning strategies for the banks in fund mobilization?
Hypotheses of the Study
The following hypotheses will be tested:
Hypothesis 1: Depositors’ behavior in bank patronage is positively correlated to the
level of interest rates that banks offer for taking deposits.
Hypothesis 2: Depositors’ behavior in bank patronage is positively correlated to the
availability of the bank.
Hypothesis 3: Depositors’ behavior in bank patronage is positively influenced by
referral from friends or relatives.
Hypothesis 4: Depositors’ behavior in bank patronage is positively correlated with the
promotion campaigns that banks offer to depositors.
Hypothesis 5: Depositors’ behavior in bank patronage is positively correlated with the
bank reputation in the market.
Hypothesis 6: Depositors’ behavior in bank patronage is positively correlated with the
service quality that depositors experience with banks.
Hypothesis 7: Depositors patronize the banks when their deposit is secured.
Significance of the Study
The study is important as it addresses to answer several key questions and it
benefits researchers and banks in setting up their strategy in fund mobilization.
The study is to identify the factors that influence depositors’ behavior in
selecting banks for placing their deposits.
For the banking industry’s regulator, it finds out the gap between the fact and
polices for fund mobilization, implication for strenthening the policy environment.
For the banks, they understand factors to influence the depositors’ behaviors;
through which banks would be able to address key issues that influence depositors in
bank patronage and able to reshape their policies and strategies to win the
For marketers, the understanding of depositor behavior and influencing factors
would help them to develop suitable and effective marketing campaigns.
For researchers and students, they would have a valuable information about
depositor behavior in Ha Noi and apply in the work and study.
Scope and Limitation of the Study
The study focused on the Ha noi urban city area where the competition among
banks is fierce and the main source of bank funding come from. The subject is on
depositors who used to or place their deposits at financial institutions in Ha Noi
The survey questionnaire is developed to address several factors influencing
depositors’ behavior. The direct interview method is used to collect primary data from
depositors. The questionnaire could be handled directly by the researcher or agents.
The interviews would be conducted from November 2012 to February 2013 within the
inner districts of Ha Noi city.
The limitations that have direct bearing on the results of the study consist of
the following: (i) Duration of the study is short and resource is limited, these would
not allow a large scale interview to be made. Therefore a reasonable sample size is
expected to fit with the scope of the study; (ii) Ha Noi is a big city and it has just
merged with Ha Tay province where over 80% population living in rural areas with
limited access to banks, the study is only to conduct in the inner districts of Ha Noi
urban city areas where population is highly condensed and well informed of banks
and their services; (iii) Depositors are selected randomly and due to a low ratio of
deposit access, it is not easy for interviewers to approach successfully interviewees at
any time, hence it would take time and resources; (iv) there is limited information on
the research available and there has not been any official research made, the
identification of factors could be come from the review of literature and researcher’s
Definition of Terms
1. Bank is a credit institution which has the right to involve in all banking activities
(Law on Credit Institutions, 2010).
2. Bank availability means bank office’s location that measured by a distance from
bank to depositors’ place or the time they spend to reach the bank.
3. Bank patronage is a business give to a bank by its customers.
4. Behavior is simply a response of an individual or a group to an action,
environment, person or stimulus.
5. Commercial bank is a bank which is allowed to provide all kinds of banking
activities for profit.
6. Credit Institution is an entity to involve in one, some or all banking activities.
Credit institutions include banks, non-bank credit institutions, micro finance
institution and People’s credit funds (Law on Credit Institution, 2010).
7. Customer behavior is response that customer reveals during the process of
acquiring goods or services and usage and influenced by subjective and objective
8. Deposit is an amount of money that a depositor places in bank with expectation to
add value, keep secure and convenient for use.
9. Depositor is a person/individual who places his/her money at banks in term of
savings, or buys banks’ term deposit certificate or bond.
10. Depositors’ attitudes are defined as depositors’ evaluation of the banks in terms of
service quality and bank brand, operating conditions.
