The Financial Services NKEA is focused on developing Malaysia’s financial industry, which represents a core component and key driver of the Malaysian economy, in tandem with the needs of a high-income nation.
The EPPs of this NKEA are aimed at addressing challenges faced by the industry in achieving its next stages of growth. These include a lack of scale in certain segments of the banking industry, limitations in the types of investors, products, and currencies available in the capital market, the need to improve personal financial literacy and the need for the local industry to operate in a competitive environment regionally.
The EPPs were developed based on four strategic thrusts: Strengthening the industry’s core, serving the needs of a high-income population, developing new growth sectors, and aggressively targeting new markets and enhancing the industry’s niche in Islamic finance.
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|No||EPPs||2020 GNI (millions)||Jobs||Location||Status|
|Revitalising Malaysia's Equity Markets||3,325.20||8,598||Nationwide || |
|Deepening and Broadening Bond Markets||183.2||1,400||Nationwide || |
|Transforming Development Financial Institutions (DFIs)||1,790.50||N/A||Nationwide || |
|Creating an Integrated Payment Ecosystem||2,647.70||7,765||Nationwide || |
|Insuring Most, If Not All, of Our Population||1,544||8,659||Nationwide || |
|Accelerating the Growth of the Private Pension Industry||2,061.1||2,208||Nationwide || |
|Spurring the Growth of the Nascent Wealth Management Industry||2,096||6,147||Nationwide || |
|Accelerating and Sustaining a Significant Asset Management Industry||2,396.7||7,430 || || |
|Developing Regional Banking Champions||5,564.3||-8,524||Nationwide || |
|Becoming the Indisputable Global Hub for Islamic Finance||7,242.4||11,644||Nationwide || |
In addition to the EPPs, the Financial Services NKEA has identified further growth opportunities in the areas of investment banking, commercial banking, insurance and takaful
, asset and wealth management, Islamic banking and other segments including development financial institutions.
BO 1Investment Banking
Investment banking is anticipated to maintain strong growth in the next few years, giving rise to business opportunities including:
- Increasing the number of IPOs:
Since 2011, there have been 74 new listings on Bursa Malaysia’s Main and ACE Markets. In 2014 alone, the exchange saw 12 new listings as of 11 Dec 2014, raising RM5.87 billion with initial market capitalisation of RM20.02 billion.
- Active merger and acquisition activities:
From 2011 to 2013, approximately 2000+ M&A transactions worth over US$70 billion were recorded in Malaysia, although the three-year historical data shows a decreasing trend.
BO 2Other Segments including Development Financial Institutions (DFIs)
Under the 10th Malaysia Plan, the following areas have fuelled further growth:
- Private equity and venture capital for innovation and green financing, especially in renewable energy areas such as biofuels. The introduction of Green Technology Financing Scheme (GTFS) in 2010, which to date has financed up to RM2 billion with participation from all commercial, Islamic and development financial institutions. The introduction of Sustainable and Responsible Investment (SRI) framework in August 2014 by the SC will also facilitate financing of sustainable and responsible investment initiatives.
- Moving private equity and venture capital firms higher up the value chain.
- Shifting from informal to formal money lending and remittance businesses.
- Shifting to more productive and higher value-added activities by financial institutions through back-office centralisation.
BO 3Commercial Banking
A forecasted annual growth rate of 7% until 2020 for the commercial banking sector will be driven by:
- Innovating delivery channels through new business models which explore underserved segments and the adoption of new branch formats such as branchless banking. The introduction of agent banking in 2012 has successfully increased outreach of financial services to the underserved with 92.5% mukim served (as at end-2013) compared to 46.4% mukim served (as at end-2011).
- Increased financial inclusion through the national financial literacy programme.
- Serving growing Malaysian SMEs, which are mostly being served by SME Bank, Malaysian Industrial Development Finance Bhd and Malaysian Green Technology Corporation.
- Growth in the personal finance segment, which recorded above 20% growth in 2010-2012 period. The growth in 2013-2014 is, however, exhibiting a downtrend as a result of the introduction of macroprudential measures by BNM.
BO 4Insurance and Takaful
The insurance and takaful markets are expected to benefit from a number of business opportunities which include:
- Positive upward trajectory on insurance penetration, with latest data showing 60% of Malaysian population insured.
- Expected consolidation and rationalisation of the industry where between 2010 and June 2014 the Malaysian insurance industry saw the conclusion of 17 M&A deals valued at about RM15 billion.
- Industry consolidation and the entry of global insurance players into the market by way of M&As. This would not only assist further consolidation, which is aimed in further strengthening the insurance industry, but also encourage the development of greater product innovation, pricing and risk-management expertise as well as multi-delivery channels, including digital distribution.
BO 5Asset Management and Wealth Management
Increasing regional capital market integration: The ASEAN Capital Markets Forum (ACMF) announced the operation of the ASEAN Framework for cross-border offering of collective investment schemes (CIS) in Malaysia, Singapore and Thailand. This Framework allows fund managers operating in a member jurisdiction to offer CIS, such as unit trust funds, constituted and authorised in that jurisdiction to retail investors in other member jurisdictions under a streamlined authorisation process. This announcement follows the signing of the MoU for the ASEAN CIS Framework by the SC, the Monetary Authority of Singapore (MAS) and the Securities and Exchange Commission, Thailand (SEC Thailand) in October 2013.
The following business opportunities are expected to contribute to the continued growth of the asset and wealth management industries:
- A RM500 million fund for startups which was announced in Budget 2015.
- The Mudharabah Innovation Fund introduced under the 10th Malaysian Plan.
- Outsourcing opportunities arising from the RM20 billion public-private partnership fund established to support the 10th Malaysian Plan.
- Greater demand for asset and wealth management services in tandem with growing Malaysian wealth in line with strategies under EPP 7 and 8.
- Higher demand for unit trusts, mutual funds and wealth management services from foreign workers and Malaysians returning from abroad.
- Increasing awareness and critical mass for retail aggregators such as FundSupermart, which can negotiate lower fees for unit trusts.
BO 6Islamic Banking
The country’s Islamic banking industry continues enjoying notable growth with significant recorded achievements:
- Malaysia remains the leading issuer of sukuk, making up close to two-thirds of the global Islamic debt market.
- In 2012, Malaysian Islamic banks held US$120 billion in assets. This is expected to grow to more than US$390 billion by 2018 at a six-year CAGR of 21%.
- Collaboration between CIMB Islamic Bank and INCEIF in establishing a research centre for Islamic banking studies.
- Maybank Islamic Bhd has generated close to RM1 billion in deposit growth in six months for its Premier Mudharabah Account.