Essay: Bank Rakyat

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  • Bank Rakyat
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Company background
Under the Cooperative Ordinance 1948, Bank Rakyat was established on 28 September 1954. Nowadays, the biggest Islamic cooperative in Malaysia is Bank Rakyat with assets totaling RM89.18 billion as at end of December 2014
The transformation in 2002 of the Bank from a conventional banking system to a banking system based on Syariah has enabled the Bank to record encouraging profits year after year. For the financial year ending 31 December 2014, we have recorded a pre-tax and pre-zakat profit of RM2.16 billion.
We continue to expand our product range and customer facilities that are varied and innovative. The products and facilities include consumer banking, commercial financing, savings and investments as well as products of financial planning to satisfy the many demands of a wide spectrum of modern day customers.
Efficient delivery channels continue to be expanded and continuously improved. We continue to maintain a friendly corporate image to place us on a sound footing as Your Choice Bank.We have received various recognitions as an industry player and as an outstanding cooperative organization in Malaysia as well as internationally.
As an entity under the control of the Ministry of Domestic Trade, Cooperatives and Consumerism, we are committed to support the mission of the Ministry to consolidate the cooperative sector as the mainstay of economic growth of the nation via all the efforts and steps that we have arranged.
To date, we have 148 branches with more than 800 automated teller machines (ATMs) and cash deposit machines (CDM), and 91 Ar-Rahnu X’Change nationwide. Bank Rakyat also operates our contact centre, tele-Rakyat that can be reached at 1-300-80-5454 and the i-Rakyat internet banking at We can also be reached via Facebook, Bank Rakyat, Bank Pilihan Anda at and Twitter at
Corporate Responsibility is the proposal to set up the Bank Rakyat Foundation which aims to achieve the Education Fund was presented in early 2005, prior to the approval by Bank Negara Malaysia in August 2006 and registered in May 2007. Before commencing operations in October 2008, the Bank Rakyat Foundation was officially launched by YB Dato’ Noh Omar, Minister of Entrepreneur and Cooperative Development in April 2008.
The foundation receives funds through the contributions of RM10 from each member receiving yearly dividends. In line with the aspirations of the Bank members who are always ready to share the dividends earned from investments in Bank Rakyat, it is therefore the intention of the foundation to maintain and manage scholarships and financing for underprivileged Malaysian citizens, regardless of religion, race and background as long as they comply with the conditions to study at a Higher Education Institutions (IPT) either Public (IPTA) or Private (IPTS) as well as Public/Private Training Institutions. Apart from that, the foundation also provides financial assistance to the disabled and paralysed groups in addition to providing charitable contributions for individuals or organisations in need.
Under the education funding assistance, the foundation offers scholarships and Variable Education Loan for academic studies at PhD, Masters Degree, Bachelor Degree, Professional, Diploma and Skill Certificate (First Class). First Year IPT/IPTS/IPTA students and those who fulfil the requirements are eligible to apply for the scholarship sponsorships or Variable Education Loans from the foundation. In addition, the foundation also manages various activities related to education, among others are the education development which includes the Didik Rakyat Seminar (Educate the People) which was formerly known as Score A Seminar, Form 4 Excellent Students Motivation Programme, Resume & Career Workshop, Youth Health Programme and Computer Donations to flood victims as well as Human Capital Programme. The Human Capital Programme is compulsory for all sponsored students as it is a prerequisite in obtaining sponsorship from the foundation.
Situation analysis
Bank Kerjasama Rakyat (M) Berhad, Bank Rakyat was established in September 1954. Originally named Bank Agong, it became Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat) on January 1973. The Bank Kerjasama Rakyat Malaysia Berhad (Special Provision) Act of 1978 had placed Bank Rakyat directly under the Minister responsible for Co-operative Development, presently the Ministry of Land and Co-operative. The shareholders of the Bank are individual members and co-operatives.
The principal activities of the Bank mentioned in the its 1997 annual report are those of a co-operative which carries out conventional banking activities such as accepting deposits and providing personal, agricultural, property, commercial, leasing and other loan facilities. The Bank also carries out banking activities based on Islamic (Syariah) principles such as accepting deposits and providing personal, property, pawnbroking and other banking facilities. Bank Rakyat is one of the very few financial institutions to have offered full-fledged Islamic banking and financial services throughout its network. The Bank is constantly improving its procedures and mechanisms to further enhance the overall development and growth of Islamic banking in the country. Basically, the Bank confines itself to retail banking specifically acceptance of deposits and providing loans to customers at its 74 branches located in East and West Malaysia.
