Development Financial Institutions
Overview of Development Financial Institutions (DFIs) in Malaysia
What are DFIs
The DFIs in Malaysia are specialised financial institutions established by the Government with specific mandate to develop and promote key sectors that are considered of strategic importance to the overall socio-economic development objectives of the country. These strategic sectors include agriculture, small and medium enterprises (SMEs), infrastructure, maritime, export-oriented sector as well as capital-intensive and high-technology industries.
Roles and Functions of DFIs
As specialised institutions, DFIs provide a range of specialised financial products and services to suit the specific needs of the targeted strategic sectors. Ancillary services in the form of consultation and advisory services are also provided by DFIs to nurture and develop the identified sectors. DFIs therefore complement the banking institutions and act as a strategic conduit to bridge the gaps in the supply of financial products and services to the identified strategic areas for the purpose of long-term economic development. The DFIs have, to a large extent, contributed to the development and growth of the targeted sectors.
Strengthening Financial Conditions and Operational Structure of DFIs
Given the significant role of DFIs in developing and promoting the identified strategic sectors of the economy, it is important for DFIs to be strong, effective and efficient in performing its mandated roles better. Initiatives taken towards achieving these objectives include strengthening the regulatory and supervisory framework, building capacity and capability, as well as enhancing operational efficiency of these institutions.
One of the significant milestones in providing a comprehensive regulatory and supervisory framework was the enactment of the Development Financial Institutions Act 2002 (DFIA) to ensure financial and operational soundness of the DFIs and that the institutions perform their mandated roles prudently, efficiently and effectively. The DFIA, which became effective on 15 February 2002, takes into consideration the unique roles, functions and objectives of each DFI as well as the relevant provisions in the existing statutes. It also aims to ensure that the DFIs’ policies and objectives are consistent with the Government’s initiatives and policy direction in developing and promoting the identified targeted sectors to support the national economic development agenda.
Placement of DFIs under Bank Negara Malaysia
With the enactment of the DFIA, selected DFIs have been placed under the purview of Bank Negara Malaysia (the Bank). As part of the regulatory and supervisory framework, the Bank monitors the activities and financial performance of these institutions to ensure that they perform their mandated roles in a prudent manner, supported by strong corporate governance and best practices. In regulating and supervising the DFIs, the Bank is cognisant of the unique characteristics and functions of the DFIs, where the relevant stakeholder ministries of the respective DFIs continue to be accorded the responsibility to provide broad policy direction on the strategic roles and targeted sectors supported by each institution.
DFIs in the Financial Landscape
DFIs will remain important and relevant with a greater complementary and developmental role in supporting the nation’s socio-economic objectives. DFIs would continue to support the needs of the strategic sectors and at the same time, the roles are expected to evolve to one that facilitate greater extension of financing to the targeted and new growth areas.
DFIs prescribed under Development Financial Institutions Act 2002
List of other DFIs (not prescribed under Development Financial Institutions Act 2002)