BBBM4103

Bank Management

May 2022

NAME : Kaliswaran Gounder Subramaniam

I/C NO : 861107-38-5567

MATRIC NO : 861107385567001

TEL NO : 013-7771517

TUTOR : Sebastian Susay

LOCATION : OUM Shah Alam

Schlumb
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Table of Content Page

1.0 Introduction 3-6

2.0 Explanation of the role of each DFI 6-8

3.0 Explanation of the products and services offered by each DFI 9-13

4.0 Comparison between the DFIs 13-15

5.0 Conclusion 15

6.0 Question 2 16

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1.0 Introduction
The Development Financial Institutions (DFIs) in Malaysia are specialised financial
institutions established by the Government with specific mandate to develop and promote
key sectors that are considered of strategic importance to the overall socio-economic
development objectives of the country. These strategic sectors include agriculture, small
and medium enterprises (SMEs), infrastructure, maritime, export-oriented sector as well
as capital-intensive and high-technology industries. In this essay , we will discuss the
history, shareholdings , roles , product and services of three selected company that
registered under Development Financial Institution Act ( DFIA 2002 ). Below are the
companies :
1.1 Bank Pembangunan Malaysia Berhad
Bank Pembangunan Malaysia Berhad (BPMB) has been fuelling socio-economic
development in Malaysia since 28 November 1973. As one of the country’s first
development financial institutions, the government-owned bank was a preferred
financing partner for the expanding infrastructure, maritime, oil and gas and
technology sectors. BPMB has been accorded the highest rating of 'AAA' by both
RAM Rating Services Berhad ("RAM") and Malaysia Rating Corporation Berhad
("MARC"). It is regulated and supervised by Bank Negara Malaysia under the
Development Financial Institution Act 2002. Shareholder’s of BPMB is the
Minister of Finance and Federal Land Commissioner.

BPMB has shifted focus to align operations with government initiatives centred
around sustainability, digitalisation and technology. In 2019, it announced a three-
year transformation plan to meet evolving development needs through impact
finance. BPMB’s new vision is to be Malaysia’s leading developmental partner
which entails a new mission with impactful delivery with strategic outcome
supported by three strategic thrusts such as:

• Embracing Paradigm Shift

• Supporting Government’s Strategic Priority Areas
• Adhering to Islamic Principles

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 Figure 1 : BPMB in Menara Bank Pembangunan Kuala Lumpur

1.2 Bank Pertanian Malaysia Berhad (Agrobank)

Agrobank was established in 1969 under the name Bank Pertanian Malaysia
Berhad with an authorised capital of RM50 million and paid-up capital of RM42
million. Being a government owned bank, Agrobank is 100% owned by the
Ministry of Finance and is under the purview of the Ministry of Agriculture and
Agro-Based Industry (MOA) as the ministry responsible for the
development of agricultural policies. Hence, the bank’s financing of the
agricultural sector is driven by policies set forth by MOA. As a development
finance institution involved in financing agricultural sector in Malaysia, the main
function of the bank is to co-ordinate and supervise granting of credit facilities for
agricultural purposes and mobilise savings, particularly from the agriculture sector
and community. Formed in line with the Malaysian government’s policies to
promote sound agricultural development in the country, the bank is actively
engaged in supporting a number of special government projects through lending
operations.

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 Figure 2: Tengku Ahmad Badli Shah Raja Hussin (right) CEO of Agrobank

1.3 Export-Import Bank of Malaysia Berhad (EXIM Bank)

The government-owned Export-Import Bank of Malaysia Berhad (EXIM Bank) is
a wholly owned subsidiary of the Ministry of Finance. Incorporated in 29 August
1995, this export-import bank promotes reverse investment and export in strategic
sectors, including capital goods, infrastructure projects, shipping and value-added
manufactured products. The guarantee facility supports Malaysian companies and
contractors in new and non-traditional markets. Guarantees can be provided for
the issuance of bonds for overseas projects or contract that are led by Malaysian
companies. The guarantees can also be provided to support Malaysian companies
in their efforts to raise funds overseas. EXIM Bank it considered to be a preferred
trade financier and advisor of global businesses. EXIM banks collaborate with
other local and foreign financial institutions has offered US$ 400 million for a
floating, production, storage and offloading (FPSO) vessel for the Marlim
Revitalisation Project in Brazil.

