Mohd Muazzam Mohamed appears to be running two marathons simultaneously. The first marathon is his cycling feat and being a bicycle enthusiast, he tries to do at least 100 km on weekends.
He appears to have achieved many formidable feats in this area evidenced by the medals that he has showcased in his lush office but the other marathon that he is still at is his attempts to make Bank Islam a formidable financial player in the country.
Having assumed the leadership of the Bank in December 2018, the chartered accountant was tasked to steer Bank Islam towards its listing status and beyond.
His achievement to date is nothing short of stellar evidenced by the fact that Bank Islam, in the shortest period, became the country’s fourth-largest Islamic financier and Muazzam has put in place plans and set the vision for the newly restructured financial entity.
Industry analysts were baffled as to why a financial entity would undertake restructuring and the eventual listing of Bank Islam when the country was besieged with the pandemic.
Muazzam appears to be unperturbed by the turn of events but remain steadfast and focused on the objectives that he has set for Bank Islam and does not see the “headwinds” as an obstacle.
In an exclusive interview with Business Today, Muazzam said that the restructuring will pave the way for Bank Islam to emerge as a full-fledged pure-play Islamic financial institution in the country and that the Bank would also be accorded full autonomy in undertaking its corporate and business strategies as well as adopting its capital management initiatives.
The Group CEO thinks that the transfer of listing from BIMB Holdings Berhad (BHB) to Bank Islam will allow the bank to gain direct access to the equity capital market for fundraising activities.
As for the shareholders, the exercise is expected to allow them to participate directly in the equity and future growth of the new Bank Islam Group and Takaful Malaysia, which were previously BHB’s subsidiaries.
The whole listing exercise would allow Bank Islam to have a capital injection to further innovate and provide better products and services for the convenience of its customers.
With the listing, the Bank is not sitting on its laurels but has set its sights and goals on scales that are just not on the immediate horizon but also on timescales that are much longer.
The Road Map
Moving the plan forward, Bank Islam has set out a 5-year roadmap through its 5 business drivers; Wealth Management, Social Finance, Digital Bank, Enterprise and Wholesale Banking, premised on its key line of businesses notably Consumer Banking, SME Banking, Commercial Banking, Corporate Banking, Treasury, Deposit and Cash Management and its investment management arm, BIMB Investment Management Berhad.
Integrated Wealth Management aims to transform from product-centric business to holistic financial advisory, resulting in a wealth-creating proposition beyond basic financing.
For enterprises in the SME market, the focus is to propagate, nurture and develop the segment, by advancing from financing-centric approach to catering to an ecosystem approach to the SMEs. This will be achieved by enabling the Halal economic platform to facilitate a collaborative financial ecosystem. The renewed focus is aligned with the recent Budget 2022 announcement which, among others, emphasised business progression, particularly among the SMEs.
The Bank’s Wholesale Banking proposition looks to further enhance its delivery of total holistic financial solutions that help customers achieve sustainable growth through efficient capital mobilisation.
Bank Islam’s Digital Banking ambition will not only see the utilisation of technology and collaboration with fintech partners to further improve our digital offerings that promise convenience and security. With the advances made in digital and technological capabilities, it will catalyse the Bank’s entrance into new markets and segments.
Social Finance customers can anticipate being a part of Bank Islam’s journey of inclusivity with a focus on empowering the unbanked and underbanked communities to become bankable. This is in line with setting the path in spurring Malaysia’s economic recovery, building resilience and catalysing economic reform, as outlined during the recent tabling of Budget 2022 by the Finance Minister.
On other plans after listing, Muazzam said that the Bank has always been retail-driven and that it plans to grow its customer base, and this would mean continuous improvement of its customer service and experience.
He said that its vendor financing programmes were one of its success stories and that the concept has been replicated to many of the business strategies.
As of June 30, 2021, the size of its SME portfolio was RM2 billion and the Bank plans to elevate it’s SME portfolio in the future. The support for SMEs is crucial as they are the nation’s economic backbone, employing almost half of the total workforce in the country and contributing close to 40% of Malaysia’s gross domestic product (GDP).
Bank Islam also aims to position itself as the Bank of choice within the ecosystem, providing not only financing facilities but other financial services including cash management solutions.
Diversified Offerings
On being listed and whether it plans to take on corporate business, Muazzam said that he intends to leverage the strength as a group to deliver diversified offerings, an uplift from the previous “monoline” approach.
“Financing-based products can be accompanied by investment-related ones, hence providing “Total Islamic Financial Solution” to our customers, enabled by a digital proposition,” he said.
