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SME BANK MALAYSIA21 SEP 2016
CEO Forum of the World Federation of Development Finance Institutions (WFDFI)Gaborone International Conference Center (GICC)Gaborone, Botswana. November 2-4, 2016
Theme: “DFIs: Sustaining Relevance in the Age of Disruption”
DFIs and the Agenda for Development : Expanding Possibilities
by Datuk Mohd Radzif Mohd Yunus
3 Nov 2016
SME BANK MALAYSIA 221 SEP 2016
Overview:SME Landscape in Malaysia
SMEs in Malaysia
Source: SMEs 2011 Census Report by the Statistics Department of Malaysia & Eleventh Malaysia Plan
Source: SME Bank Financing Portfolio YTD Mar 2016
October 2016
SME BANK MALAYSIA21 SEP 2016
Full time employee
Manufacturing Services & Other Sector
Micro Less than 5 employees Less than 5 employeesSmall Between 5 - 75 employees Between 5 - 30 employees
Medium Between 75 - 200 employees Between 30 - 75 employees
Annual Sales
Micro Less than RM300,000 (USD71.4K) Less than RM300,000 (USD71.4K)
Small Between RM300,000 & less than RM15 million (USD3.6M)
Between RM300,000 & less than RM3 million (USD0.7M)
Medium Between RM15 million & RM50 million (USD11.9M)
Between RM3 million & RM20 million (USD4.8M)
Eligibility Criteria
Status Entity defined as Small Medium Enterprise (SME)
Business activity Activities related to manufacturing, services and construction that not in contrary to Shariah principlesPrimary agriculture, mining, private/commercial housing, gambling and other activities determined by the Bank from time to time ARE NOT ELIGIBLE
Ownership Malaysian owned entity ( >51% Malaysian equity)
Note: RM1.00 = USD4.20
SME Definition & General Financing Criteria
October 2016
SME BANK MALAYSIA21 SEP 2016
SME Master Plan 2012-2020
October 2016
SME BANK MALAYSIA21 SEP 2016
Perspective of DFIs in Malaysia : Role of DFIsThe strategic sectors include agriculture, small and medium enterprises (SMEs), infrastructure, maritime, export oriented sector as well as capital-intensive and high-technology industries
The are 13 DFIs in the country of which 6 are prescribed under the Development Financial Institutions Act 2002 or (Amended) Act 2015 and supervised by Bank Negara Malaysia (BNM)
Roles and functions in
providing focused financial and development
support to bolster
economic growth,
socio-economic agenda and human capital development
DFIs are specialised FIs established by the Government with specific mandate to develop and promotekey sectors thatare considered ofstrategicimportance to the overall socio-economic development objectives of the country
October 2016
SME BANK MALAYSIA21 SEP 2016
Rationale of existence : Unique Individual MandateDFI MANDATE
Development Bank of Malaysia
Providing financial services focusing on capital intensive industry i.e. infrastructure projects, maritime & hi-tech sector
SME Bank
Providing financing and advisory services activities to SMEs involved in manufacturing, services and construction sectors
Export-Import Bank of Malaysia Berhad (EXIM)
Providing facilities to support exports & imports of goods, services and overseas investments
Agro Bank Malaysia Providing full range of financial services focusing on agricultural sector
Co-operative Bank Provide financing and accept deposits as well as producing satisfactory dividend for its members (co-operative)
National Savings Bank To encourage savings, investments and smart financial management among Malaysians to increase quality of life
The remaining 7 entities which are not governed by Central Bank have their own respective specific mandates
SME BANK MALAYSIA 721 SEP 2016
Central Bank(Regulator)
MITI(Supervising Ministry)
Broad Focus on:• Manufacturing sector• Services sector• Construction sector
SME Bank :Ownership and Reporting
Ministry of Finance(Shareholder – 100% )
• Authorized Capital RM5.0 billion
• Paid up Capital RM1.35 billion
SME BANK MALAYSIA21 SEP 2016
&
A full-fledged specialised financial institution, an international benchmark for nurturing SME excellence
To develop SMEs to be the nation’s engine of growth, in line with the Government’s economic agenda
October 2016
SME BANK MALAYSIA21 SEP 2016
SME Bank Competitive advantages : What SME Bank is doingBeyond Financing
MEDIUMSMALLMICRO
Small Medium Enterprises (SMEs)
DevelopmentBanking
High Impact Developmental Program ThroughSynergized Approach of Financial Assistance and Intervention
Financial assistance serves as enabler
for SMEs, as engine of growth, to move up the value chain and create
viral effect to the economy
Hand-holding approach from the entry point
to inculcate business acumen and propel
SME business to the next level
FINANCING INTERVENTION
SME BANK MALAYSIA21 SEP 2016
~RM40-50B financing not addressed by commercial banks
today
…Working capital and expansion needs
represent ~80% of financing supply gap
…Financing gaps are driven by two broad categories of market
inefficiencies
Note: *Estimated supply gap that are creditworthy (i.e. demanded by viable businesses) Source: BNM, SME Bank primary market research survey (N=300)
Underserved by commercial banks due to information asymmetry, lack of
collateral, age of SMEs, and structural
complexity of industry
Desire to accelerate growth to meet
government’s socio-economic agenda through stimulus
financing
RM40-50B financing not
served by comm. banks
DFIs need to play a critical role in supporting government’s goals for SME sector to (1)address SME financing gap due to continued “market inefficiencies” & (2) invest in capability building to nurture SMEs.
