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1
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 2
2
1957-2008: Four different phases of economic growth
In the last 5 decades, Malaysia has witnessed major structural transformation of the economy
1957-70 1971- 85 1986-99 2000 onwards
Towards higher
Commodity-driven and Rural development and Rapid industrialisation and knowledge-based
import substitution nascent industrialisation global integration economy…
1997-98 2009
1985 Global
Asian
Recession Recession
Crisis
3
Outcomes of four decades of economic transformation
4
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 5
5
Malaysian Financial System Landscape
ONSHORE OFFSHORE
A dual financial system with conventional and Islamic finance operating in parallel
6
Size of financial system participants
0 5 10 15 20 25 30 35 40 45
7
The financial sector today is more resilient, efficient and competitive
8
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward
9
Central Banks in emerging economies have a wider role to promote
balanced & equitable growth
Greater challenges in
preserving financial stability • Greater sensitivity to political & socio-economic
as emerging markets are imbalances
more fragile
10
10
Mandate under the new Central Bank Act 2009
CBA 1958 CBA 2009
Mandates broadly defined Strategically focused
11
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 12
12
Malaysia ranks high in terms of access to financing
‘Ease of Access to Loans’ No. 13 in 2009 (up from World Economic Forum
no. 15 in 2008) (Global Competitiveness
Reports 2008-2009 and
2009 – 2010)
13
Banking system is the major financier to SMEs
14
Banks continued to support financing needs of SMEs in difficult environment
100
SMEs End-Feb 39
84 2010
75
72
Title
All customers
Measure End-1998
50 27
2003 2004 2005 2006 2007 2008 2009 2010
J-F
Source: Bank Negara Malaysia
15
SMEs in all economic sectors have access to financing
Agriculture
5% Others
9%
• BIs continue to support the
financing needs of the key
Construction economic sectors
12%
Services
50% • Services sector accounted
for the largest share (50%)
of total financing outstanding
at end-Feb 2010
Manufacturing
24%
16
Comprehensive initiatives to ensure continued access to financing
for SMEs
Financial Infrastructure
• Assist SMEs that have inadequate track record or collateral to obtain credit
Credit Guarantee facilities from FIs by providing guarantee cover
Corporation
• Offer a wide range of products (e.g. credit enhancement products) and
services (e.g. advisory, market research) to enhance SMEs’ ability to obtain
financing
17
Central Credit Reference Information System (CCRIS) as the main credit
database in Malaysia, enhances access to financing for SMEs
Description Benefits
• Provide credit information to
• Managed by and located FIs to:
at BNM – Facilitate credit
To FIs assessment of customers
– Facilitate credit risk
management
– Promote more efficient
credit processes
• Collect info from banks
and regulated FIs
Benefits of • Facilitate BNM for
To BNM regulatory, supervision
CCRIS
and analytical purposes
• Comprehensive database
18
To the public • Conduit to inculcate good
credit culture
18
CGC’s SME Credit Bureau (www.smecreditbureau.com.my)
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CGC was established to assist SMEs with inadequate collateral or track
record get access to financing
Roles
• Provide credit guarantees and advisory services to
SMEs that do not have adequate collateral or track
record, in a financially sustainable manner
Outcomes
• Bridge the gaps between businesses and banks via
guarantee mechanism • Guaranteed more than
• Embarked on transformation plan in 2006 RM45.3 billion financing to
404,460 SME accounts
Key achievements since 1972
• Expanded scope of guarantee beneficiaries to include Islamic • Outstanding guarantee of
banks and DFIs RM11.1 billion financing to
• Expanded product range 41,646 SME accounts as
- Participated in securitisation of SME loans as credit enhancer
at end February 2010
- Introduced equity financing through joint venture with global • SME Credit Bureau -
fund management company members registered as at
- Introduced guarantee scheme for start-ups Feb 2010 were 38 financial
- Introduced direct lending institutions & 28,200 SMEs
• Introduced risk based pricing structure for guarantee
20
• Established SME Credit Bureau in 2008, subsidiary to
provided credit information services on SMEs
20
