Financial Services

Over the next 10 years, the commercial banking segment is expected to maintain a moderate growth of 7 percent per annum. Most of the incremental GNI of RM29.6 billion in 2020 is anticipated to come from baseline growth with contribution from the following business opportunities:

• Innovation in the delivery of fnancial services including new business models to tap underserved segments and new branch formats including branchless banking;
• Increased fnancial inclusion via the national literacy programme;
• Commercial banks supporting the growth of SMEs, which will be strengthened as engines of growth and innovation under the Tenth Malaysia Plan; and
• Fast growing personal fnance segment.

This business opportunity requires RM64.9 billion in funding, of which approximately RM61.2 billion will be sourced from the private sector.

The outlook for investment banking is anticipated to remain positive with strong growth of 15 percent per annum throughout 2010 to 2015, slowing to 10 percent over 2016 to 2020. Incremental GNI impact is expected to be RM5.2 billion in 2020. Most of the GNI value is expected to be derived from baseline growth, with additional contribution from several business opportunities:

• Increase in IPOs due to a push for innovation under the Tenth Malaysia Plan;
• Integration of capital markets (e.g. exploiting the advantage of QDII status with China and mutual recognition agreements with Hong Kong and Dubai); and
• Increase in merger and acquisition activities due to expected consolidation in several key sectors.

This business opportunity requires RM10.2 billion in funding, of which approximately RM9.5 billion will be sourced from the private sector.

The Islamic banking segment is expected to contribute RM11.1 billion in incremental GNI for 2020. This will be supported by strong growth of 15 percent per annum from 2010 to 2015, slowing down to 12 percent over 2016 to 2020. Most of the GNI value is expected to be derived from baseline growth, with additional contribution from several business opportunities:

• Islamic pawn broking (ar-rahnu); and
• Migration of money lending business to conventional or Islamic banks following the proposed amendment to tighten the money lending business.

This business opportunity requires RM50.2 billion in funding, of which approximately RM46.9 billion will be sourced from the private sector.

This segment is expected to create incremental GNI of RM13.1 billion GNI in 2020. Industry growth for conventional insurance and reinsurance is expected to remain stable at 6 percent, whereas takaful and retakaful will register stronger growth at 20 percent over 2010 to 2014, slowing down to 15 percent over 2015 to 2020. Most of the GNI value is expected to be derived from baseline growth, with additional contributions from several business opportunities:

• Greater insurance take-up arising from Government's efforts to educate the public on fnancial planning and the importance of protection;
• Expected further consolidation and rationalisation will create strong institutions and platform for growth; and
• Micro insurance will become more viable with cheaper distribution models.

This business opportunity requires RM17.3 billion in funding, of which approximately RM16.5 billion will be sourced from the private sector.

The asset management and wealth management (AMWM) segment is estimated to contribute RM1.9 billion in incremental GNI in 2020. This will be driven by an average 8 percent growth over 2010 to 2020. Whilst most of the GNI value is expected to be derived from baseline growth, several opportunities within the segment will be expected to give rise to GNI:

• Increase in access to funding for innovative start-ups arising from creation of a RM500 million Mudharabah Innovation Fund under the 10th Tenth Malaysian Plan;
• Outsourcing opportunities arising from the creation of the RM20 billion public-private partnership fund to support the 10th Tenth Malaysian Plan;
• Growing Malaysian wealth will require asset management and wealth management AMWM services;
• Increase in demand for unit trusts, mutual funds and wealth management services among foreign workers and returning Malaysians; and
• Growing awareness and critical mass for retail aggregators that can negotiate lower fees for unit trust products, e.g. FundSupermart.

This business opportunity requires RM1.3 billion in funding, of which approximately RM1.2 billion will be sourced from the private sector.

The remaining segments in the fnancial services sector, such as DFIs, private equity and venture capital businesses, are estimated to account for RM11.0 billion incremental GNI in 2020. Most of the GNI value is expected to be derived from baseline growth, with several business opportunities identifed under the following 10th Tenth Malaysian Plan initiatives:

• Investment activities under 1Malaysia Development Berhad’s RM100 million business development fund;
• Opportunities in private equity and venture capital for innovation and green fnancing, with a strong emphasis on projects in renewable energy, especially biofuels;
• Value chain impact to private equity and venture capital as the capital market becomes more vibrant and IPO becomes easier;
• Signifcant underground money lending and remittance business will move towards formal money lending and money transfer business as the economy evolves; and
• Back-offce centralisation will enable fnancial institutions to focus on more productive and higher value-added activities.

This business opportunity requires RM1.9 billion in funding, of which approximately RM1.8 billion will be sourced from the private sector.