Download Visioning the Strategic Role of Development Finance Institutions

Visioning the Strategic Role of
Development Finance Institutions
34th ADFIAP Annual Meeting, Kyrenia, North Cyprus
20th - 23rd April 2011
DFIs and SME Finance:
Building Capacity for SME
Development and Innovative
Financing Mechanisms
DFIs Challenges:
Past, Present and Future...
1. Balancing Act
2. Evolving in Nature
3. Keeping Abreast
4. Staying Relevant
5. Target Market
6. Making the Difference
Balancing Act...
Developmental
Role
Merit Based
High Utilization of
Open Market Funds
Financing & Profit
Making
High Interventions i.e.
Business Advisory
Supports
Need Based
Evolving in
Nature...

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

A sound development bank is one
that is changing and living up to its
underlying goals, both financial and
economic, seeking continually to
regenerate itself in the light of the
changing circumstances
Each development bank is unique to
the environment and there is no
single solution applicable to all
Each institution must be self-reliant
and capable of using its resources
efficiently
It cannot do so if it relies on
procedures automatically and
repetitiously satisfying yesterday’s
standards
Keeping Abreast...
SME Customer’s
Business &
Financial Needs
(Products &
Services)
Market &
Industry
Requirement
(Domestic &
Global)
Rapid Technology
Advancement
(Efficiency; Greater
Market Outreach)
In-House Knowledge
& Capacity Building;
i.e. Internal
Expertise
(Human Capital
Development &
Resources)
Socio-Economic
Requirement
(Government
Aspirations &
Developmental
Policies)
Economy;
Industry;
Market;
Technology;
& Knowledge
Progressions
Staying Relevant...

1. SME Bank’s Evolving Role as a DFI
2. Promoted Growth Areas
3. Strategic Initiatives
4. Effective Implementation
5. Key Performance Indicators

The Tenth
Malaysia
Plan
New Economic
Model
New Key
Results Area
Government
Transformation
Plan

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Effective Integrations and Implementations
at the SME Bank
Stakeholders Engagement - Maintain a
mutually beneficial relationship with the
individuals and institutions on whom its
effectiveness depends
The Concept of Change, Transformation,
Innovation and the Culture of Nurturing Requires that its staff and training
programs be oriented towards inculcating
in everyone - staff as well as management
Developmental - Never end the process of
reviewing its own experience and of
society’s changing needs
Dynamic - Requires that its own policies be
renowned and marked to market
Target Market...
Making the Difference...
Turning and Changing From:
1. Impossible to Possible
2. Dreams to Reality
3. Design to Redesign
4. Synergy to Energy
5. Domestic to Global
6. Interventions to Inventions
7. Ideas to Bankable Businesses
Quick Take:
SMEs Development in Malaysia
1. Malaysian Shores
2. SME Significant Contribution to the Economy
3. Shifting Traditional Economy to an Innovation Based Economy
4. SME Significant Contributions to the Economy
5. Important Driver to Achieve a Developed Nation and High Income Status
6. Multi-Facet Challenges and Limitations
7. DFIs: An Integral Component in Executing Government’s Agenda in SME Development
The Five (5) Dimensions of
Global Changes
Malaysian Shores...
Leadership
Characteristics of
Malaysia in 2020
Governance
Market Led
Well-Governed
Regionally Integrated
Entrepreneurial
Innovative
People
Planet
Profits/
Productivity
Per Capita
Income USD

SMEs constitute 99.2% of total
business establishments in Malaysia
Unlocking the Value Drivers
$17,500

In line with the New Economic Model
(NEM), with the exponential annual
growth of 6.5%, the GDP value will be
around RM900 billion by 2020
High Income
Average Annual Economies
Growth of 6.5%
$15,500
Lower Income
Economies
Efficiency

It is targeted that the SMEs’
contribution towards GDP will stand at
50% - 60% which will be around
RM450 bill - RM540 bill by 2010
Labour
Investment
Value Drivers
$7,000
Current
Income
2010
8 Strategic Reforms Initiatives
2020
Source: New Economic Model for Malaysia Part 1
SME Significant Contributions to the
Economy
Shifting Traditional Economy to an Innovation
Based Economy
Important Driver to Achieve a Developed
Nation and High Income Status
Multi-Facet Challenges and Limitations
DFIs: An Integral Component in Executing
Government’s Agenda in SME Development
Visioning SME Bank:
Building Tomorrow’s Future Today
1. Vision & Mission
2. Raising the Bar
3. IQ-Dagang
4. Moving Forward:
- The Importance of SME
- Moving from funding standpoint, rather than outcome based
- New Business Model: Focused on financing the ecosystem, driven by desired outcomes (i) & (ii)
Vision

To be fully-fledged specialized financial
institution to nurture the small medium industry
and enterprise for Nation building
Mission

To support Government’s Economic
Agenda in developing SMEs as an
engine of growth
Raising the Bar
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Launched in August 2010
The Objectives:
To enhance the Bank’s
services via unique partnership
with recognized external
service providers, a
partnership that is constantly
developing in line with the
economy
As at December 2010:
A total of 104 professionals
and industry experts have
registered with the Bank
IQ-Dagang
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Officially introduced in
October 2010
Approaches:
i) To turn viable business ideas to be credit worthy
ii) To help and guide entrepreneurs to secure funding
iii) To nurture entrepreneurs towards sustainable success
iv) To have more business partners (including SME Bank)
to play roles as investors in business matching
v) To simplify and clarify the loan application process

As at April 2011:
i) 129 ideas registered
ii) 19 ideas accepted
iii) 1 idea has secured fundings
from SME Bank
Moving Forward...
DFI’s who’s socio
economic targets
are realized, have
poor commercial
results
DFI’s with strong
commercial results,
no longer focus on
the socio economic
agenda
Based on the initial
understanding, socio
economic and
commercial goals
are deemed to be
mutually exclusive
How then do we
measure the
success of SME
Bank?
“Taking everything
into account, what is
the appropriate
business operating
model moving
forward?
The Importance of SME
The needs of SMEs are growing
over the years and SME Bank
should assume a significant role in
meeting the requirement
YEAR 2010 (GDP VALUE: RM540 bill)
Contribution by SMEs (37%): RM200 bill
YEAR 2010 (FINANCING REQUIRED)
Expected Needs of SMEs: RM120 bill
YEAR 2015 (GDP VALUE: RM740 bill)
Expected Contribution by SMEs (50%): RM300 bill
YEAR 2015 (FINANCING REQUIRED)
Expected Needs of SMEs: RM180 bill
Moving from funding standpoint, rather than
outcome based
New Business Model: Focused on financing
the ecosystem, driven by desired outcomes(i)
New Business Model: Focused on financing
the ecosystem, driven by desired outcomes (ii)
Thank You
Together we create Value
towards sustainable
Success