SWOT analysis
This section present the SWOT analysis on the organization as summarized in Table 2.1. An assessment of strengths and weaknesses reflect the Banks internal capability while, the assessment of opportunities and threats provide the environmental scanning process. The discussion begins with its strengths namely its product and services, financial strength and loan collection capability.
Strengths Weaknesses
Products and Services
. Personal Loans
. Deposit (Mudharabah)
. Pawn Broking-i Ar-Rahnu
Financial Performance
. Assets
. Profits
Loan Collections (BPA) Inefficient IS
. Loan processing
. Payment posting
. Loan recovery
. Accounting
. Reporting
Opportunities Threats
-growing economy
-growing demand
-growth rates and profitability
-new products and services
Islamic banking
Database marketing/Data mining -growing competition and lower profitability
-technological problems
Mergers and acquisition
Foreign banks
BPA facilities open to others
The products and services can be considered as one of the Bank strength. The Bank provides an array of products and services like any other conventional banks in Malaysia. It can accept deposits from public and give financing to individuals, firms, cooperative and even government body. Bank Rakyat personal loan is one of the popular among government servants. Bank Rakyat accommodates convenience way to pay back the loan by cutting of their monthly wages. However the products and services offered by the Bank are limited to those allowed by the various laws and regulations in the country specifically, the;
. Banking and Financial Institutions Act 1989 LBAFIA),
. Co-operative Act 1993,
. Bank Kerjasama Rakyat Malaysia Berhad (Special Provision) Act 1978,
. Bank Rakyat By-Law.
Bank Rakyat is grouped under the development bank category together with Bank Pembangunan Malaysia (BPM), Bank Pertanian Malaysia (BPM) and Bank Industri Malaysia (BlM).
The product provides high returns to the Bank because the collection mechanism ensures prompt payments. The collection is done through a third party call Biro Perkhidmatan Angkasa (BPA). The statutory body was founded to promote co operative movement and to provide the machinery for collecting payments on behalf of the co-operatives at a small percentage on the collected amount. The channel allows Bank Rakyat to secure their loan payments with little or no risk of default. The product stands at almost 80% of the Bank’s total loan portfolio.
Figure 2.1 shows how the system of collection via BPA works.
Fig 2.1 Collection through BPA
Other financing facilities like agricultural loan, property, commercial and leasing also has been well received by the public. Another popular product is the Islamic pawn broking known as Ar-Rahnu. Pawn Broking-i Ar-Rahnu another product of Bank Rakyat provide , offers fast and easy cash financing up to RM50,000 with low safekeeping fee charges based on 3 Syariah principle. interest free loans (Qard) , savings with guarantee on the pawn items (Wadi`ah Yah Dhamanah) and safekeeping fees (Ujrah). It offers options to consumer from the conventional practices. The modest and small fee has attracted a steady flow of customers especially at the beginning of school sessions.
Deposits: Savings Account, General Investment Account Bank Rakyat source its deposits mainly from its Al-Wadiah Savings Account and Al-Mudharabah General Investment Account (fixed deposits). Like any other savings account found in conventional banks it provides profits payment and use of Automatic Teller Machine (ATM). The fixed deposits facilities has been giving competitive returns to the depositors and has been successful in attracting large.
The efficiency of Bank Rakyat in loan processing is not efficient and takes a long time. The possible factor for this issue is internal coordination because loan file must be checked by the processing team, the underwriting team, and the settlement team which is a lot of coordination to be made. Another factor is obtaining verification because Bank Rakyat need to fully assess a borrower’s risk before choosing to approve or deny a loan request. Verifying process for the loan file needs employment with managers, obtaining history from credit bureaus, and acquiring records from previous loan. Confirming this information can take time if the loaner references are difficult to contact or less than cooperative.
The cooperative of loaner is the factor of weakness in Bank Rakyat, the mentality or culture of the loaner to postpone their payment to Bank Rakyat. This factor could affect the cash flow for Bank Rakyat. The Loan recovery or collection of amount due depends on the purpose, time and condition. Recovery is different from one loan to another. For example In short term loans recovery is less than 36 months and long term loans recovery is normally 84 months or longer. Interest earned is the income for Bank Rakyat, this should payments, the entire expenses and plough back requirement therefore, recovery of money is one of the major source of funds for Bank Rakyat. The wellbeing of the Bank Rakyat is judged by the extent of recovery that it can affect. All source of funds carry cost, if the cost of borrowings is higher, it reduces the margin profit, further the profit are subject to payment of income tax as per applicable laws.
