The Malaysian Experience by Nik Mohamed Din Nik Musa Bank Negara Malaysia 21 September 2016 1
Outline of Presentation Overview of Malaysia s Remittance Landscape Why Johor Bahru difference from other City. Strategies and Key Activities & Outcomes Outcomes of the Survey. Pick Remit Implementation & Challenges. Outcomes & Strategies moving Forward. Video Presentation More Than Just A Transfer 2
Transformation of non-bank remittance business in Malaysia Today s results of on-going transformation sharp increase of remittance value from 2011 (average rate of >20% annually) consistent reduction in cost of transaction (2006: <12%, 2015: <5%) significant increase in number of access points (2006: 940, 2015: >2,300) Underwent modernisation and consolidation phase since 2011 to push inclusion agenda Turnover value Vs. cost Access point Vs. ratio of foreign worker 25,000.0 14 3,000 (Turnover, billion) (Cost, %) 12 Turning point 20,000.0 2,500 Turning point 15,000.0 10,000.0 10 8 6 4 Turnover Cost 2,000 1,500 1,000 No. premises Ratio per foreign worker 5,000.0 2 500 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 0 2009 2010 2011 2012 2013 2014 2015 Turning point: re-licensing exercise in 2012 and new Act produced greater business synergies and promoted healthy level of competition wider public access through formal channels and elevated professionalism level Centre of excellence in regulatory and legislative framework, training and accreditation 3 3
Asia s 1 st Greenback 2.0 Project - Johor Bahru as Remittance Champion City 2-year project launched on 29 Nov 2015 Objective tailored to Johor Bahru: enhance transparency and competition to reduce remittance cost promote migration to formal channel and inclusion, address illegal operators SMEs as new target group under initiative Johor Bahru A city in most southern part of west Malaysia, bordering Singapore Why Johor Bahru? Vibrant economic development of especially in property development, plantation and manufacturing sectors 3 rd highest concentration of migrant workers in Malaysia (10% of population in Johor state) dynamic SMEs sector, i.e. growth of SMEs in Johor surpassed national GDP growth by 1.2% from 2010 to 2013, indicating promising business opportunities for SMEs in Johor To complement future Greenback project in Lombok, Indonesia 4
Key Activities - Formulation of Winning Strategies and Action Plan Activities/ strategies/ challenges Awareness prog. on merits focus on remittance issues & direct to target group e.g. Remittance Fair, Hit The Street, SME Pocket Talk edutainment and freebies state authorities involved Rigorous promotions mainstream & social media update ambassador as spokesperson Enhance accessibility of regulated channel agents and kiosks mobile remittance participation of market players in programmes Progress/ Achievement Cost reduction, i.e. lower than 3% (Aug 2016) in Johor Bahru. <3% in Johor vs. >5% nationwide double digit growth rate 1% of cost reduction saved over RM30m or USD7.5m in remittance amount for migrant workers (in Johor Bahru only) Encouraging participation in awareness programme & Pickremit app >8,000 migrants and SMEs in the past 8 months and number is increasing Close to 3,000 visits to Pickremit for the same period, highest worldwide Increasing new registration with remittance companies Over 104,000 new customers registered form Jan-June 2016 and more will follow Over 1.000 SMEs registered 5
Session with migrant workers Awareness program (inc. Pickremit demo) Migrant Worker Dormitory Shopping Mall Remittance Fair Embassy Compound 6
Session with SMEs Awareness program & involvement of industry player Back 7
Key Activities Challenges and Enabling/ Success Factors Demography barrier Dealing with various nationalities of migrants with different level of education, languages & backgrounds Participation issue To attract migrants and SMEs to participate in the program Awareness issue Trust over remittance companies Effective collaboration with partners Full support & strong commitment from partners, e.g. MSB operators, employers of migrant workers and SMEs association High accessibility of PickRemit Majority of migrant workers have a smart phone with internet accessibility 8 Flexible and focus awareness program Tailored to needs of target group to ensure effectiveness & high impact result On-going review of programmes and syllabus On-the-ground activities, direct to intended target group