Recent risk sharing schemes have assisted viable SMEs to obtain financing
SME AGS - SME Assistance Guarantee Scheme, BNM (as at 21 Mar 2010)
SAF & SMF - SME Assistance and SME Modernization Facilities, BNM (as at 21 Mar 2010)
WCGS - Working Capital Guarantee Scheme Facility, MOF (as at 25 Mar 2010)
IRFGS - Industry Restructuring Financing Guarantee Scheme, MOF (as at 25 Mar 2010)
21
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 22
22
Financial inclusion objective to promote balanced growth
Access to Financing
FINANCIAL INCLUSION
Ensure that every
economic activity,
geographical region & Access to Financial Services
segment of society
has access to
financial services Access to Financial
Assistance
Access to Financial
Information
23
23
Importance of financial inclusion
Ensure all economic sectors, regions and the population at large have
access to a broad range of financial products and services
• • Bring
Bringlower
lowerincome
incomegroups
groupsand
andmicro
micro
enterprises into the economic
enterprises into the economic
mainstream
mainstream
Promote
Promotebroad
broadbased
based
and
andbalanced
balancedgrowth
growth • • Enable
Enablepoorer
poorersegments
segmentsofofthe
the
population
population and micro enterprisestoto
and micro enterprises
participate
participateininincome-generating
income-generating
economic
economicactivities,
activities,thereby,
thereby,
equalising
equalisingopportunities
opportunitiesandandreducing
reducing
inequalities
inequalities
24
The philosophy of development, growth with equity/balanced distribution is
integrated in all Malaysian development policies
24
Financial inclusion is one of a range of strategies to eradicate poverty
Healthcare
Eradicating poverty
Basic
requires access to Education
services
financial services & …
Housing
25
25
History of Microfinancing in Malaysia
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Findings from a Census* in 2005 showed that there was an opportunity for
the formal financial system to serve the micro enterprises
44%
34%
Own 32%
Money 50%
Micro enterprises 43%
80% (435k)
26%
27
FIs 13% 16%
27
Prior to 2006, micro financing was provided by Government sponsored
schemes ..
TEKUN
24%
Govt. sponsored
TEKUN micro credit
24%
26% schemes
54%
74%
54%
22%
AIM
28
AIM
via National Savings Bank &
22%
Agriculture Bank
28
Financial institutions can benefit from offering microfinancing
Strength Weakness
Opportunity
Threat
• Attractive market currently served • Narrowing margins in existing
by shadow banking system
business lines
• Liberalised interest rate framework to
generate good return of equity (ROE)
29
29
Successful microfinance needs to overcome several challenges
Challenges Solutions
− Target group that is geographically dispersed
and have low financial literacy − Products that meet the needs of the
target customer i.e. easy, fast and
− Target group is averse to approaching
convenient
financial institutions
− High admin cost to serve the target customer − Pricing of products that incentivise
outreach
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− Lack of economies of scale
− Leveraging on existing banking branch
infrastructure and that of strategic
partners
Objective:
Objective:Enhance
Enhanceaccess
accessto tofinancing
financingto tomicro
microenterprises
enterprises
....by
byencouraging
encouragingfinancial
financialinstitutions
institutionstotoprovide
providesustainable
sustainablemicrofinance
microfinance
31
The National SME Development Council (NSDC) approved a
comprehensive sustainable microfinance institutional framework in 2006
Definition of Microfinance
Agriculture Bank (DFI)
• Financing up to RM50,000
Cooperative Bank (DFI)
(USD16k) to micro enterprises
for business purposes
32
Nine financial institutions rolled out micro financing products
2006
Incumbent Players After NSDC’s Approval on Framework
1998
AMBank B. Rakyat CIMB
AIM BPM
AmMikro in Pembiayaan Mikro-i Xpress Cash
Skim Pembiayaan Modal Usahawan Tani
Feb ’07 (Modal untuk Financing-i
Ikhtiar in Sept ‘87 (MUST) in Sept ’05
Usahawan Koperasi in Sept ‘07
– MUsK) in Apr ’07
CIMB UOB
Xpress Cash Personal EasiCash
Loan in Aug ‘05 in Jul ’06
33
33
The microfinance industry has grown
9 Financial
Institutions TEKUN
TEKUN RM835mil
RM617 mil
26%
CAGR: 35.9%
26%
74% yoy 35%
AIM Govt
sponsored 12%
Schemes
RM295
34 mil
27%
AIM
RM647mil
34
Micro enterprises have benefited from micro financing by the 9 FIs