The opportunities of Bank Rakyat in Islamic Banking based on the principles of Shariah (Islamic law) and guided by Islamic economics. The guideline is on the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest. Islamic Banking is an opptunities because of Malaysia is a multiconfessional country whose most professed religion is Islam. As of 2013, there were approximately 19.5 million Muslim adherents, or 61.3% of the population so a lot of potential client in Malaysia.
Electronic commerce is an evolving concept that combines the process of buying and selling or exchanging of products, services, and information by computer networks including the Internet. Electronic Banking is a process by which a customer may perform banking transactions electronically via computer or smartphone. Since Malaysia is a developing country , the electronic banking is an opportunity since it is still new to Malaysian people. Bank Rakyat need to educate the Malaysian people the advantage and dis advantage of electronic banking.
Database marketing/Data mining
There is a lot of growing competition in banking sector in Malaysia and lower profitability. Based Information from Forbes and Relbank as of 31/12/2014 , Total assets of Bank Rakyat is 89.305 (RM Billion ) rank at No. 8 in Term of total asset compare to Maybank is 640.300 (RM Billion ) . Threats from Technological problems for example the case of Case of Al Rajhi Bank at 30 September 2014 , seventh automated teller machine (ATM) was hacked/ robbed because of the bank still using Windows XP operating system for their ATM even though Microsoft have stopped supporting Windows XP operating system after 8th April, 2014.
Segmentation, Targeting and Positioning (STP)
In Modern Marketing strategic is using Segmentation, Targeting and Positioning (STP). Most commonly applied marketing models in practice. STP is useful when creating marketing plans since it helps marketers to prioritize propositions and then develop and deliver personalized and relevant messages to engage with different audiences. Segmentation can identify niches with specific needs, mature markets to find new customers, deliver more focused and effective marketing messages. Existing markets based on nearly any variable.
Segment the audience by using Demographics, Breakdown by any combination: age, gender, income, education, ethnicity, marital status, education, household or even profession. For example Bank Rakyat strength is Islamic Banking product, so the audience may be a Muslim. Another way to segment the audience is using psychographics. Refers to ‘personality and emotions’ based on behaviour, linked to purchase choices, for example Umrah is a pilgrimage to Mecca, Saudi Arabia, performed by Muslims that can be undertaken at any time of the year, in contrast to the Hajj. Bank rakyat could attract the muslim client with Umrah promotion if saving under Bank rakyat.
Lifestyle segment refers to Hobbies, recreational pursuits, entertainment, vacations, and other non-work time pursuits. For example many people nowadays hobbies is surfing internet via computer or smart phone, the advertising of Bank Rakyat should be approach by using E-com method or attract client that love to travel by using promotion with big discount for flight fee. Segment audience by belief and values is refers to Religious, political, nationalistic and cultural beliefs and values. For example Bank Rakyat offer Islamic banking complainant to shariah which meets specific religious requirements in Islam.
Life Stages is the Chronological benchmarking of people’s lives at different stages, for example Bank Rakyat can approach there customer to invest based on their age , people who 50+ may try to find short term investment with high dividend compare to youngster may try to find long and low risk kind of investment. Segment the audience by Country, region, area, metropolitan or rural location, population density or even climate for example Bank Rakyat product is Islamic Banking , there can focus their advertising at Muslim area to attract more muslim customer.
Market targeting is to evaluate the potential and commercial attractiveness of each segment. Criteria Size: The market must be large enough to justify segmenting. If the market is small, it may make it smaller. For example Malaysia is multi race country whose most professed religion is Islam, the segment is large market. Measurable differences must exist between segments for example approximately 19.5 million Muslim adherents, or 61.3% of the population so a lot of potential client in Malaysia. Bank Rakyat must anticipated profits must exceed the costs of additional marketing plans and other changes and different segments must need different benefits.

The segmentation, targeting and positioning model

Marketing Strategies
Convenient and secure online access via the banking institution’s websites (and mobile applications) to services and transactions normally available only at physical locations or via mail or over the phone. Examples:
• New account applications – The Savings Account-i enables you to deposit your money safely based on the principle of Wadi`ah Yad Dhamanah and the money may be withdrawn at any time.
