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Visioning the Strategic Role of Development Finance Institutions
 

Visioning the Strategic Role of Development Finance Institutions

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    Visioning the Strategic Role of Development Finance Institutions Visioning the Strategic Role of Development Finance Institutions Presentation Transcript

    • 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 Financing & Profit Making Merit Based Need Based High Utilization of Open Market Funds High Interventions i.e. Business Advisory Supports
    • Evolving in Nature...
      • 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... 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) SME Customer’s Business & Financial Needs (Products & Services) Socio-Economic Requirement (Government Aspirations & Developmental Policies) Economy; Industry; Market; Technology; & Knowledge Progressions
    • Staying Relevant...
      • 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
      The Tenth Malaysia Plan New Economic Model New Key Results Area Government Transformation Plan Effective Integrations and Implementations at the SME Bank 1. SME Bank’s Evolving Role as a DFI 2. Promoted Growth Areas 3. Strategic Initiatives 4. Effective Implementation 5. Key Performance Indicators
    • 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
    • Malaysian Shores...
      • SMEs constitute 99.2% of total business establishments in Malaysia
      • 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
      • It is targeted that the SMEs’ contribution towards GDP will stand at 50% - 60% which will be around RM450 bill - RM540 bill by 2010
      Leadership Governance Planet Profits/ Productivity People The Five (5) Dimensions of Global Changes Characteristics of Malaysia in 2020 Market Led Well-Governed Regionally Integrated Entrepreneurial Innovative 2010 2020 Value Drivers 8 Strategic Reforms Initiatives Average Annual Growth of 6.5% Current Income High Income Economies Lower Income Economies Investment Labour Efficiency Per Capita Income USD $17,500 $15,500 $7,000 Unlocking the Value Drivers 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 Mission
      • To support Government’s Economic Agenda in developing SMEs as an engine of growth
      • To be fully-fledged specialized financial institution to nurture the small medium industry and enterprise for Nation building
    • Raising the Bar
      • 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
      • 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
    • 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? Moving Forward...
    • The Importance of SME YEAR 2010 (GDP VALUE: RM540 bill) Contribution by SMEs (37%): RM200 bill YEAR 2010 (FINANCING REQUIRED) Expected Needs of SMEs: RM120 bill Expected Contribution by SMEs (50%): RM300 bill YEAR 2015 (GDP VALUE: RM740 bill) YEAR 2015 (FINANCING REQUIRED) Expected Needs of SMEs: RM180 bill The needs of SMEs are growing over the years and SME Bank should assume a significant role in meeting the requirement
    • 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