“We see this as an opportunity to strengthen our market positioning and build winning operating models while profiling the group synergy proposition. While the Bank and the entire industry has been absorbing losses from the pandemic, we see this as building reserves towards recovery,” the Group CEO said.
Minimising resource and infrastructure duplications would mean prioritising cost optimisation and management. The inclusion of a stockbroking arm, BIMB Securities, provides alternative means to expanding fee-based revenue streams, together with our investment management arm, BIMB Investment. Having entrenched in the local market, the question is whether Bank Islam would be making its presence in the overseas market altogether. To this,
Muazzam said that it has no plan to go outside the region. He further said that with a deeper collaboration with a global asset manager, Arabesque, its investment management arm, BIMB Investment aims to strengthen local market position while garnering new market share by securing further distribution in regional markets. BIMB Investment’s 5-year roadmap aspires to grow its Asset Under Management (AUM) to more than RM10 billion in 5 years. This, in turn, will pave the way for access to the vast ASEAN regional network to be recognised as the market leader in the Shariah-ESG space. The company strives to establish a value proposition for long-term sustainable growth while expanding and establishing Shariah-ESG investment capabilities, he said.
With the onset of digitalisation in banks, Bank Islam has no intention of being left behind. The Bank embarked on a three-year transformation plan (2019-2021) named CODE21, where the Bank marched towards culture, operation and digital excellence.
Becoming the digital Islamic Bank of Choice is one of the items that Bank Islam is striving for, and one of the ways to do this is by working with FinTech companies that would provide the Bank with the solution on digitalization Muazzam said that it has gained significant traction and is on track to get some initiatives off the ground by early 2022.
“With these efforts, Bank Islam intends to provide financial solutions that are beneficial to all. These endeavours stem from improving Malaysia’s situation today; the rising cost of living, high household debts, and high level of unemployment exacerbated by the pandemic.
Also, one of the key focus, he said in the innovation labs is to develop Bank Islam’s ability to enhance staff skill set, train employees to bring agility in processes, and apprise them of developments in ongoing digital transformation.
Still, many would ask what is the value that Bank Islam brings to investors and stakeholders, Muazzam said that this listing will allow Bank Islam to better position itself in the Islamic Finance and Islamic Capital Market and capitalise on both markets’ growth in the Bank’s effort to expand its customer base.
He said that Bank Islam can look forward to enhancing group value proposition plans and with more business opportunities being formed, delivering value to all of the stakeholders has become its goal. “It’s noted that while the exercise will enlarge its share capital base, it will also strengthen its capital position and improve the liquidity of the shares,’’ he said.
Green Financing
On Environmental, Social and Corporate Governance (ESG) and Value-based Intermediation (VBI), he said that in the 5-year direction, the Bank plans to expand and grow Shariah-ESG investment and financing capabilities.
“It means to double our green-financing portfolio from where we are while raising Shariah-ESG funds to about 12% – 15% by 2025, thus providing a total Islamic solution,” he said.
“We also aim to provide value-added services that are offered to the customers (advisory) including information sharing and updates on relevant development within the ESG spheres (industrial and regulatory development BNM, Bursa Malaysia, Securities Commissions),” he said.
He said that with the current pandemic, investors will continuously assess their exposure to defensive and cyclical stocks to ensure that diversification effects are maximised in the wake of unstable situations that are highly volatile. ESG has become more critical now to these shareholders in seeking sustained business performance.
Muazzam further said, “The year 2022 will be a critical year for Malaysia, not just from an economic recovery perspective but also the healing of businesses, livelihood and employment, particularly to those most adversely affected by the pandemic.
With these efforts, Bank Islam intends to provide financial solutions that are beneficial to all. These endeavours stem from improving Malaysia’s situation today; the rising cost of living, high household debts, and high level of unemployment exacerbated by the pandemic.
He adds, “Therefore, Bank Islam will continue to play its role to stimulate the market and provide the necessary aid in promoting economic growth and sustainable income generation to all in the sector.”
With the listing and the visionary team in place, Bank Islam is set to change the Islamic financial landscape in the country.
Amrum: full moon over the beach, light house, beach chair©DZT (Markus Pioro)
Busdorf: UNESCO Haithabu, colony of vikings©Ostseefjord Schleswig GmbH (Beate Zoellner)
Rhön: Sternenpark, Orion im schwarzen Moor©Sternenpark Rhön (A. Hänel)
freshly tapped draught beer©FrankenTourismus/Bamberg TKS (Andreas Hub)
Rheinradweg: cycling in the landscape park Duisburg-Nord©Tourismus NRW e.V. (Dominik Ketz)
Hubris among International school operators
Despite the gloomy macro and microeconomic picture, one sector of business seems to have their heads in the sand – International schools.