11. Depositors’ behavior is the depositor’s selection of bank, kind of money, term,
and kind of deposit, originated from his motivation, perception and attitudes and the
behavior is influenced by subjective factors such as age, professional, work
experiences and income, and objective factors like bank influencers, social and
12. Depositors’ motives are to seek for value added, to ensure safety and convenience
for their money.
13. Depositors’ perception is defined as the depositors’s understanding and
knowledge of banks and their products and services.
14. Foreign banks are are commercial banks having branches or establishing 100%own banks in Viet Nam.
15. Funds mobilization is banks’ activities to mobilize funds or deposits from
different sources including funds from depositors.
16. Gross Domestic Product (GDP) is the market value of all officially recognized
final goods and services produced with a country in a given period of time.
17. Human behavior refers to the range of behaviors by humans and influenced by
culture, attitudes, emotions, values, ethics, authority, rapport, hypnosis, persuasion,
18. Interest rate is the price that banks offer to pay depositors for taking deposits with
commitment to return deposit amount in full plus interest at the end of deposit period.
19. Joint Stock Banks are the commercial banks established in Viet Nam with capital
contribution from individuals and entities.
20. Non-performing Loans (NPL) is the loans at banks that overdue more than 90
21. Promotion is the marketing campaigns adding more value to depositors that banks
offer to them.
22. Referral is recommendation or advice from depositors’ friends or relatives to use a
bank or products.
23. Reputation is the bank image and brand name.
24. Service quality is the quality of products or services that banks offer and could
be measured through depositors’ satisfaction.
25. State Owned banks are the commercial banks established in Viet Nam with the
state controls more than 50% owner capital.
26. The State Bank of Viet Nam (SBV) is the central bank of Viet Nam who is
responsible to manage and supervise the banking system of Viet Nam.
27. Viet nam dong (VND) is the official currency of Viet Nam
28. Viet Nam General Statistical Office (GSO) is the government entity providing the
29. United States Dollars (USD) is the official currency of the United States of
REVIEW OF LITERATURE AND STUDIES
The chapter presents the discussion of the overview of Viet Nam economic
development and the literature review of banking industry, the consumer behavior
model, similar studies of depositors behavior and, the review of influencing factors to
depositors as well. Deposit formulates a key part in banks’ balance sheet. Banks are
only able to fund its growth of balance sheet size by attracting more deposit. Giving
the strong competition in the banking industry, banks’ survival in the long- run would
very much depend on whether they are able to attract depositors and retain them.
Therefore, the study on the depositors’ behavior in bank patronage is the key to help
the researcher and banks to address better the issue of winning depositors’ interest.
2.1.1. Viet Nam Economy
Viet Nam population is 86.9 million, of which 30% lives in urban areas and
70% lives in rural areas (General Statistic Office (GSO), 2010).
The country has experienced bouts of macroeconomic turbulence in recent
years—double-digit inflation, depreciating currency, capital flight, and loss of
international reserves—eroding investor confidence. Rapid growth has revealed new
structural problems. The quality and sustainability of growth remain a source of
concern, given the resource-intensive pattern of growth, high levels of environmental
degradation, lack of diversification and value addition in exports, and the declining
contribution of productivity to growth. Vietnam’s competitiveness is under threat
because power generation has not kept pace with demand, logistical costs and real
estate prices have climbed, and skill shortages are becoming more widespread (world
Bank (WB), 2012).
The Socio-Economic Development Strategy 2011-2020 gives attention to
structural reforms, environmental sustainability, social equity, and emerging issues of
macroeconomic stability. It defines three "breakthrough areas": (i) promoting human
resources/skills development (particularly skills for modern industry and innovation),
(ii) improving market institutions, and (iii) infrastructure development. The overall
goal is for Vietnam to lay the foundations for a modern, industrialized society by
2020 (WB, 2012).
