By Nilammasri Ja’afar Senior Vice President/Head Micro Finance Asia Microfinance Forum

1. 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

2. 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

3. 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

4. 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…

5. 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

6. 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

7. BSN Agent Banking & Sustainable Development Communities & BSN agents Environment BSN The Nation

8. 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.

9. 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

10. 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

11. 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)

12. 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.

13. 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

14. 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)

15. 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

16. 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

17. Financial Inclusion Agenda: Current Strategic Direction Existing MF customers to become EBB Providing MF to the appointed EBB for business expansion • Synergy

18. Current Status 579 EBB / MF Customers (11%)

19. Strategic Collaboration- Moving Forward EBB M F

20. THANK YOU BSN… Your Community Bank