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 Figure 3 : EXIM Bank in signing ceremony with DNeX to Accelerate Export

2.0 Explanation of the role of each DFI

Given the significant role of DFIs in developing and promoting the identified strategic
sectors of the economy, it is important for DFIs to be strong, effective and efficient in
performing its mandated roles better. Initiatives taken towards achieving these objectives
include strengthening the regulatory and supervisory framework, building capacity and
capability, as well as enhancing operational efficiency of these institutions. Following are
the roles of each DFI :

2.1 Bank Pembangunan Malaysia Berhad

BPMP adheres to Islamic finance principles and supports the national
development agenda while embracing the paradigm shift. BPMB brought in
experts from the World Bank to help implement the evidence-based assessment
framework Measuring Impact on National Development (MIND). The framework
considers financial and sustainability metrics, allowing the bank to back projects
with the highest potential to create positive impacts for all — people, planet and
nation. BPMB utilised this framework in 2020 and has seen tangible results in
terms of profits and impacts. It has achieved modest growth of 2.5 percent for the
first time in five years. BPMB aims to identify gaps in the economy and fill them

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 with the right players. Although catering mainly to corporate customers, the bank
views SMEs as the backbone of the economy and, as a sector-agnostic financer
with decades of experience, is well-positioned to support their growth. It intends
to launch a private equity business line to provide further diversity of support to
SMEs.
2.2 Agrobank
With a primary focus on strengthening the agriculture sector in Malaysia,
Agrobank strikes an equal balance to its developmental and commercial roles to
benefit the agriculture sector.
Agrobank provides a comprehensive range of financing solutions for the
agriculture community; that includes upstream activities related to primary food
and commodities-based agriculture activities to downstream activities such as
processing, marketing and distribution of agricultural products. Following are the
roles of Agrobank in Malaysia :

• To promote Malaysia sound agricultural development;

• To co-ordinate and supervise the grant of credit from public funds for
agricultural purposes by the various persons or bodies of persons whether
incorporate or unincorporate;
• To provide financing, advances, and other credit facilities for the
development of the agriculture sector and agriculture related business;
• To mobilise savings with particular regard to the agricultural sector and in
furtherance of this object to accept savings and time deposits;
• To uplift the well-being of the agricultural community; and,
• To carry on the general business of a modern and progressive financial
services institution catering for the total financial needs of its customers.

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2.3 EXIM Bank
In executing its mandated role, EXIM Bank continues to pursue alliances with
international associations and multilateral organisations and has also executed
several agreements to further boost its business and market outlook. The role of
EXIM Bank are as follows;

 Financial export and import of services and goods from the country as
exim trade.
 It helps in financing the export as well as import of machines.
 It also helps to refinance the bank services as well as other institutions for
foreign financing trade or exim trade.
 It helps in financing the export or import of services and goods from other
countries also.
 It also provides financial assets for the business in foreign and also helps
the business to join the joint venture in foreign.
 It also helps in providing the finance for technical assets to exporters and
importers.
 EXIM trade helps in functioning the export and import of Merchant Navy
Banks
 EXIM Bank also plays a major role in writing shares, bonds, stocks as well
as debentures involved in foreign companies’ trade
 It also offers the LOCs and short-term loans to foreign governments and
banks
 To provide finance in cooperative banks
 This bank provides the services of business advisory
 EXIM Bank also provides funds for foreign country’s projects
 To partner the industries of Malaysia in their competitive and superior
globalisation attempts

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3.0 Explanation of the products and services offered by each DFI
As specialised institutions, DFIs provide a range of specialised financial products and
services to suit the specific needs of the targeted strategic sectors. Below are the products
and services offered by the selected DFIs :

3.1 Bank Pembangunan Malaysia Berhad

The products and services offered can be considered one of the Bank strength.
BPMB provides an array products and services as below ;

Figure 4 : BPMB Service and Products

i. Project Financing
Designed for long-term capital-intensive projects whereby the source of
financing repayment is solely based on the cash flow generated from the
project.

