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Role of State Owned Banks in Financial Inclusion. By Nilammasri Ja’afar Senior Vice President/Head Micro Finance Asia Microfinance Forum 4-8 August 2014 Shanghai, China. Bank Simpanan Nasional – Your Community Bank. Regulated & Supervised by Ministry of Finance and Bank Negara Malaysia.

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slide1

Role of State Owned Banks in Financial Inclusion

By Nilammasri Ja’afar

Senior Vice President/Head

Micro Finance

Asia Microfinance Forum

4-8 August 2014

Shanghai, China

slide2

Bank SimpananNasional – Your Community Bank

  • Regulated & Supervised by Ministry of Finance and Bank Negara Malaysia
  • Established under the Act of Parliament 146 - Laws of Malaysia 1974.
  • 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.
  • Utiliseexcess funds of the Bank to help finance economic development of the nation
slide3

BSN Today – An Overview

5,300agents

401Branches 100% nationwide coverage

6,800Employees

59Micro Finance Centres

85Islamic branches

10 Mobile Banking Units

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

344 CDMs

899ATMs

slide4

Financial Inclusion : BSN’s Driving Agenda

  • Under-served communities
  • Non- urban areas
  • Non-economical areas
  • Low population

Reach

Mandated to BSN ; Providing Financial Access

Scalability

Cheaper cost to serve

Financial services to micro entrepreneurs – viable middle to lower income businesses

  • A better way…
slide5

BSN Agent Banking: Innovation in Extending Access to All

  • Form-based
  • Manual input
  • Fixed line
  • Longer process
  • Less Coverage

Normal Practice

Customers visiting branches

  • Online
  • Real-time

Bring BSN to the Community

Innovative Idea

  • Formless
  • Automated
  • Wireless GPRS
  • Simplified process
  • Increased coverage

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

slide6

BSN Agent Banking : Cost Effectiveness

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

Agent Banking Set-up Cost

Cost Effectiveness : Branch VS Agent Banking

100Innovative Agent Banking Outlets

1 Brick-and-Mortar Branch

slide7

BSN Agent Banking & Sustainable Development

Communities & BSN agents

Environment

BSN

The Nation

slide8

BSN Agent Banking : Effective Coverage

Before BSN Agent Banking

After BSN Agent Banking

Total

Sub-District

895

Total

Sub-District

895

Served

388

Un-served

507

Un-served

12

Served

388+495

43%

57%

99%

1%

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

slide9

BSN Micro Finance : Agents of Social Economic Change

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

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

Ultimate objective is to alleviate the poor out of poverty.

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

slide10

Most Establishments in Malaysia are Micro Enterprises

  • 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

Source

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

slide11

But Majority of Micro Enterprises are Self Funded…..

  • Only 17.4 % of micro enterprises relied on financing from financial institutions (FIs)

Sources of financing by size of SMEs, 2010

  • Micro enterprises lacked financing from FIs
  • due to :-
    • Lack supporting documents-no proof of income & expenses
    • No collateral
    • High transaction cost- small loan sizes

Source

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

slide12

BSN Micro Finance : Government Mandate

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.

slide13

Key Deliverables of BSN Micro Financing Scheme

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

Financing Amount From RM5,000 To RM50,000

  • No Collateral
  • Minimum Documentation
  • Simple Financing Procedures

Small Financing Amount

Funding for Business Purposes

Easy

  • Widely Accessible
  • 59 Dedicated MFC
  • 401 Branches
  • 5,300 EBB

Convenient

Fast

  • Approval - 6 Working Days
  • Disbursement - 4 Working Days
slide14

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

  • Advisory services
  • Capacity building & skills training programs
  • Instilling financial discipline & record management
  • Business & loans counseling
  • Credit clinics

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)
slide15

BSN Micro Finance Scheme: Building a Sustainable Portfolio

  • 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
slide16

BSN Micro Financing : Creating Positive Impact

  • 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

slide17

Financial Inclusion Agenda: Current Strategic Direction

Existing MF customers to become EBB

Providing MF to the appointed EBB for business expansion

  • Synergy
slide18

Current Status

579 EBB / MF Customers (11%)

slide20

THANK YOU

BSN… Your Community Bank