SME Bank focuses on providing funding assistance to businesses that are in the development and
growth stage or small to medium.
Financing Gap for SMEs: Unserved and Underserved markets
October 2016
SME BANK MALAYSIA 1121 SEP 2016
SME Bank’s mandate is to finance and support the growth of underserved SMEs in a financially sustainable way
“Do Good”Socio-economic Impact
“Do Well”Financial Sustainability
SMEGDP
Impact
BumiParti-
cipationSME
Growth inNKEAs
Access to Financing
Capacity Building
High GrowthSMEs
Nurtured
Financial Sustainability
(ROE to be independently
scalable)
October 2016October 2016
Play the balancing act : Development growth vs financial sustainability
SME BANK MALAYSIA 1221 SEP 2016
Business Impact
Policy Impact
Other Impact
1.Service Sector
2.Financial Technology
(FinTech)
Large-Scale Involuntary Migration
Cyber Attacks and Terrorist Attacks
Urbanization Scarcity of core commodities (e.g. clean water)
Source: The Global Risks Report 2016-11th Edition
Forces of Change
Climate Change Gen-Y Bloc Economy Ageing Society Women
Economy Rise of the
Richest
Recognize, prepare and act to forces of change
SME BANK MALAYSIA 1321 SEP 2016
Find new focus sector or in downstream sector
• Moving Digitally• Explore FinTech Financing • e.g. IAP• Look at FinTech Companies- Crowdo &
Others• Factoring and Leasing
Importance & Readiness
FinTech
Bloc Economy
Gen-Y
Ageing Population
Service Sector
Women Economy
Climate Change
Speed of Progression
• 46% of SME Bank workforce(2015)• 9% job turnover rate (2015) • 42.5% at Associate position
Explore new areas of service sector e.g. ICT, Green Tech, R&D
• Potential source of fund• Positive outlook for services sector, luxury items, properties
• Loss to GDP• Positive for waste
mgt .companies
Private pension scheme not ready20
40
60
80
100
• More than half total workforce-woman
• New financing products• Increase woman
entrepreneurship• Concern on TPPA, AEC,
RECEP• Need to push SME-Export
Mapping of our current state to the Forces of Change
29/3/2016
Oil Price
Rise of the Richest
Ringgit vs USD
New Economic Power
• New Export market for SMEs• Opportunities:-provide consultancy in
the new emerging market
SME BANK MALAYSIA 1421 SEP 2016 Source: The Global Risks Report 2016-11th Edition
Realising the opportunities
Focus on mandated role :
financing & developmental
assistance to underserved and
unserved markets
Adoption of financial
technology & digitization for greater market
outreach & productivity
Constant upgrade
capacities & capabilities of
SMEs
Produce innovative products &
programs; thus improve access
to financing
Development of focused strategic
partnership
Improve service delivery and
market outreach
Establishment of Banking
School
Improve infrastructure & distribution
channels
Understand market & take opportunity
offered by trade agreements
Adopting best practices from
other institutions
Mobile Apps, mobile banking
& internet banking
SME BANK MALAYSIA21 SEP 2016October 20163 Nov 2016