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Micro-financing in Malaysia: Helping the poor

Amanah Ikhtiar Malaysia. Micro-financing in Malaysia: Helping the poor. Imagine. Malaysia. Income Distribution by Ethnicity (1970) (as a percentage of total households). Incidence of Poverty in Peninsular Malaysia. Agenda. About Amanah Ikhtiar Malaysia (AIM)

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Micro-financing in Malaysia: Helping the poor

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  1. AmanahIkhtiar Malaysia Micro-financing in Malaysia: Helping the poor

  2. Imagine

  3. Malaysia

  4. Income Distribution by Ethnicity (1970) (as a percentage of total households) Incidence of Poverty in Peninsular Malaysia

  5. Agenda • About AmanahIkhtiar Malaysia (AIM) • Why AIM is the best fit for Malaysia • Critical evaluation of organization • Recommendations going forward

  6. AIM’s Objective AIM attempts to alleviate poverty by providing micro-loans to poor households. These loans allow individuals to undertake activities in order to enhance their economic prosperity. What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  7. AIM’s Strategy • Loan to 5 individuals of the same gender • Loans range in size from RM2,000 to RM20,000 (about $500 to $5,000) • Repaid within 25 to 150 weeks • Range allows to tailored loan plans What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  8. AIM’s Strategy Target Market Rural areas Women Malay What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  9. Operational Effectiveness of AIM What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  10. Operational Effectiveness of AIM Strict Screening of Eligibility Government Poverty Line Training and Oral Exam Communications What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  11. Communication Channels Volunteers Newspapers In schools Village gatherings What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  12. Greater equality in wealth distribution Appropriate for Malaysia’s middle-income classification, i.e. huge income gap What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  13. Striving for national unity despite racial tensions • Reduction/eradication of poverty • Accelerate the process of restructuring Malaysian society to correct economic imbalance AIM can follow NEP 2-prong strategy Rural Bumiputera entrepreneurs What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  14. AIM fosters sustainability What is AIM?Why is AIM best for Malaysia?Evaluation of AIM

  15. Decreases agricultural dependence Economic Trade Rice Agriculture What is AIM?Why is AIM best for Malaysia?Evaluation of AIM

  16. Malaysia Successfully Decreases Agricultural Dependency What is AIM?Why is AIM best for Malaysia?Evaluation of AIM

  17. Critical Issues • 60% of AIM’s funding comes from the government • Corruption • Managing director jailed • Political leader charged for misleading Indians • Improvements to board: • More knowledgeable board-members • Politically neutral experts • More involvement of women What is AIM?Why is AIM best for Malaysia? Evaluation of AIM

  18. AIM lacks metrics to measure operational effectiveness Apply Acumen Fund Metrics Framework What is AIM? Why is AIM best for Malaysia?Evaluation of AIM

  19. SROI • % change in poverty reduction • Composition of borrower base (e.g. Bumiputera, women) Metrics Guidelines • Portfolio-at-risk ratio • Payback ratios • Average loan size • Solvency ratios • Cost savings measures • Reducing time to process loan applications, streamline process What is AIM? Why is AIM best for Malaysia?Evaluation of AIM

  20. Can AIM forge a partnership or become an independent bank to add value? What is AIM? Why is AIM best for Malaysia? Evaluation of AIM

  21. 1987 At its inception, AIM model a good fit for the contemporary environment Sociocultural Political Demographic • New Economic Policy, government efforts to reduce poverty • Bureacracy and divided Northern and Eastern regions • Hardcore poor mostly Bumiputera • Poverty concentrated in rural areas where Bumiputera reside • Pre-urban exodus, rural families • Power Distance Index on the rise as Malaysia becomes industrialized Economic Technological • Infrastructure still developing • Requires more tools to compete on a global scale in a variety of different industries • Economy heavily dependent on mining/agriculture • GDP – $31.6 billion

  22. Two Decades of Malaysian Urban Evolution +60%

  23. 2007 AIM goes astray, overwhelmed by changing environment Sociocultural Political Demographic • Corruption, bureaucracy slows cash flows to AIM • Politically divided Eastern and Northern states • Not-so-poor and non-poor individuals seeking loans • Men begin seeking loans • Poor gravitate toward urban regions • Men control many government positions as well as board positions at AIM • Power Distance Index exceptionally high Economic Technological • Technological advances make it possible for Malaysia to export more goods and shed its dependence on agriculture • Economy shifts to trade, led by mass immigration to urban areas • Oil, rubber, electronics (manufacturing) become major exports • GDP - $138 billion

  24. QUESTIONS?

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