presentation at the microfinance workshop … by mr f waqabaca cmfsdc... · microfinance...

MICROFINANCE MICROFINANCE –– THE MALAYSIAN THE MALAYSIAN

EXPERIENCEEXPERIENCE

Presentation at the

Microfinance Workshop

Reserve Bank of Fiji

EXPERIENCEEXPERIENCE

Filimone Waqabaca

4 November 2009

IntroductionIntroductionIntroductionIntroduction

• 80% of the SMEs in Malaysia are micro

enterprises (435,000)

• Government saw it important that a sustainable

microfinance industry is developed


microfinance industry is developed

• Aim is to ensure that micro enterprises have

access to financing from the formal financial

system

Types of enterprisesTypes of enterprisesTypes of enterprisesTypes of enterprisesNumberNumberNumberNumber ofofofof micromicromicromicro enterprisesenterprisesenterprisesenterprises totaltotaltotaltotal 435435435435,,,,000000000000• Most are in the services sector = 88%

• restaurants, tailors, barbershop, workshop,saloon/spa, selling traditional medicines, cosmetic,

bookshop


• Agriculture sector = 7%• rearing cattle, rubber, paddy, fishing, vegetable

plantation, flower plantation, fish farming, rearing ofleeches and worms

• Manufacturing sector = 5%• traditional delicacies, arts and craft, manufacturing

of traditional medicines, manufacturing of food e.g.chilly sauce, ketchup, noodles , etc

Main sources of financingMain sources of financingMain sources of financingMain sources of financing• OwnOwnOwnOwn moneymoneymoneymoney –––– 32323232%%%%• OthersOthersOthersOthers –––– 31313131%%%%• FriendsFriendsFriendsFriends andandandand familyfamilyfamilyfamily –––– 24242424%%%%


• FriendsFriendsFriendsFriends andandandand familyfamilyfamilyfamily –––– 24242424%%%%• FinancialFinancialFinancialFinancial institutionsinstitutionsinstitutionsinstitutions –––– 13131313%%%%

• Need to assist micro enterprises obtainfinancing from formal sources

Microfinance Institutional FrameworkMicrofinance Institutional FrameworkMicrofinance Institutional FrameworkMicrofinance Institutional Framework• Bank Negara Malaysia developed a comprehensive

microfinance institutional framework, where:• banking institutions;• development financial institutions; and• credit co-operatives


• credit co-operatives

were identified to provide microfinance to viable microenterprises

• Approved by the National SME DevelopmentCouncil in 2005

Within the Institutional Framework… Within the Institutional Framework… GovernmentGovernmentGovernmentGovernment leveragedleveragedleveragedleveraged onononon existingexistingexistingexisting infrastructureinfrastructureinfrastructureinfrastructure

• Bank Simpanan Nasional has been mandated toprovide microfinance

• Bank Rakyat mandated to provide microfinance to


• Bank Rakyat mandated to provide microfinance tomembers of co-operatives

• Bank Pertanian to continue to provide microfinanceto micro enterprises in the agriculture and agro-based sector

Since then… Since then… Since then… Since then… • 9999 financialfinancialfinancialfinancial institutionsinstitutionsinstitutionsinstitutions rolledrolledrolledrolled outoutoutout micromicromicromicro financingfinancingfinancingfinancing• MicrofinanceMicrofinanceMicrofinanceMicrofinance industryindustryindustryindustry hashashashas growngrowngrowngrown stronglystronglystronglystrongly• MicroMicroMicroMicro financingfinancingfinancingfinancing outstandingoutstandingoutstandingoutstanding::::

• EndEndEndEnd 2000200020002000 ==== USUSUSUS$$$$42424242 millionmillionmillionmillion• EndEndEndEnd JuneJuneJuneJune 2009200920092009 ==== USUSUSUS$$$$556556556556 millionmillionmillionmillion


• EndEndEndEnd JuneJuneJuneJune 2009200920092009 ==== USUSUSUS$$$$556556556556 millionmillionmillionmillion• AverageAverageAverageAverage loanloanloanloan sizesizesizesize ==== USUSUSUS$$$$3333,,,, 138138138138• AvailableAvailableAvailableAvailable atatatat 1111,,,,542542542542 branchesbranchesbranchesbranches andandandand 1111,,,,766766766766 accessaccessaccessaccess pointspointspointspoints

• participation of the banking institutions is important• have large funding and network of branches• critical to ensure the wide outreach of microfinance