• Personal Financing-i Civil Servant is a unique product that is designed specifically for public servants and selected GLC Company which offers a lower profit rate with special benefits by using the concept of Tawarruq
• Faraid is the portions determined by Shariah to be allocated to beneficiaries or Will is the act of assigning and empowering executable rights to someone to act upon the death of testator
• Takaful Amani is a takaful protection scheme which provides monetary compensation in the events of death or permanent disability on the injuries caused solely and directly by accidents
• Term Financing-i is a financing package with fixed PROFIT RATES designed for companies and co-operatives. It is based on Islamic concept of Bai’ Al-Inah (buy and sell back agreement), Al’-Istina (where payments are made in stages to facilitate progress of the manufacturing or construction of the subject of sale) and Al-Bai’ Bithaman Ajil (where the bank provides financing to customers to own property by purchasing the asset/service with cash and sell back the property/service to the customer at cost price plus profit).Credit card activations
• Loan and bill payments
• Fund transfers
• Check orders
• Direct deposit setup
• Personal information updates
• Help with questions
The price of the product depends upon the services provided by the Bank on the respective product to the customers. Detailed pricing changes from time to time and the same can be found on the website. Free; online banking is an additional service available to bank customers. Any visitor to the site can apply to become a customer, and any existing customer can sign up for online access to his/her bank account(s) at no additional cost.
Visualization tangibilizes services through hoardings, TV and print campaigns or advertisements. Physical representation in services has a good promotional appeal to customers like use of colors to symbolize wealth and status. Service providers use documentation in their promotions in support of their claims for dependability, popularity and responsiveness. Online services are presumably communicated to new customers at signup. Online banking is also the main focus of banks’ homepages:As seen by the first item on homepage, immediately below their logo, is a sign-in section to access online personal internet banking. The page is also set to default the text cursor’s location to the “Username” field.
Place plays an important role in tangibilizing service offerings. Quality of service is perceived by many customers in the form of place of delivery- locational appeal, interiors, ambience, etc. If a bank is located in a crowded market the place or location will be a negative tangibilizes. Providing excellent tangibles in the form of place or location and interiors is particularly important for appealing to the customers segment. Bank are providing very attractive tangibles in the form of their locations, exteriors and interiors. Potentially, anywhere: any location where consumers can access the bank’s website, or access their accounts over a properly equipped mobile device with an internet connection.
People are a common factor in every service. And people tangibilize services. Good people (means good performance) make good or successful services. Bad performers deliver bad services.
Customer defined business process- Process innovations and continuous improvement through people involvement. Result oriented approach- Each process has been designed by first planning the desired results. Bank Rakyat is constantly taking initiatives to offer the best in class service that seek to enhance customer experience.
Physical Evidence
Reduce paper usage- Due to technological innovations such as use of Finance software for core banking solutions. It has positioned itself as a bank which gives higher standard of services through product innovation. Satisfies is when the diverse need of individual and corporate clients. It is customer centric, and service oriented.
Evaluating the strategies to be implemented is evaluation is crucial marketing strategies will bring to the Bank Rakyat achieving their goals and objectives. The evaluation covers the external and internal assessment or SWOT analysis of Bank Rakyat.
This analysis emphasized on political, economic, social, technological, environmental and legal aspects of Bank Rakyat. They are the six main components of strategic significance in the macro-environment. The macro-environment includes the wide environmental framework of the industry which the company has no direct control.
Political Factors
As a well-known Bank, Bank Rakyat also facing political issues that will affect the company for overall. In Malaysia, there is a minimum wage policy, which means Bank Rakyat must pay their employees’ salaries, according to the policy which stated RM900 minimum. So it is illegal for Bank Rakyat to pay under that minimum wage policy. Besides, one of the factors is GST (Goods & Services Tax) that been implementation from Malaysian Government. As a huge organization, the tax rate is higher compared to smaller organization and it is important for Bank Rakyat to adapt to the new implementation , they can cope and maintain their operation .
Economic Condition
Due to unstable in Malaysia economy nowadays, Bank Rakyat also faces many challenges in economic term such as the increase in the cost of living that leads to increase in cost of living. Besides, the implementation of Goods and Services Tax (GST) give a huge impact to Bank Rakyat which means the company might have to face an increase in prices of many items in Malaysia which may cause their client may late to pay their loan or start to take out their money from the bank for other use and this will affect the cash flow plans of the company . The economic situation nowadays also gives a negative impact to Ringgit Malaysia which cause the exchange will become wider and will affect the company that using Ringgit Malaysia.
Social Cultural Forces
Due to competitive competition in banking business nowadays, many companies such as Maybank, CIMB and Public Bank Berhad come to become popular bank. This will give Bank Rakyat a tough challenge and to overcome this situation, Bank Rakyat must come with new ideas and innovation that might give them advantage compared to their competitors.
