Supply-side of financing to bumiputera sme: action research in a malaysian islamic bank

Malaysia has a unique phenomenon vis-à-vis other developing countries where the focus of economic empowerment since its independence is on one ethnic group, i.e. the Bumiputera.  There are vast literatures covering the demand-side of financing provided to the full spectrum of the Bumiputera Economy.  However, there is a research gap due to scarce of literature available on supply-side of financing from commercial banks to Small and Medium Enterprise (SME) in general and specifically to Bumiputera SME (BSME) by an Islamic bank in Malaysia, which is most likely due to sensitivity and confidentiality of information.  The objectives of this research in closing supply-side gap of financing to BSME in Business Banking Division (BBi) of AA Bank are to observe, analyse and intervene in the decision making process on the strategies pertaining to three major infrastructure pillars i.e. personnel, products and branches network adopted by BBi in achieving their internal Key Performance Indicators (KPI) set on increasing their BSME customer franchise.  Qualitative methodology using action research framework is applied where we explore situations in which the intervention being evaluated has no clear, single set of outcomes. The preliminary findings using base data from 2008 to 2013 revealed that the BSME financing customer base for AA Bank has grown by more than 10 times in the last five years with most significant year-on-year growth was recorded in 2013 due to the surge of unsecured financing product customers.  However, BSME’s growth-rate is still slower relative to non-BSME’s growth-rate in 2013, which means, in order for BSME financing customer base to grow, the total SME customer base needs to be enlarged first.  At the time of reporting also, there is no BSME Sales personnel left in BBi from the original 19 BSME sales personnel in 2008 which indicates that BSME customers could still be acquired without BSME sales personnel as long as the marketing effort by the Bumiputera Development Unit (BDU), a unit under BBi, could be performed in systematic manner.  Since granting financing to BSME in AA Bank is gaining considerable momentum over the past five years, it would be of interest from academic and commercial perspectives to investigate and document the observations for sustainable growth. These observations would also help influence further major investment decisions such as future branches network expansion, and shall be tested as per the classic action research framework for consistency.