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‘HalMap’ helps Halal SMEs tap into a $2.6t global industry
CASE STUDY: MAYBANK HALMAP ‘HalMap’ helps Halal SMEs tap into a $2.6t global industry
Over 50 products of Malaysian SMEs are now being sold in Singapore.
At the start of 2021, Malaysian small and medium enterprises (SMEs) producing halal products could only dream of leaving a sizeable dent in the estimated $2.6t global halal market–an industry set to grow to $5t by 2030, according to the Malaysian government. By the end of the year, ten Malaysian SMEs now have 50 of their halal products combined sold at supermarkets in Singapore–all under Maybank Islamic’s Halal To Roadmap programme (HalMap).
Launched in August 2021, HalMap aims to enhance awareness of the halal industry, increase the number of new halal-certified companies, and ultimately assist said companies to expand operations into the overseas halal markets.
“We found that Malaysian SMEs in the [Fast Moving Consumer Goods (FMCG)] segment have difficulties accessing big name hypermarket and retail outlets, therefore we focused on these clients
Norzulkarnien Nor Mohamad
HalMap will not limit operations to just Singapore given a huge demand for halal products globally
for a start,” said Norzulkarnien Nor Mohamad, head of Islamic Banking, Maybank Singapore.
“With the current challenges faced by SMEs due to the COVID-19 pandemic, HalMap can be a new channel to provide Maybank’s SME customers with additional opportunities to expand their operations,” he further told Asian Banking & Finance in an exclusive interview.
The programme kicked off with a selection of 10 Malaysian SMEs to venture into Singapore’s halal food market. The 50 new-to-market products are now available at Eccellente by HAO Mart located in Kinex Shopping Mall.
Apart from providing Shariahcompliant financing to the selected SMEs, they were provided with a distribution platform, service advisory, and training to market their products and services in the FMCG market segment.
In choosing which businesses to partner with, Maybank Islamic
HalMap can be a new channel to provide Maybank’s SME customers with additional opportunities to expand their operations considered small and medium enterprises who are at least three years old; are halal certified and Makanan Selamat Tanggungjawab Industri (MeSTI) certified; have products whose shelf life has a minimum of one year; have professional product packaging; have products with a barcode; and have a production capacity of at least 5,000 units per annum.
Performance is encouraging and indicative of demand. “It has only been a few months since the launch in November 2021, and there is about S$25,000 in sales of products so far. We can see that the demand for halal products is there and we hope their products will continue to gain traction,” Norzulkarnien said.
Expanding SME reach
Since launching less than half a year ago, SME interest in the programme has grown. “We have received about 70 applications in Malaysia,” Norzulkarnien shared.
Currently, Maybank Islamic focuses on existing Maybank SME customers who are in the food and beverage trade within the FMCG sector, Norzulkarnien said. Other Halal industries, such as pharmaceutical, fashion and tourism, will be explored by the bank in the future.
“We are constantly looking to expand this initiative and will definitely not limit it to just Singapore. There’s a huge demand for halal products globally,” Norzulkarnien said.
Apart from that, Maybank Islamic plans to expand the list of companies onboarded in the initiative. For 2022, they are targeting at least 20 companies.
“We will [also] look at facilitating suitable platforms for Singapore SME clients with halal businesses to reach other countries, such as those in halal healthcare and financial technology for halal sector,” Norzulkarnien concluded.
COUNTRY REPORT: PHILIPPINES Philippine central bank takes a swing at sustainability in the banking sector
The BSP aims to help banks win in embedding sustainability principles into their operations.
With Asia suffering from $72b catastrophe-related losses in 2021, the Bangko Sentral ng Pilipinas (BSP) is helping banks score a home run in the sustainability principles with the Sustainable Finance Framework.
Approved in 2020, the Sustainable Finance Framework outlines the expectations of the BSP on the integration of sustainability principles, including those covering environment and social risk areas in the corporate governance and risk management frameworks, as well as in strategic objectives and operations of banks.
Under the sustainability framework, the BSP said it recognised the risk of climate change and other environmental and social risks that could pose financial stability concerns considering their significant and protracted implications on the bank’s operations and financial interests.
