1. Micro-financing in Malaysia: Helping the poor

2. Imagine

3. Malaysia

4. Income Distribution by Ethnicity (1970) (as a percentage of total households) Income range (mo.)MalayChineseIndianOther RM 1-10022.92.61.3.2 RM 100-19919.17.84.4.1 RM 200-39910.411.93.5.1 RM 400-6993.05.31.2.1 RM 700 and above1.33.7.8.3 total56.731.311.2.8 Incidence of Poverty in Peninsular Malaysia 19701980199019952000 Households below poverty line 49.433.815.09.15.5

5. Agenda About Amanah Ikhtiar 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 Village gatherings In schools Volunteers Newspapers 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 Rural Bumiputera entrepreneurs What is AIM? Why is AIM best for Malaysia? Evaluation of AIM 1.Reduction/eradication of poverty 2.Accelerate the process of restructuring Malaysian society to correct economic imbalance AIM can follow NEP 2-prong strategy

14. AIM fosters sustainability Provides the best possible option for each person by individualizing loan plans Identifies pool of individuals that benefit the most from AIM’s services through screening and training Instills commitment and work ethicEliminates dependence on funds by setting a maximum tenure Distributes wealth among large rural populations which in turn become self-sufficient What is AIM? Why is AIM best for Malaysia? Evaluation of AIM

15. Rice Agriculture Decreases agricultural dependence Economic Trade 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. 60% of AIM’s funding comes from the government Corruption Managing director jailed Political leader charged for misleading Indians Improvements to board: 1.More knowledgeable board-members 2.Politically neutral experts 3.More involvement of women Critical Issues What is AIM? Why is AIM best for Malaysia? Evaluation of AIM

18. AIM lacks metrics to measure operational effectiveness One Standard of Reporting Cost- Efficiency Social Return on Investment Financial Sustainability Apply Acumen Fund Metrics Framework What is AIM? Why is AIM best for Malaysia? Evaluation of AIM

19. III. Operational II. Financial I. Social Impact SROI % change in poverty reduction Composition of borrower base (e.g. Bumiputera, women) Portfolio-at-risk ratio Payback ratios Average loan size Solvency ratios Cost savings measures Reducing time to process loan applications, streamline process Metrics Guidelines 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? Hurdles to overcome Lack of metrics Interest rate spread “Mission drift”Bureaucracy 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 Demographic Economic Technological PoliticalSociocultural Hardcore poor mostly Bumiputera Poverty concentrated in rural areas where Bumiputera reside Infrastructure still developing Requires more tools to compete on a global scale in a variety of different industries New Economic Policy, government efforts to reduce poverty Bureacracy and divided Northern and Eastern regions Pre-urban exodus, rural families Power Distance Index on the rise as Malaysia becomes industrialized Economy heavily dependent on mining/agriculture GDP – $31.6 billion

22. Two Decades of Malaysian Urban Evolution

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

24. QUESTIONS?