Technology Factors
For a well-known Bank Rakyat, Bank Rakyat must come with new innovation or technology that can differentiate them from their competitors. Better, more secure and more user friendly internet banking. Through this plan, Bank Rakyat will increase efficiency by using new technology of server. Besides the other objective of this plan is to reducing waste of time for their client to their bank, so that their client can do any banking business from their home or anywhere they want.
Environmental Forces
Bank Rakyat can optimize their resources by cut the cost using Environmental Management Plan (EMP) that will help the company to minimizing paper wastage. Besides, EMP also been introduced with Environmental Management System (EMS). The function of EMS is by using less paper for their normal operation. For example to register for new account client , just use a computer to upload their client information and the ATM machine do not have to use paper to print the receipt just use SMS to client phone.
Legal and Regulatory Factors
Bank Rakyat must to ensure they follow the legal and regulatory that been introduced by government to ensure all their business safety and legal. So any business performed at Bank Rakyat must comply with government. It is important for Bank Rakyat to follow with regulatory that being stated especially LAWS OF MALAYSIA Act 701 CENTRAL BANK OF MALAYSIA ACT 2009.
This model highlighted that the nature of competitiveness in an industry can be seen as a combination of five forces, namely; rivalry among competing companies, potential entry of new competitors, potential development of substitute products, bargaining power of suppliers and bargaining power of consumers. It will assist in determining the competition within the industry could make Bank Rakyat to make acceptable profit.
Competition among bank
The rivalry among the bank in Malaysia is quiet competitive with big player such as Maybank and CIMB compare to Bank Rakyat, for example if in credit card business. Every major bank offers multiple cards with interest rates custom-tailored to applicants. The drive to offer lower rates constitutes the main price competition in this industry. The prime rate is offered by banks to the most creditworthy client businesses and individuals with excellent credit ratings .So pay low interest rates and longer term of paying will be the client choice. Banks certainly compete on the rates they offer to this client, since these can, other things being equal. Bank like Maybank differentiate themselves with a high level of service and pride themselves on extensive websites, free automatic bill-paying, online transfers of money to other institutions and helpful customer assistance. Compare to Bank Rakyat online banking, still a lot of improvement to be improves but Bank Rakyat is catching up. Furthermore Bank Rakyat has their own unique online service that are online Banking 1-Pay and Autopay.
Potential Development for a Substitute Product.
Substitute products refer to products that able to replace the current product in Bank Rakyat. Substitutes create a threat which exists when a product’s demand is affected by the change of a substitute product. A product’s price elasticity is affected by substitute products – as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices. Bank Rakyat have defined their subjects as size and business location, product type, the quality and workmanship, the marketing strategies, pricing scheme and the timing of the launch of new substitute product in the market.
Bargaining Power of Consumers
The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the relationship to the producing industry is near to what an economist terms a monopsony – a market in which there are many suppliers and one buyer. Under such market conditions, the buyer sets the price.
The marketing strategic that already been implement by Bank Rakyat is Corporate social responsibility that still effective and need to be continue for example Bank Rakyat Foundation which aims to achieve the Education Fund . Their intention of the foundation to maintain and manage scholarships and financing for underprivileged Malaysian citizens, regardless of religion, race and background as long as comply with the conditions to study at a Higher Education there are the education development which includes the Didik Rakyat Seminar which was formerly known as Score A Seminar, Form 4 Excellent Students Motivation Programme.
The form of marketing Bank Rakyat implement is Debt Consolidation Financing to help debtor to settle the financing balance from Financial Institution, Coop and other Registered Financing Companies by using this strategic by helping debtor to manage several of their debt into one debt payment. Lifestyle segment audience refers to client that love to travel by using promotion with big discount for flight fee , Bank Rakyat implement this with Malindo Air Promotion that user will get a 20% discount if using Bank Rakyat credit card. Another example to client lifestyle that love to shop 2% rebate if using Bank Rakyat credit card at Parkson.
Based on the strategies evaluation made earlier, the recommended implementation plan for Bank Rakyat marketing is focus on Islamic Banking product and aliases with good internet banking. Islamic product may attract new non –Muslim client since the Islamic banking system uses methods of profit/loss sharing to facilitate financial transactions: for some types of loans, the borrower only needs to pay back the amount owed to the lender, but the borrower can choose to pay the lender a small amount of money to serve as a gratuity. Bank Rakyat has maintain and established a very good branding to their names thus this will ensure the brand name towards their products expecially Islamic Banking product . Advertisement and personal selling be the part of the promotion efforts for the strategies implemented. Their sales personnel are customer-centric and well trained to attend and to assist for any queries relating to the client regarding Islamic baking.

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