ii. Contract Finance

Contract finance is a short to medium term financing offered to
contractors, who have been awarded contracts to construct and complete
infrastructure projects under progress payment arrangement.

iii. Deferred Payment Loan

Deferred payment loan is a medium-term financing offered to contractors.
Designed to bridge the gap between the period of completion and the
actual payment made by the government to the contractor.

iv. Private Finance Initiative

Private Finance Initiative (PFI) is a scheme designed to support the
government’s efforts to improve the quality of services of public facilities.

v. Structured Finance
Structured Finance is a medium to long-term financing offered to eligible
customers. The financing is to assist the customers in the construction of
building and acquisition of assets.

vi. Islamic Bank Guarantee (BG-i)

Facilities offered as a package facility with other fixed asset and working
capital financing to strength of project and satisfied collateral.

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 vii. Tawarruq Deposit
Tawarruq Deposit (TWD) is a deposit product based on the Bai’ Tawarruq.
BPMB solicit deposits from depositors and this Islamic fund is utilized for
financing purposes or other investment, which are Shariah compliant.
TWD is a sale of an asset to a purchaser with deferred payment based on
Murabahah concept. The purchaser then sells the asset to the third party on
cash basis.

3.2 Agro Bank

Agro-Based Industry launched the Agrobanks Trade Finance products and

services, a Shariah-based facility to facilitate its Small Medium Enterprise (SME),
commercial and corporate customers with short-term working capital financing
for their business activities covering both local and foreign trade transactions.
With this new facility, Agrobank becomes the first Development Financial
Institution (DFI) in Malaysia to offer its own trade finance services. Following
other service offered by Agrobank ;

Figure 5: Agrobank Service and Products

• Agro fatih-i
A complete plan that can be used as a grant plan that can replace income
and even a medical card.

• Program pemodenan vesel dan mekanisasi tangkapan

The purpose of this program is towards the development of the coastal
fishing industry through the Vessel Modernization and Catch
Mechanization Program to encourage the use of environmentally friendly
equipment and increase the mechanization of vessel fishing equipment
throughout Malaysia.

• Term financing-i
Is an Islamic financing facility provided to the customer for carrying out
the activities or projects that have relevance to the agricultural sector.

• Modal kerja-i
Is a short term revolving credit facility that provides financing available to
Customers who wish to obtain financing for their working capital.

• Kredit mikro
Uncollateralised micro financing for business purposes.

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 • Agro cash line-i
Is an overdraft facility to finance agriculture based business.

• Agro farah-i
Exclusively for all women aged 18 years old and above to support
women’s empowerment. With a minimum deposit of RM50, it allows
women to start small and get more rewards with more savings in the future

• Hartani-i
Provides financing facilities to the Government Servant or Private Sector
Employees and Stable Income Earners for the purpose to purchase
agricultural land.

3.3 EXIM Bank

EXIM Bank offers a wide range of conventional banking facilities, as well as
Islamic banking, as this is in line with the Malaysian government’s aspirations of
becoming an Islamic financial hub. This is set to complement the conventional
banking system, offering customers a range of solutions that fit their needs and
business requirements. Below are the products offered by EXIM Bank :

Figure 6 : Offcial Website EXIM Bank

a) Islamic & Conventional Banking

In Islamic banking leasing, ownership remains with bank and risk and
reward bear by the bank as owner of asset. In conventional banking, fixed
rate of interest being given to depositors. In Islamic banking, profit are
distributed out of profit earning by bank for the month as per decided
weightages.
i. Cross-Border Financing

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 Refers to the process of providing funding for business activities
that occur outside a country's borders. Below are the services
offered under Cross-border financing ;
 Overseas Investment Financing-i
 Overseas Project Financing-i
 Contract Financing-i
 Buyer Financing-i
 Term Financing-i
 Revolving Credit-i
 Import Financing-i

ii. Trade Finance

Trade finance represents the financial instruments and products that
are used by companies to facilitate international trade and
commerce. Following service as offered ;
 Supplier Financing-i
 Letter of Credit-i
 Trust Receipt-i
 Export Credit Refinancing-i
 IDB Co-Financing
 Vendor Financing Scheme-i
 Back to Back Letter of Credit-i
 Letter of Credit Advising-i
 Letter of Collection-i
 Letter of Credit Confirmed-i
 Letter of Credit Transfer-i
 Inward Bills of Collection-i
 Outward Bills of Collection-i
 Shipping Guarantee-i
 Standby Letter of Credit-i