2.1.2. Ha Noi Economic Development
Ha Noi is the capital of Viet Nam. In 2008, Ha Noi expanded in geographical
area by merging with Ha Tay province, extending to 3,3 million km2 with population
of 9 million (GSO, 2012). The average GDP growth rate per annum: 10% (20112015), 9% (2016-2020), and about 8% (2021–2030) and GDP per capita: about US
$3,300 (by 2015), US $5,300 (2020) and US $11,000 (2030 as projected (Xuan Hong,
According to the strategy on socio-economic development to 2030, Ha Noi
continues to function as the country’s administrative and political center and an
ecological city of thousand-year civilization.
Hà Nội will focus on building a
knowledge economy, nurturing talents and skilled human resource, so as to become a
high-grade training center in the region. The city will further prioritize hi-tech
industries and modern services, especially finance, banking, insurance, securities, post
and ICT, health, education and scientific services. Meanwhile, agriculture will be
modernized through applying technical advances. Under the strategy, Hà Nội will be
an urban complex with modern technical infrastructure (Xuan Hong, 2009).
Regulation of Banking Industry
2.2.1. Background of Vietnam Banking Industry
Vietnamese banking sector consists of 99 banks and foreign bank branches
including 6 state owned banks (including VCB and CTG), 34 jointstock commercial
bank, 55 foreign banks and foreign bank branches, and 4 joint venture banks. Only 11
out of 40 domestic banks (25.6%) have chartered capital of VND5,000 billion and
above. Small banks account for a large proportion in the banking sector currently.
Most of these were initially rural commercial banks but are now pursuing the strategy
of becoming national banks. This transition enabled them to achieve fast expansion in
terms of assets and high growth of loans within a short time, however, risk
management and corporate governance were not accordingly improved to mitigate
risks (Quach, 2011). Banks have strongly grown not only in number but also in size of
operating network. However, the development strategy of each bank determines the
way it expands the geographical coverage of branches, transaction offices and ATMs.
Table 1 bellow provides classification of banks by ownership and some key
indicators of the banks in Viet Nam. There are only 6 SOBs but they dominate the
market with nearly 40% marketshare while 34 JSCBs also have the same portion of
market share and the remaining 10% for foreign banks and joint ventrure banks. The
Appendix A.1 to A.5 provide details of name, capital, location of head office and
some key information of all participants in the banking industry. It is obvious that
most of the banks based their head offices in Ha Noi and Ho Chi Minh Cities where
having concentration of commercial and economic activities and big size of healhy
population. Some few JSCBs locate their head offices in provinces, mainly
historically for license in the fast, but their operation also concentrate in Ha Noi and
Ho Chi Minh and some other healthy areas.
Bank classification by ownership and key indicators as of 30 June 2013
Type of banks
State Owned Banks (SOBs)
Jointstock Commercial Banks
Foreign and Jointventure Banks
Source: The State Bank of Viet Nam
2.2.2. Key Challenges Facing the Banking Industry
According to Quach, 2011, the Viet nam baking sector is summarized by the
following characteristics : (i) Banking sector experienced dramatic growth in both
quantity and total assets during 2005 – 2010, (ii) High NPL ratio, small size, credit
growth much higher than deposits and GDP growth, and income heavily depending
on lending are key characteristics of the banking sector. NPL ratio of the whole sector
was 3.1% in June 2011 and is expected to reach 5% in 2011 year end. Average credit
growth during 2000-2010 was 32%, higher than 29% of deposit growth and 7.15% of
GDP growth, which might cause negative impacts on the health of the economy. (iii)
Since the beginning of 2011, the banking sector has gone through hard times, due to
instability of the interest rate and multiple changes in the credit policy. The SBV has
continually adjusted policy rates and imposed a rate cap on VND and USD deposits in
an effort to control inflation and stabilize the macro economy. Credit growth was slow
during the first 7 months of 2011 due to inefficient capital flow among banks and
markets. Interest rate racing among banks and a large gap maintained between USD
and VND credit growth were highlights in this period.
