Business Study Mission in Bank Rakyat:
A Rare Experience for FICOBank Delegates

As laid down in its 2011-2015 Transformation Plan, FICOBank will pursue and sustain its historical growth, improve its ownership structure, strengthen further its governance capability and expand its business operations. With these lofty intents, the Board of Directors and Senior Management perceived the need to benchmark FICOBank’s ways of seeing, doing and getting banking things with an exemplary coop bank in order to improve further its own business.

The Bank Kerjasama Rakyat Malaysia Berhad, which, in short, is known as Bank Rakyat, now the largest, strongest and best cooperative bank in Malaysia that had successfully undertaken corporate transformation, is so far the best bank that will serve as FICOBank’s point of reference for its transformation initiative. It is especially so, as Bank Rakyat is rated as AA₂ Financial Institution by Rating Agency Malaysia (RAM), and is ranked as: 1st for the Biggest Islamic Bank in Malaysia; 1st in Malaysia and 2nd in Asia for the Highest Return on Assets; 2nd for the World’s Islamic Bank with Highest Profit; and 5th Strongest Bank in Malaysia.

Through the assistance of the Philippine Embassy in Malaysia, the 11 delegates, from among the 19-person participants (Board of Directors, Senior Management and key officers) to this Business Study Mission, had the opportunity—on March 19, 2012 at Bank Rakyat’s Head Office in Kuala Lumpur, Malaysia—to get an insight into the historical development, banking operations, corporate governance, risk management, best practices and business perspective of the host bank, which has come a long way over the past 57 years.

Bank Rakyat is jointly owned and controlled by 1,414 cooperatives and 756,942 individuals. It has an extensive delivery/distribution channel of its financial products and services, with 134 branches, 35 pawnbroking outlets, 45 service agents, 436 automated teller machines (ATMs) and 190 cash deposit machines (CDMs) that are spread over the peninsula of Malaysia.

With its corporate-brand tagline, “Bank Rakyat: Your Choice Bank,” it has a long list of select financial products (i.e., deposits, investments, consumer financing, commercial financing, financing for small and medium industries and cooperative enterprises, etc.) and fee-based services (i.e., internet banking, call center, electronic banking, on/off-premise ATMs, inter-bank giro, debit/credit cards, inter-bank fund transfer, auto-pay system, collection agent services, one-stop bill payment, service agency, foreign currency exchange, financial planning services, will-writing services, pawnbroking, remittance tie-ups, etc.). Its financial products are unique, simple and have timely delivery. These are offered and provided through services and facilities that are sensitive to customers’ needs.

Bank Rakyat has aggressively engaged in allied undertakings, with Rakyat Holdings Sdn Bhd as its holding company. From its business model, Bank Rakyat has a 100-percent shareholding with the latter. Subsequently, the holding company has also 100-percent shareholdings on the subsidiary entities, which are engaged in: cooperative acquisition and liquidation management services (Rakyat Asset Management Sdn Bhd); property development and project management (Rakyat Hartanah Sdn Bhd); franchising of pawnbroking (Rakyat Management Services Sdn Bhd); building management (Rakyat Facility Management Sdn Bhd); travel agency (Rakyat Travel Sdn Bhd); trading and supply (Rakyat Niaga Sdn Bhd); and shares operations (BKR Nominees Sdn Bhd). It may also be worth mentioning that these subsidiary companies have common first names—Rakyat (which means people).

Bank Rakyat has good corporate governance and strong leadership. It has an issue/initiative-based organizational structure, where, aside from the board-level committees and the management committee, it has 16 management sub-committees that are responsible to provide assistance and focus on major banking issues/initiatives to its management committee. The said coop bank has board-level and management-level risk management committees that are backstopped by its risk management office, with distinct responsibility for the risk management function and the comprehensive risk management framework across its entire organization.

Furthermore, the Financial Sector Blueprint (FSB) of the government of Malaysia, which encompasses its objectives, strategies, roles of the financial sector, landscape of the financial system by year 2020 and implications for the banking industry, has been given utmost consideration by Bank Rakyat in crafting its three-tiered plans (strategic, tactical and operational). Its plans and programs go well with, and take full advantage of, such FSB.

As of end-December 2011, Bank Rakyat has whopping resources of RM72.48 billion (1.00 Malaysian Ringgit is equivalent to 13.92 Philippine Peso). Dominating its sources of funds is its deposit liability, with a total of RM58.51 billion. Its cooperative-and-individual shareholders’ equity amounted to RM8.35 billion. For its financial year ending December 31, 2011, Bank Rakyat posted an all-time-high net income of RM2.00 billion, with a net profit ratio of 36.36 percent. As to its financing operation, personal and consumer loans account for about 90.00 percent of its total portfolio. Its non-performing loans stood at a manageable 2.80 percent. The strong showing of Bank Rakyat can be attributed to its laser-sharp focus on growing its financing activities and improving its asset quality.

The foregoing experiences, practices and performances of Bank Rakyat may be worth noting for possible replication by FICOBank in its corporate transformation thrust. The lessons learned through the audio-visual and PowerPoint presentations prepared by the corporate planning department of the host bank were reinforced during the get-together session of the senior officers of both banks. Reflecting together on various banking issues, sharing points of view and learning ways of seeing, doing and getting banking things made both the hosts and visitors feel more like they were on a common sphere.

The Business Study Mission in Bank Rakyat is indeed a rare experience and a good exposure for the delegates of FICOBank.