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By Nilammasri Ja’afarSenior Vice President/HeadMicro Finance
Asia Microfinance Forum4-8 August 2014Shanghai, China
Role of State Owned Banks in Financial
Inclusion
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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.
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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%)
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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