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 iii. Guarantee-I
Bank Guarantee-i is a guarantee facility provided by EXIM Bank
to the creditor/principal on the obligations of the debtor/obligor
specified in the contract between the creditor/principal and
debtor/obligor.
 Bank Guarantee-i
 Forward Foreign Exchange-i

b) Credit Takaful/ Insurance

Credit Takaful provides protection against the risk of non-payment by
buyers as a result of commercial and/or political risks. Credit Takaful is an
utmost essential facility for Malaysian Exporters to secure payment for
their exports and imports either from the buyers or from EXIM Bank by
way of Takaful claims.

i. Short Term Credit Takaful

 Trade Credit Takaful
 Bankers Trade Credit Takaful
 Bank Letter of Credit Policy

ii. Medium/Long Term Credit Takaful

 Specific Takaful
 Overseas Investment Takaful

4.0 Comparison between the DFIs

Below in the table is the comparison between selected DFIs based on their similarities
and differences ;

Description BMPB Agrobank EXIM

Similarities Owned by the Government of Malaysia through Minister of
Finance
Main Role Provide medium to Elevating the Provide credit

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 long-term financing standards of facilities to finance
to the nation’s agriculture and and support exports
nascent providing and imports of
infrastructure, sustained supports goods, services and
maritime, oil and gas that create values overseas projects
and technology to communities, with emphasis on
sectors. economy, non-traditional
environment and markets
stakeholders
Total Assets 26,128,373 18,187,593 7,813,799
(RM’000) (2021) (2020) (2021)
Deposits and 2,124,567 2,603,556 3,126,776
placements with (2021) (2020) (2021)
banks and other
financial
institutions(RM’000)
Loans, advances and 16,074,609 12,667,911 3,301,561
financing(RM’000) (2021) (2020) (2021)
Financial investments 5,949,928 468,949 1,107,639
(RM’000) (2021) (2020) (2021)
Right-of-use assets 846 41,163 5,007
(RM’000) (2021) (2020) (2021)
Total Liabilities as of 17,357,729 14,996,417 6,188,285
2021(RM’000) (2021) (2020) (2021)
Lease 867 33,091 5,090
liabilities(RM’000) (2021) (2020) (2021)

Share Capital 4,018,781 1,000,000 2,708,665

(RM’000) (2021) (2020) (2021)

Intangible assets 8,022 30,126 1,211

(RM’000) (2021) (2020) (2021)

Property, plant and 84,395 147,254 66,396

equipment (RM’000) (2021) (2020) (2021)

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 Operating revenue 254,356 40,326 174,705
(RM’000) (2021) (2020) (2021)

Net income 817,601 27,868 165,449

(RM’000) (2021) (2020) (2021)

Based on the comparison , we can say the total of BMPB is higher than other DFIs. As
per the financial statement report, due to the pandemic restriction, it has affected the
overall revenue of all the DFIs comparing to previous year.

5.0 Conclusion
In the summary, Development financial institutions (DFI) play an important role in
supporting strategic sectors that are important to the country. The important sectors of the
economy currently supported by the DFIs is to promote industrialisation, particularly the
high-technology industries, export-oriented industries, infrastructure development and
highly capital-intensive investments and the agriculture sector.

Such development institutions are generally specialised in provision of medium and long-
term financing of projects, which require specialised skills and focus, and may carry
higher credit risks or market risks due to the longer investment tenures.

Apart of that, this essay also has discussed the product and services. Each DFIs has
different product and services offering to fill in the gaps in the supply of financial
services that are not normally provided by the banking institutions.

This will ensure the continued relevance of DFIs and their effectiveness in this
challenging time. Competitive edge, investment in new technology, is the key for DFIs in
increasing their capacity, effectiveness and efficiency providing the specialised financial
services.

(2677 words)

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6.0 Task 2
6.1 Post 1

6.2 Post 2

6.3 Post 3

6.4 Post 4

6.5 Post 5

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