by nilammasri ja’afar senior vice president/head micro finance asia microfinance forum

By Nilammasri Ja’afarSenior Vice President/HeadMicro Finance

Asia Microfinance Forum4-8 August 2014Shanghai, China

Role of State Owned Banks in Financial

Inclusion

Bank Simpanan Nasional – Your Community Bank

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Regulated & Supervised by Ministry of Finance and Bank Negara Malaysia

BSN’s Objectives:• Promote and mobilise

savings, particularly from small savers

• Inculcate the habit of thrift and savings.

• Provide an avenue for savings to the general public.

• Utilise excess funds of the Bank to help finance economic development of the nation

Established under the Act of Parliament 146 - Laws of Malaysia

1974.

BSN Today – An Overview

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59 Micro Finance Centres

401 Branches 100% nationwide coverage

899 ATMs

6,800 Employees

344 CDMs

10 Mobile Banking Units85 Islamic branches

5,300 agents

> 8.5 mil customers> 0.7 mil SMS Banking Users> 0.35 mil Internet Banking Users

Financial Inclusion : BSN’s Driving Agenda

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• Under-served communities

• Non- urban areas

• Non-economical areas

• Low population

Mandated to BSN ;

Providing Financial Access

A better way…

Cheaper cost to serve

Scalability

Reach

Financial services to micro entrepreneurs – viable middle to lower

income businesses

BSN Agent Banking: Innovation in Extending Access to All

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Customers visiting branches

Normal Practice

Bring BSN to the Community Innovative

Idea

• Online• Real-time

Form-based Manual input Fixed line Longer process Less Coverage

Formless Automated Wireless

GPRS Simplified

process Increased

coverage

Services: Savings & Deposits, Bills & Loans Payments, Remittances &

Cashless Payments

BSN Agent Banking : Cost Effectiveness

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ITEMS COST

Set-up Cost(One-off)

MYR4,800(USD1,487)

POS TerminalSignage

Point-of-Sales Materials

Yearly Operating Cost MYR1,950(USD605)

MaintenanceNetwork Access Fee (GPRS)

Thermal Paper

Total Cost (First Year) MYR6,750(USD2,092)

Costs

BranchesATM-OffPremise

Agent Banking% Cost

Savings – Agent

Banking VS Branches

MYR / USD

Set-up Cost(One-off) MYR500,000

(USD155,000)MYR45,000

(USD14,000)MYR5,000

(USD1,500)99.04%

Yearly Operating Cost MYR250,000

(USD78,000)MYR40,000

(USD12,400)MYR2,000(USD600)

99.24%

1 Brick-and-Mortar Branch

100 Innovative Agent Banking Outlets

Agent Banking Set-up Cost Cost Comparison – Branch VS ATM-Off Premise VS Agent Banking

Cost Effectiveness : Branch VS Agent Banking

BSN Agent Banking & Sustainable Development

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Supports the Government ‘s National Agenda• National Blue

Ocean Strategy (Cost effectiveness, rapid expansion, high impact)

• Financial Inclusion

Expansion & development of local communities• BSN agents are

also agents of growth in their own communities

• Knowledge of IT and banking

Reduces BSN’s carbon footprint• Reduces setup

of brick-and-mortar branches

• Carbon-friendly as less emission of CO2.

The Nation Communities & BSN agents

Environment BSN

BSN Agent Banking : Effective Coverage

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Un-served12

Served388+495

99% 1%

Total

Sub-District

895

Un-served507

Served388

43% 57%

Total

Sub-District

895

Before BSN Agent Banking After BSN Agent Banking

By end 2014, BSN would have covered 100% of the Sub-Districts in Malaysia, with an additional 1,000 agents to be appointed.

BSN Micro Finance : Agents of Social Economic Change

Assists the poor to generate income & employment via self employment i.e. micro enterprises.

Ultimate objective is to alleviate the poor out of poverty.

Micro Finance is viewed as a development approach that provides financial as well as social intermediation.

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The other key objective is to transform fledgling micro enterprises into the next level i.e. SMEs

Most Establishments in Malaysia are Micro Enterprises

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• Micro Enterprises comprised 77% of all SMEs in Malaysia

• Employs 1.3 million workers or 36.5 % of all SMEs

• Average 3 workers per establishment

SourceEconomic Census 2011, Profile of Small and Medium Enterprises by Department of Statistics, Malaysia

But Majority of Micro Enterprises are Self Funded…..

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Sources of financing by size of SMEs, 2010Only 17.4 % of micro enterprises relied on financing from financial institutions (FIs)

SourceSME Census 2011, Department of Statistics, Malaysia (DOSM)

Micro enterprises lacked financing from FIs

due to :-

Lack supporting documents-no proof of income & expenses

No collateral High transaction cost-

small loan sizes

BSN Micro Finance : Government Mandate

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The National SME Development Council (NSDC) mandated BSN to be a specialized Micro Finance (MF) institution in 2006.

BSN launched its MF Program on March 15, 2007, to provide financing facilities to viable micro enterprises.

Key Deliverables of BSN Micro Financing Scheme

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Small Financing Amount

Funding for Business Purposes

Easy

FastConvenient

Financing Amount From RM5,000 To RM50,000

• No Collateral• Minimum

Documentation• Simple

Financing Procedures

• Approval - 6 Working Days

• Disbursement - 4 Working Days

• Widely Accessible

• 59 Dedicated MFC

• 401 Branches

• 5,300 EBB

• Financing to All types of Micro Enterprises / Self-employed Individuals

BSN Micro Finance Scheme : More Than Just Loans...

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Besides providing credit facilities, BSN also extends:-

Savings Access -• Customers required

to save via regular monthly deposits

Insurance/Takaful Protection• Covers loans in

cases of death or total permanent disability.

• Additional monetary benefits for customers (optional)

Advisory services

Capacity building & skills training programs

Instilling financial discipline & record management

Business & loans counseling

Credit clinics

BSN Micro Finance Scheme: Building a Sustainable Portfolio

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• Financing facilities are offered on market rates

• Effective selection & screening process- loans/financing are extended only to viable micro entrepreneurs

• Leveraging on existing Bank network of 401 branches and 5,300 EBB agents for:- Deposits Loan repayment Sourcing of new credit

applications

• Collaboration with governmental agencies for capacity building programs

BSN Micro Financing : Creating Positive Impact

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Micro enterprises gained in terms of:-

• Income & asset growth

• Creation of new jobs in local communities

• Expansion- new markets/products

• Graduation to the next level of SME

Pre Financing Post Financing

Financial Inclusion Agenda: Current Strategic Direction

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Agent Banking

(EBB)

Micro Finance

(MF)

Synergy

Providing MF to the appointed

EBB for business

expansion

Existing MF customers to become

EBB

Current Status

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MF

• 59 dedicated MF Centers• Over RM800 Million disbursed to

39,000 Customers• RM380 million loans outstanding

balance @ 44% of M’sia MF market share among Banks

EBB

• 5,300 active agents• Over 11.5mil transaction count

• More than RM990 million transaction amount.

579 EBB / MF Customers (11%)

Distribution Centers for

MF Customers

MF Loan Collection

Access Points for MF Loan

Application

Cross Sell other MF

Customers Products

Strategic Collaboration- Moving Forward

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EBB

M F

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THANK YOU

BSN… Your Community Bank