After the too fast expansion and growth of the banking industry, it is projected
that the banking industry would face with a consolidation period. The clear signals
were starting from mid of 2012 as (i) the banking industry faced with serious liquidity
problems and many of them had to ask for the help of last resort from State Bank, (ii)
the Sate Bank of Viet Nam stopped giving licenses for banks to open new branches,
(iii) the governor of the State Bank of Viet Nam warmed that strong actions should be
taken with weak banks through restructuring process or mergered with other banks
and there would be 5 to 8 banks should be mergered in 2012, following of the merger
of 3 banks in 2011 including SCB, Ficobank and VNtinnghia bank.
According to Vu H., 2013,
9 weak banks have been placed under
restructruring program innitiated by SBV, including (i) the merger of three banks
(SCB, Ficombank, and Vntinnghia bank, (ii) the merger of Habubank into SHB bank,
(iii) restructure of Trust bank, and (iv) the merger of Western bank and PVFC – a
financial company. Besides, DaiA Bank and HDBank annouced their merger at
shareholders’ meeting on 15 June 2013 (Giaoduc.net.vn, 2013). Also, Vu H., 2013
mentioned that the restructuring of banks has made significant progress as the safety
of banking system improves, the signal of banking system colapse is over, deposit
withdrawal is served on time, and the money market is stabilized.
Even during financial crisis time and consolidation of the banking system, the
figure showed an increase of public deposits in banking system. This indicated the
depositors’s confidence on the banking system in general. The increase of deposits in
the banking system was by 11.23%, while credit increased only by 1.4% at of August
2012, in compared with the year beginning (Vneconomy.vn, 2012). Other inplication
of the situation is that depositors might not have better choices of investment, rather
than making deposits at banks.
Background of Ha Noi Banking Industry
2.3.1. Banking Industry in Ha Noi
According to SBV HN (2012), in Ha Noi, there are 2,041 branches and
transaction offices, belong to 403 credit institutions. Total assets of all credit
institutions are 1,455,497 billion VND, of which 471,296 billion VND for sate owned
banks, 566,294 billion VND for joint stock banks, 153,571 billion VND for foreign
banks, 5,726 billion VND for joint venture banks, 132,834 billion VND for financial
companies, and 115,330 billion VND for others.
Ha Noi is Viet Nam’s capital where most of banks locate their head office.
Banks are providing full range of banking products and services. According to Kim
C., 2013, total fund mobilization in Ha Noi reaches 857,473 billion VND while credit
reaches 616,600 billion VND as of the end of February 2013. This figure indicates
that a part of funds mobilized in Ha Noi should be used to fund credit growth in other
markets. As Ha Noi is considered as a pool of funds, all banks concentrate in the
market and competion become very strong.
2.3.2. Practice in Deposit Mobilization in Ha Noi
For a long period of time from 2005 – 2011, the average credit growth rate of
the banking system is 30% per year. This causes the fierce competition among credit
institution to mobilize fund for their asset growth. In consequence, the competition in
saving mobilization is very strong and always causes the increase of interest rates.
To prevent the over-increase of the cost of funds that would negatively impact
the economy and economic activities, the State Bank of Viet Nam set the cap on
deposit rates. At the same time, SBV also regulated to limit the withdrawal of deposit
before due by applying the demand rates which are low to every before-due
withdrawal. In fact, deposits at credit institutions are mainly short term deposits less
than 3 months (SBV HN, 2012). Due to the regulated cap on deposit rates, small
banks are loosing advantage in compared with bigger banks. To attract deposits and
keep depositors, small banks use many ways to compensate depositors, which
eventually increase the cost of fund much higher than the cap.
Given the difficulties in the banking system and the economy, the fund
mobilization in Ha Noi for the first half of 2013 increases by 5.74% compared with 31
December 2012 while credit increases ony by 1.8% (Nguyen T., 2013). This means
that depositors still increase their deposits at banks and consider banks as an attractive
channel for investment or keep their money safe.