PickRemit Promising tools in Supporting the Greenback 2.0 Johor Bahru Apps developed by World Bank Accessible via smart phone and tablet Free download (Apps Store and Google Play) Supported by BNM and MSB industry Aim to facilitate market transparency >20 MSB operators in Malaysia were involved & more are joining Accessible to the target group 74% of migrant workers in Johor Bahru has smartphones with 67% have access to internet Apps present capability Identify location of nearest MSB operator Display the rates offered 5. Compare delivery method 1. Choose destination 2. Set amount to be remitted 3. Find location (nearest MSB operators) Apps future plan To include comprehensive information on fees/charges & exchange rate per transaction To enable the apps to conduct transaction, i.e. mobile remittance platform 4. Compare rates Main challenges in promoting the apps Language barrier among migrant workers Entry barrier,e.g.convince MSB operators esp. banks to participate Back 9
Remittance behavioral Analysis of Migrant Workers and SMEs in Johor Bahru Migrant Workers Demography Majority of migrant workers are Indonesian (6 out of 10) mainly from Lombok Remittance behavior Huge demand for non-bank remittance operators as most migrants prefer non-bank services to 90% remit money remit money due to cheap and speedy services overseas Cost remain a major concern for migrants in choosing remittance channel. Remittance awareness More can be done to improve migrant awareness on remittance as there is still large number of migrants unaware of the risk of using unregulated remittance channel & how to differentiate between regulated and unregulated channel (40%) Financial inclusion Low level of financial inclusiong among migrant 40% workers, i.e. 40% with no bank account. Reason given mainly they do not need for bank account & the bank location is too far. SMEs Demography Reflected business synergy with Singapore with 90% of SMEs are in services sector (trading subsector). China as the most popular destination for remittance Remittance behavior Majority prefer banks for remittance services. Perceived security & trust are main considerations for using banks. 86% use banks for remittance SMEs also cost concious as more willing to use non-bank services as remittance cost is cheaper Those not using banks mainly due to lower fees and more convenient location Remittance awareness Lack of knowledge among SMEs on how to identify informal services, i.e. half of SMEs unaware how to identify unregulated channel services despite 75% aware of risk using it To review future program in accordance to the main issues of SMEs. Back 10
REMITTANCE: MAIN RECIPIENTS AND MOTIVATIONS SOCIAL IMPACT TO DEPENDANT BACK HOME AS REMITTANCE MAINLY FOR PURPOSE TO MAINTAIN THEIR HOUSEHOLD S EXPENSES, OTHER THAN KEEPING SOME SAVINGS BACK HOME HAVE DEPENDANTS BACK IN THEIR HOME COUNTRY 95% REASONS FOR TRANSFERRING MONEY TO HOME COUNTRY Family maintenance / household expenses 94% Savings (for future business or retirement) 56% Urban: 98% 28% 55% 12% UP TO 2 DEPENDANTS Plantation workers (34%) 3 TO 6 DEPENDANTS ABOVE 6 DEPENDANTS Education 44% Emergencies & health 29% Home renovations 13% To pay loan in home country 11% Plant. : 23%
Spill-Over Effect of Greenback 2.0 Project (Johor Bahru) to Other Region Johor Bahru, Malaysia Johor Bahru Sender country (remitted >RM2b annually). 3.35 million population. >300k foreign workers 60% of migrant workers are Indonesian, of which 70% from Lombok Lombok, Indonesia 12 Lombok: Receiver oriented (inward remittance in average of RM450 million annually) 3.31 million population (2014). Over 400k Lombok migrants working mainly in Johor Greenback 2.0 Lombok, Indonesia Launched on 25 May 2016 by the World Bank. To be integrated with Greenback 2.0 Johor Bahru Focus to improve and support socio-economic development in Lombok via remittance Potential benefit of integration Broadening geographical reach of financial services in Lombok Enabling migrant workers & family members to best use their resources through financial or entrepreneurial education Deepening variety of financial services available to migrant workers and family members Encouraging migrant worker to be agents of change in Lombok
Why remittance is important? Let s hear from them More Than Just A Transfer 13 13
Thank you Grazie 14