Before the framework was released, however, the Philippines had no formal definition of sustainable finance. International and national definitions describe sustainable finance as strategies to mainstream climate and environmental factors as a financial and strategic imperative and mobilise private finance for clean and resilient growth; or the process of taking due account of environmental, social, and governance (ESG) considerations when making investment decisions in the financial sector, leading to increased longer-term investments into sustainable economic activities and projects.
The BSP’s Sustainable Finance Framework defines sustainable finance as any form of financial product or service which integrates environmental, social and governance criteria into business decisions that supports economic growth and provides lasting benefit for both clients and society while reducing pressures on the environment. This also covers green finance which is designed to facilitate the flow of funds towards green economic activities and projects and climate change mitigation and adaptation projects.
In a recent international press chat, the BSP said it is particularly concerned about physical and transitional risks arising from climate change that could result in significant societal, economic, and financial risks affecting banks and their stakeholders. With this in mind, the BSP ordered banks to embed sustainability principles, including those covering environmental and societal risk areas, in their corporate governance framework, risk management, and strategic objectives consistent with their size, risk profile, and complexity of operations.
BSP Governor Benjamin Diokno reported that as of their last tally 101 banks or around 20% of the 503 banks supervised by the BSP now have transition plans to more sustainable operations.
The BSP however, isn’t stopping there. It plans to work with
There is no rush. The Philippine economy is on solid recovery momentum
Another thing that prompted BSP to rein in drastic monetary policies is the huge lead in foreign direct investments
The Philippines’ unemployment rate dropped to 6.5% in November 2021, from a peak of 17.6% in April 2020
development partners to offer capacity building activities for the banks in the country that have yet to adhere to the central bank’s directive.
For the first phase of its ESG regulations in April 2020, the BSP gave broad supervisory expectations on the integration of sustainability principles across the operations of banks. The second phase, issued in October 2021, gave granular expectations to the banks’ board of directors to set strategic environmental and social (E&S) objectives for the bank’s credit operations.
Diokno said, without revealing an exact date, that the third phase is coming soon. This will include guidelines on the management of E&S risks in relation to the activities of banks. Additionally, the third phase will also cover the incentives that may be given to banks that will adhere to the sustainability framework.
Recovery
Aside from its sustainability plans, Governor Diokno reported that the country is currently in recovery.
In 2021, the country’s gross domestic product (GDP) grew at 5.6%, exceeding the government’s target of 5% to 5.5%. GDP growth in the fourth quarter was measured at 7.7%. The Philippines also saw its unemployment rate drop to 6.5% in November last year, the lowest for 2021 from a peak of 17.6% in April 2020.
However, what most wanted to know is: will there be tighter monetary policies?
In which Diokno replied: “There is no rush.”
Diokno enumerated several reasons why the central bank is keeping a calm hand on the steering wheel.
Weighing both economic factors and uncertainties remaining given the risk of COVID-19 variants, Diokno said, “We need to maintain some flexibility in case conditions do not evolve as expected.”
Another thing that prompted the central bank to reign in any drastic measures or at least just keep watch as the situation develops is the huge lead in foreign direct investments (FDIs). FDIs leapt 48.1% to $8.1b from January to October 2021, which according to Diokno, are currently in line with the pre-pandemic levels.
Diokno added that they expect a huge leap in FDIs in the country, hinting that sectors, such as telecommunications, air, and marine, may see a huge increase in foreign investments in the country.
The BSP also said that inflation settled at 3% in January, the midpoint between its target rates of 2% and 4%.
“All these indicators point to improving external and domestic demand accompanied by within target inflation. Clearly, the Philippine economy is on solid recovery momentum,” Diokno said, adding not only that the Philippine economy is poised to make a full recovery this year, but is also under transition from lower to optimal middle income.
Looming threat
Despite the BSP clearly stating that it will keep a patient hand on its policy levers, there is still a cause for alarm as the US Federal Reserve may push through its rate increase, which may affect BSP’s decision on tightening monetary measures.
The World Bank’s Philippine office said that even though the inflation rate stayed in the middle of the government’s projected expectations, rising US inflation and forthcoming monetary policy tightening are developments for policymakers to watch out for.