Consumer behavior is a complex process involving the activities people
engage in when seeking for, choosing, buying, using, evaluating and disposing of
products and services with the goal of satisfying needs, wants and desires. Arnould,
& Zinkhan (2002) defines consumer behavior as
individuals or groups
acquiring, using, and disposing of products, services, ideas, or experiences. A range of
factors; both internal and external take to influence consumer behavior. These factors
range from short‐term to long‐term emotional concerns . Understanding the process of
how a purchase decision is reached is fundamental as this forms the foundation that
can be used to analyze any given product or services.
In the following, the researcher discusses two conceptual models of
consumer behavior that form the foundation of the study, namely the Engel, Kollat
and Blackwell model and the Hawkins, Best and Coney model.
Hawkins, Best & Coney (1998) presents a conceptual model of consumer
behavior. External and internal factors contribute to the formulation of self-concept
and lifestyle, which take an impact on the consumer decision process. During this
process, experiences and acquisitions update the original external and internal
Conceptual Model of Consumer Behavior
Source: Hawkins, Best & Coney (1998)
In the model, the individual's self-concept and life-style will be influenced by
both external and internal factors. The external influences are mainly sociological and
demographic, including constructs such as culture, demographics, social status,
reference groups and family. The internal influences are mainly psychological and
physical, including constructs such as perception, learning, memory, motives,
personality and attitudes. According to the conceptual model, the individual's selfconcept and life style generate needs and desires, some of which are satisfied by
consumption decisions. The individual is confronted with situations that trigger the
consumer decision process. The stimuli may include products, retail outlets, sales
personnel, advertisements, etc. The consumer responds to the stimuli after following
a problem-solving process which includes problem recognition, information search,
alternative evaluation and selection, outlet selection and purchase, and post purchase
processes. The stimuli is said to activate and create a state of dissatisfaction or
problem that the consumer will engage in solving. In this conceptual model the
general structure of the stimulus-organism-response models, wherein the internal
processes leading to the individual's response are stated in terms of informationprocessing and problem-solving or decision-making.
Hawkins, Best, & Coney (1998) in bellow also describes a conscious problem
solving and learning model of consumer behavior. This model shows the development
in customer behavior. In the model there are five stages, this involves problem
recognition, alternate evaluation, search for alternatives and purchase and outcomes.
It is not essential for the customers to go through all those stages.
Conscious Problem Solving and Learning Model of Consumer Behavior
Source: Hawkins, Best, & Coney (1998)
The customers would get data from marketing and non marketing research;
this would influence the problem recognition. This is the first stage of the decision
making process for the customer. If the customers have still not come to a final
decision, the consumer would go to the next stage of the model. This model has a
good description of active information seeking and evaluation processes of consumer.
The information processed in this model is the stimulus. The consumer decision
processes act upon this stimulus in order to determine a response to it. The model
attempts to explain each stage and shows interrelated between the stages of consumer
buyer behavior from the stimulus, through the purchase to post purchase behavior.
2.5. Review of Related Studies
There are many related studies available in the public sources, both overseas
studies and domestic studies. There is not a same captioned studies of the correlation
between depositors’ behavior and bank patronage. However, the depositors’ behavior
had been studied by many scholars or researchers in conjunction with economic
environment, insurance system, during a financial crisis time, and with bank
According to Schmukler S., Peria M.S.M., and Levy E. (2009), depositors
respond to increases in bank risk- reflected in bank-specific characteristics by
demanding higer interest rates on their deposits or by withdrawing their funds,
penalizing managers for excessive risk-taking. Macroeconomic risks can influence
depositors action, both regardless of and through bank-specific characteristics. The
effects can take place when worsening macroeconomic conditions directly threathen
the value of market participants’ assets such as bank deposits. Macroeconomic factors
are significant drivers of depositor behavior in crisis periods, at times overshadowing
the role of bank-specific characteristics.
Babolola (2009) mentioned that although trust is the conerstone of the banking
industry, the perceptual factors influence the customers’ choice of banks. Attitudes
are important in a consumer environment and attitudes influence thoughts, feelings,
and most importantly behavior. Also, the overriding choice of the customers may
depend on a number of external factors.