But before we examine that phenomena, let’s take a look at the industry.
ISC Research’s Market Intelligence Report for Malaysia, the total number of English-medium international schools in the country have increased by 75 percent since 2012, and student enrolments have also gone up by 87 percent. A further 12 new international schools opened in the 2018/19 academic year. There are now approximately 80,000 students studying in international schools.
Approximately 80 percent of students attending international schools today are the children of local families who hope their kids can get an English centric education and a leg up in the future.
Since the MCO started 2 months ago, schools have been going on full e-learning mode to varying degrees of sophistication depending on how prepared they are with relevant e-learning tools.
E-learning is ready for prime-time but it is not, and never will be a substitute for face-to-face learning. Global experts have been advocating blended learning for years which is the combination of face-to-face learning, 2-way learning online via video conferencing tools as well as online lectures, webinars, podcasts and other digitised material.
Online learning cuts the cost of delivery while at the same time increases retention and engagement among students. The costs of these solutions can be quite affordable. For example, www.kidslearning.asia only costs USD60 per annum (about RM 20+ per month)!
However, it is not a substitute for face-to-face learning provided by the school environment.
International schools however seem to feel that they are performing their roles as per normal and are shockingly choosing to continue charging parents normal fees with token discounts of 5 to 15 percent being offered!
In essence, they are trying to make this a net revenue neutral exercise for them!
If schools are closed, essentially, they save money on running costs of the buildings and facilities in areas such as utilities, cleaning and security staff (which is normally outsourced).
From a service delivery perspective, however, the parents (who are the customers of the school) are shortchanged. Not only do they have to supervise their own kids, the quality of education is lower and absolutely no access to normal facilities and interaction which normally an international school provides.
In the corporate world, no vendor will dare charge customers the same fees while delivering lower quality of services. Essentially, they would be setting themselves up to lose customers or worse still, open themselves up to lawsuits.
Schools are also able to act in an arbitrary manner because parents have to pay deposits prior to children entering the schools and therefore, if at least a term’s notice is not given, the deposit is forfeited. So, essentially for most parents, pulling the kids out of school is not an option and hence, they are at the mercy of the school.
What these schools don’t realise is the threat of being out of touch with the market, as well as potential disruptions to their business model by alternative providers such as homeschooling which is a viable alternative product, if they blend it with e-learning.
After all, the MCO has been a game changer for how we work, live and study.
In an article in the Edge Financial Daily in 2018, Eduseeds Sdn Bhd founding chairman Kevin Gan Muk Chun, said that “There are easily more than 100 [homeschooling] centres in the Klang Valley alone.” Eduseeds is a home-grown virtual curriculum provider for private learning or homeschooling centres.
Gan, who manages five such homeschooling centres in the Klang Valley( at that time), is among a growing number of educators benefiting from parents clamouring for cheaper and more effective educational alternatives to what they perceive as a poor national school system and the high cost of international schools.
Industry players report that, on average; homeschooling centres enjoy a profit margin of between 20 percent and 40 percent. Across the Klang Valley, homeschooling centres’ monthly fees range from RM700 to RM2,500 per month.
“If my centre can make a 35 percent profit from a monthly fee of RM1,300 per student, how much more profit do you think a RM2,000 fee could command?” a homeschooling centre operator said in the Edge article.
So, what is the middle ground here for the schools and parents, particularly for the majority of middle-class parents who make tremendous sacrifices in order to send their kids to international schools?
My daughter studies at UCSI International in Subang Jaya. Parents across the board have requested a reduction in fees. I proposed something which I felt was logical and fair to both the school as a business and to parents which is to split the fees by timeline and service delivery in the following manner:
The school’s response was a feeble one, that is, their business rental is not being reduced!
And, to top it off – NO DISCOUNT on fees, but payment deadline extended for one month!
The Ministry of Education as the regulator, should come out with a clear policy that is fair to parents. Otherwise the schools will continue to do as they please.
Minister, this is an opportunity to display decisive leadership, protect voters and set yourself apart from discussions about drinking warm water to neutralise covid-19, Doremon, Tik Tok and wearing of Hazmat suits!
By Brian Fernandez
Brian Fernandez is a former business presenter at BFM and at MoneyFM in Singapore. He heads Talent Search International, a regional executive search company and in January launched 360learning.asia, an e-learning business.