The Philippines’ central bank said it already acknowledged the risk from the US Fed rate increase and added that a gradual adjustment in US interest rates could help arrest a possible rise in financial vulnerabilities from the unprecedented policy support amid the global pandemic.
However, Diokno said the BSP does not necessarily have to move in tandem with the US Fed.
“We will try to be patient to make sure that we are really on our way to recovery. Because I don’t like to be changing course in the middle of the recovery,” Diokno said, citing that it will affect the credibility of the central bank.
Not remaining idle
Determined to help SMEs during the recovery period, BSP allowed new loans to them in compliance with the reserve requirements.
In January, the BSP had already lent SMEs $4.60b coming from a base of $170m before the pandemic.
We will try to be patient to make sure that we are really on our way to recovery
BSP does not necessarily have to move in tandem with the US Fed (Photo: Benjamin Diokno)
ANALYSIS: WEALTH MANAGEMENT Breaking the mould: Transforming wealth management through analytics
Meeting customers’ needs requires a business model that is efficient yet adaptable to individual clients.
The wealth management industry is typically seen as embodying old-fashioned values
Amidst increasing technological advancement, rising competition, and a highly-connected world, wealth managers will need to keep pace with new offerings whilst retaining values in order to serve their modern clients more effectively.
McKinsey & Co.’s report, “Analytics transformation in wealth management” was penned by McKinsey partners, Anutosh Banerjee of Singapore, Fumiaki Katsuki of Hanoi; associate partners, Vishal Kaushik, Aditya Saxena, and Sanchit Suneja ; and senior partner, Renny Thomas. It delved deep into the modern wealth management industry and the means by which traditional managers can keep up with their customers’ increasingly modern needs.
The wealth management industry is typically seen as embodying old-fashioned values and providing discrete, tailored services, the report
Wealth managers are unlikely to be able to serve modern clients effectively without a digitised operating model
said. Whilst these attributes remain valuable parts of the business, for many clients, these approaches are no longer sufficient.
“Wealth managers are unlikely to be able to serve modern clients effectively without a digitised operating model. This will support advisory and non-advisory activities and service everchanging investment preferences,” McKinsey said.
Wealth managers are not blind to this fact. Some leading managers are reportedly building modular data and IT architectures, which enable smart decision-making, personalisation at scale, and more extensive product offerings, as McKinsey first reported in its article “Building the AI bank of the future.”
The changes already have a marked advantage on the wealth managers, helping them meet their regulatory obligations, boosting the productivity of relationship managers (RMs), as well as helping lift compressed margins.
According to McKinsey, meeting the needs of today’s customers requires a business model that is at the same time efficient and adaptable to individual clients. They noted that wealth managers are finding success with two approaches:
• The first is by serving clients across the wealth continuum on a flat-fee advisory basis.
“Instead of the still-prevalent product-focused model, wealth managers need to build in pricing flexibility aligned to clients’ needs at every stage of their lives,” McKinsey wrote. “An increasingly common pricing model is for clients to negotiate a flat fee based on the value of their investments. To maintain revenues with this model, wealth managers need to create new efficiencies and ensure
RMs are more productive, which means spending more
time with clients.”
• The second is to embrace personalisation aligned to the clients’ life stages and
goals. “Today’s customers are increasingly dissatisfied with a one-size-fits-all service model, so wealth managers should consider transitioning to needs-based personalisation. This requires
RMs to get comfortable with a wider range of solutions, from the simplest products to complex higher-yielding investments (private markets, venture capital, pre-IPO, and structured products).
In addition, RMs must be equipped to help clients make complex investment decisions, supported by analytics,”
McKinsey said.
Fixing the system to generate more gains
Modernisation can be gamechanging when it targets the role of RMs, the report posits.
According to McKinsey’s study, RMs waste an estimated 60% to 70% of their work time on non-revenue generating activities, to meet rising regulator and compliance obligations. This is a result of their organisation not having the most up to date technology, which in turn forces RMs to use legacy IT systems or even spreadsheets.
“Only a few leading wealth managers are using technology to provide RMs with the tools to serve clients more efficiently and effectively,” the report read. “Some have taken a zero-based approach, rebuilding their tech stacks and embracing advanced analytics to inform more personalised services. By providing targeted solutions, these firms and companies have been able to boost revenues and reduce operational costs.”