Microfinance clients outstanding Microfinancing outstanding (USD mil) Microfinance access points
35
The steps taken to create a sustainable microfinance industry
Create
widespread
Design right awareness on the
product to meet availability and
Encourage FIs to needs of micros benefits of
provide microfinance
microfinance
36
36
BNM encouraged financial institutions to provide microfinance
• Diversify portfolios
Microfinance • Create new revenue streams
can be • Use excess liquidity profitably
profitable • High ROE business Activities
• Can charge rates to reflect costs
• BNM leadership organised
and led FI CEOs and
senior management on
• High competition in existing businesses study visits to successful
‘Blue ocean’ • Venture into uncontested market space
business microfinance institutions in
Indonesia & India
37
Jointly designed the right product to meet the needs of micro enterprises
‘Easy, fast & convenient’
Value to
micros
Local moneylenders
Formal financial
institutions that provide
microfinance
Product
features
Low interest Safety Easy Fast Convenient
rates - No collateral
38 Fast approval & Widely accessible at
- Min documentation disbursement branches and other
- Simple procedures distribution channels
Market research
38
Key benefits of Pembiayaan Mikro
Easy, Fast & Convenient
Small
• No Collateral
• Financing is offered to Financing
• Minimum documentation
micro enterprises Amount
• Simple loan procedure
Convenient Fast
39
Financial institutions adopted diverse business models to provide micro
financing
• Study visits
Microfinance
• Market research Business
Models
• Pilot tests
Cooperatives Distributor
network
40
40
Created the Micro Enterprise Fund to lower the financing cost to micro
enterprises in a responsible manner
Micro Financial
Micro
Enterprise Institutions
Enterprises
Fund (FIs)
• RM 200 million
revolving fund • Micro loans at reduced retail
financing rates but higher than
• Soft loan to FIs at a
SME financing rates to prevent
concessionary rate
leakages of assistance and
disincentive to remain small
41
Various initiatives in promoting widespread awareness on the availability
and benefits of microfinance
• Posters/Buntings of Microfinance
42
A National Microfinance Logo to provide prominent identity and create
greater awareness on microfinance
43
43 43
Rationale for the National Microfinance Logo
Colour GREEN
represents ‘life’
Major organisations 44
(e.g. FIs)
44
Microfinance logo displayed at financial institutions, strategic partners and
borrowers
1 2
3 4
45
(1) Financial Institution (2) Financial institution (3) Strategic partner (4) Customer
45
Distribution of multi-lingual microfinance flyers at strategic locations & via
direct mailing
46
46
Comparative table on the features of various microfinance products
47
47
Direct Mailing of Microfinance flyers to 397,209 micro enterprises
48
TV and radio commercials (Barber Shop)
49
49
TV and radio commercials (Tailor)
50
50
News articles & interviews on microfinance by Malaysian leaders
51
51
Microfinance articles featured in SME magazines
52
52 52
Information booths at exhibitions / roadshows
53
53 53
Information booths at exhibitions / roadshows
54
54
Microfinance Poster/Buntings
55
55
Continuous promotions and awareness programmes
56
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 57
57
Comprehensive mechanisms in place for consumer education and
protection
58
BNM’s financial advisory services via BNMLINK & BNMTELELINK
(Integrated Contact Centre)
Services
59
Many have benefited from the advisory and resolution services provided
60
The Small Debt Resolution Scheme
• Objective
• To assist viable but financially distressed
SMEs, by rescheduling & restructuring
61
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 62
62
Moving forward, the financial sector is well positioned to support
and contribute meaningfully towards economic transformation
A new Blueprint for the financial sector is being developed for the next decade
Greater role of the financial sector as an enabler, catalyst and driver of growth
Reinforce Malaysia’s position as an international hub for Islamic services through
accelerated development and promotion of Islamic finance
63
63
Goals of Malaysia’s New Economic Model
64
64
Lessons Learnt
65
Useful links
• http://www.bankinginfo.com.my
• http://www.insuranceinfo.com.my
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SME and Micro financing: Malaysia’s Experience
Presentation for the Financial Inclusion Advisors Programme
Kampala, Uganda
67