3 steps taken to create a sustainable microfinance 3 steps taken to create a sustainable microfinance industry…industry…3 steps taken to create a sustainable microfinance 3 steps taken to create a sustainable microfinance industry…industry…• ENCOURAGEENCOURAGEENCOURAGEENCOURAGE FINANCIALFINANCIALFINANCIALFINANCIAL INSTITUTIONSINSTITUTIONSINSTITUTIONSINSTITUTIONS TOTOTOTO PROVIDEPROVIDEPROVIDEPROVIDE

MICROFINANCEMICROFINANCEMICROFINANCEMICROFINANCE

• DESIGNDESIGNDESIGNDESIGN RIGHTRIGHTRIGHTRIGHT PRODUCTPRODUCTPRODUCTPRODUCT TOTOTOTO MEETMEETMEETMEET NEEDSNEEDSNEEDSNEEDS OFOFOFOF MICROMICROMICROMICROENTERPRISESENTERPRISESENTERPRISESENTERPRISES


• CREATECREATECREATECREATE WIDESPREADWIDESPREADWIDESPREADWIDESPREAD AWARENESSAWARENESSAWARENESSAWARENESS ONONONON THETHETHETHEAVAILABILITYAVAILABILITYAVAILABILITYAVAILABILITY ANDANDANDAND BENEFITSBENEFITSBENEFITSBENEFITS OFOFOFOF MICROFINANCEMICROFINANCEMICROFINANCEMICROFINANCE

1. ENCOURAGE FINANCIAL INSTITUTIONS TO PROVIDE MICROFINANCE1. ENCOURAGE FINANCIAL INSTITUTIONS TO PROVIDE MICROFINANCE• Microfinance can be profitable

• diversify portfolios, create new revenue streams, use excessliquidity profitably

• ‘Blue Ocean’ business• high competition in existing businesses, venture intouncontested market space


uncontested market space• Competitive advantage

• Extensive branch network & resources, cost effective fundingsource from deposit base, opportunity to form ‘smartpartnerships’ to lower admin cost & enhance outreach

• Enhance image• Contribute to national economic development, enhances imageof bank

1. ENCOURAGE FINANCIAL INSTITUTIONS TO PROVIDE MICROFINANCE1. ENCOURAGE FINANCIAL INSTITUTIONS TO PROVIDE MICROFINANCE

ACTIVITIES by Bank Negara Malaysia:

1. Organised and led Financial Institution (FI) CEOs andsenior management on study visits to successfulmicrofinance institutions in Indonesia and India


microfinance institutions in Indonesia and India2. Provided microfinance global studies and information pack

to the FI3. Frequent discussions with FI4. Promote competition to ensure benefits flow to micro

enterprises

2. DESIGN RIGHT PRODUCT TO MEET NEEDS OF MICRO ENTERPRISES2. DESIGN RIGHT PRODUCT TO MEET NEEDS OF MICRO ENTERPRISES

“Easy, Fast & Convenient”• Easy

� no collateral� minimum documentation� simple procedures


• Fast� fast approval and disbursement

• Convenient� widely accessible at branches and other

distribution channels

3. CREATE WIDESPREAD AWARENESS ON THE AVAILABILITY AND BENEFITS OF MICROFINANCE3. CREATE WIDESPREAD AWARENESS ON THE AVAILABILITY AND BENEFITS OF MICROFINANCE

• National microfinance logo – as a branding for microfinance• Microfinance flyers – distributed at strategic, high micro enterprise trafficlocations

• Microfinance advertisements/Interviews – radio, newspaper, magazines


• Microfinance posters• Distribution of comparative table on microfinance product features –roadshows, websites

• Financial Institutions own sales & marketing• Nationwide SME & Micro financing Fairs

Challenges moving forward…Challenges moving forward…Challenges moving forward…Challenges moving forward…

• Enhance outreach, particularly to rural areas – leverage oncooperatives, sustain momentum

• Increase usage of technology to reduce costs• Financing rates and consumer protection


• Financing rates and consumer protection• Impact assessment and continuous improvement

THANK YOUTHANK YOUTHANK YOUTHANK YOU


THANK YOUTHANK YOUTHANK YOUTHANK YOU

Definition of Microenterprise in MalaysiaDefinition of Microenterprise in MalaysiaDefinition of Microenterprise in MalaysiaDefinition of Microenterprise in Malaysia

• defined as business concerns with:

� less than five full-time employees; and

� an annual sales turnover of less than RM250,000 in

the manufacturing sector and RM200,000 in the


the manufacturing sector and RM200,000 in the

agricultural and services sectors

• The Census of Establishment and Enterprise 2005

(Census)

presentation at the microfinance workshop … by mr f waqabaca cmfsdc... · microfinance...

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