Transformation in Asia
In Asia, it is estimated that ITbased transformations could create some $40b to $45b of incremental value for wealth managers that are serving high net worth individuals in the region.
The potential is especially strong in the region as wealth managers in Asia have not yet fully leveraged digitisation to achieve a significant performance uplift, according to McKinsey & Co.
McKinsey, in particular, sees benefits in three key areas: acquisition and onboarding, engagement and deepening of client relationships, and servicing and retention. • Acquisition and onboarding.
“Basic acquisition and onboarding applications include client discovery, risk profiling, account opening, and onboarding. RMs and investment teams can use analytics for lead generation, share-of-wallet modeling, and automated proposals.
There are also multiple applications in investment management, risk, and compliance, including social-profile checking, antimoney-laundering and know your customer, and fraud protection applications.” • Engagement and deepening.
“Client-focused applications include personalised research, portfolio management, and notifications. RMs and investment teams can implement client clustering, propensity modeling, recommendation engines, and digital performance management. In investment management, risk, and compliance, there are opportunities to de-bias
investment decisions, data analysis, and trade execution.” • Servicing and retention.
“Client-related applications include portfolio simulations and optimisation, as well as self-execution of trades. RMs can leverage applications such as churn predictors and work planners, whilst investment management, risk management, and compliance can scale up portfolio planning and trade surveillance.”
Exception, not rule
Early success stories are encouraging, but wealth managers who succeed in their transformation are the exception rather than the rule, according to McKinsey.
“More often, firms have started the transformation journey but have faltered along the way. Common reasons include a lack of ownership at senior levels and budgetary or strategic restraints that prevent project teams from executing effectively,” the report noted.
But whilst the challenges of transforming service models are significant, they are not insurmountable yet.
In particular, McKinsey identified five key ingredients of an analyticsbased transformation: strong leadership, a rigorous focus on outcomes, and a willingness to embrace new ways of working. Indeed, managers who execute effectively will get ahead of the competition and be much more adept at meeting client needs.
An analyticsbased transformation requires crossfunctional teams
Source: McKinsey analysis
Anutosh Banerjee
Fumiaki Katsuki
Renny Thomas
An analytics-based transformation for wealth managers has five key elements
Source: McKinsey analysis
(1) Strong leadership
Analytics-driven transformations are often restricted to narrow silos occupied by a few committed experts, McKinsey noted. “As a result, applications fail to pick up enough momentum to make a real difference to performance. Conversely, if support for change programmes comes from the top and is guided by an outcomes-driven approach, the business can break away from entrenched operating norms and reset for structural change,” it said.
Executive teams are called to communicate a vision that can be cascaded through the business; and they should also create a safe environment, or sandbox, for business lines to experiment before development of scaling.
(2) Plot the change journey
Wealth managers have reportedly applied advanced analytics to achieve different objectives.
“Some have found that the application of advanced analytics to business problems delivers significant value and enables them to make better decisions faster and more consistently. Others are using data and advanced analytics to improve sales and marketing, inform investment decision-making, and boost RM productivity,” McKinsey & Co noted.
“Any plan for data-driven change must fit the organisation’s business model. Implementation will vary based on the technical feasibility, data accuracy and accessibility, time to impact, scalability, and availability of funds,” McKinsey added.
One common impediment to scaling is the lack of a single metric to describe the impact, according to McKinsey. This reportedly makes it hard for technology teams to communicate benefits.
“Still, there are workarounds. Financial key performance indicators (KPIs) can show flows across key mandates or volumes of advisory, rather than execution-driven assets under management. Nonfinancial metrics can focus on cross-sell ratios, increased client retention, number of RMs trained, or adoption rates for solutions,” McKinsey & Co noted.
Other helpful evaluations include customer satisfaction scores, new trust-based RM-client relationships, time to market, and cultural shifts.
(3) Build a strong and informed foundation with technology
A strong analytics backbone requires a rigorous standard of data management, coupled with informed decisions about the IT applications and systems to employ, according to McKinsey.
“Wealth managers are routinely in touch with their clients offline. These interactions elicit significant information about client preferences and requirements, but the information is often stored on paper or in RMs’ heads,” the report noted,
“To mine this knowledge fully, wealth managers must capture it digitally and convert it into a structured format that can be processed to create insights and personalised services. In doing so, they need to put systems in place to ingest, store, and organise the data in line with regulatory obligations whilst ensuring the data are accurate, available, and accessible,” it added.
On the technological side, some leading wealth managers are reportedly using natural-language processing to analyse text and voice data and to identify personalised triggers and insights.
Others are building feedback loops across channels to train artificial intelligence algorithms. Technologies can also be applied to processes: robotic process automation, for example, can replace routine manual labour and mental processing in regulatory compliance, risk assessment, reporting, and query management, according to McKinsey & Co.
“Deployment of data-driven decision-making requires scalable, adaptable, and resilient core technology components—a unified data and technology stack that connects across IT activities. This will enable managers to adopt a tech-first approach to designing customer journeys,” the report said.
In building data and IT architecture, wealth managers require a basic tool kit with four key components: 1. a rationalised IT stack to create a common front-and back-end platform and a unified resource for mobile and web applications 2. a scalable data platform with modular data pipelines and application-programminginterface (API)-based microservices for building and deploying data analytics solutions at scale 3. a semi-autonomous lab environment to enable experimentation, coupled with an at-scale factory environment for the production of data analytics solutions 4. a highly scalable distributed network on the cloud to respond to variable demand for data storage and processing
Apart from these, banks must also consolidate data from across
Analytics-driven transformations are often restricted to narrow silos occupied by a few committed experts
Technology and analytics adoption rates in wealth management are low overall in Asia
¹Straight-through processing Source: McKinsey interviews with industry experts
(4) Build the team and prioritise change management
RMs must be front and centre of the transformation process, and for this to happen, organisations need effective team building and even change management.
Team building. A productive approach to team building is to create cross-functional squads with a range of talents, according to McKinsey.
A core objective should be to explore analytics and AI use cases that boost RM productivity. To that end, the squad should embed business and channel management teams so that ideas are aligned with RM client services. Several firms have found that involving RMs and other domain experts in squads leads to significant improvements in data interpretation and modeling.
In many cases, assembling productive squads will require new talent. Banks will need data scientists to be responsible for building analytics software and data engineers to scope and build data pipelines and data architecture. Translators, who act as conduits between the business and technology teams, will be critical for ensuring that squads understand business needs.
Finally, squads need IT skill sets to ensure that analytics and digital solutions are compatible with core data and technology stacks, the report further explained.
Change management. Change management strategies can help encourage relationship managers to embrace analytics and convince them that new applications lead to better services and higher levels of performance, the report said. “Examples include creating teams of ‘influencers,’ running capabilitybuilding sessions, developing change narratives that generate widespread excitement, redefining roles, and aligning performance with financial or nonfinancial awards.”
(5) Institutionalise new ways of working and productivity
Analytics-driven transformation should adopt the agile approach: scale should be predicated on collaboration, team self-steering, and an iterative approach to problem-solving.
And in running agile sprints, it pays to keep business needs in sight, accepting that failure is part of the process. Two-week sprints are usually sufficient to get pilots up and running, and the aim should be to produce an MVP with every sprint, McKinsey reminded.
Wealth managers can reportedly apply these basic principles via four process disciplines: 1. Inspect and adapt. Daily check-ins will ensure that teams identify roadblocks, such as product backlogs, and maintain their focus on goals. 2. Engage end-users. Sprint reviews with end-users, stakeholders, and sponsors enable teams to gather feedback and bake in recommendations. 3. Embed a sense of unity and purpose. Teams should hold retrospectives to incorporate and apply learnings. 4. Institutionalise support infrastructure. Agile tooling (for example, Confluence,
Jira, and Zeplin) will facilitate experimentation and support remote working where and when necessary. 5. Embrace flexible learning.
This is a departure from traditional waterfall-based approaches, in which decision-making occurs at the beginning of each project.
In agile, capability building and a relentless focus on change management will be vital elements of optimising the programme. To cement the relationship between innovation and growth, leading firms also assign KPIs to application rollouts, and they reward decision-makers based on the value created.
Analytics-driven transformation should adopt the agile approach
Relationship managers spend 60 to 70 per cent of their time on non-advisory activities
