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Cooperative Industry Overview and Prospects

Co-operative in Malaysia regulated by the Co-operative Societies Act 1993 and the Malaysia Co-operative Societies Commission Act 2007, under the supervision of the Ministry of Domestic Trade, Co-operative and Consumerism (MDTCC).

According to the data provided by the Co-operative Commission of Malaysia (also referred to as “SKM”), co-operative banking retail assets have been growing above overall retail market average at 12% CAGR (Compound Annual Growth Rate) as compared to 9.2% CAGR growth on traditional retail banking assets in Malaysia, 2008 – 2014 as in Figure 1.

Motivated by the capability of the co-operatives and the restoration of public confidence in investing in co-operatives, as well as intention of the Malaysia Government to promote the growth of co-operative banks via the Malaysia Central Bank (also referred to as “BNM”) Financial Sector Blue Print 2011 – 2020, SKM together with the BNM target to create 4co-operative banks by 2020. To-date, there are two co-operatives have obtained the stamp of approval to operate as Co-operative Banks; namely Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat) and Koperasi Bank Persatuan Malaysia Berhad4.

Capitalizing on the opportunity that BNM had frozen the issuance of the standard banking license, however, there still are opportunity and room to pursue the Co-operative Bank status.

SNAPSHOT OF KOJADI BERHAD AS A CREDIT CO-OPERATIVE

KOJADIBerhad (KOJADI), as a co-operative society was founded in the year 1981 and operates on co-operative principles and spirit of “One for All and All for One” with main objectives in providing the education loan to eligible students to pursue higher education at higher learning institutions. The idea of established KOJADI was mooted in the 1970s when many aspiring and qualified students could not afford to further their studies due to the limited number of local universities coupled with the Malaysia quota system practiced by local universities, making the entry into Malaysian local universities beyond the reach of many people. Against such of backdrop, the community initiated a co-operative campaign to form KOJADI to pool the financial resources among its community to implement “Education Loan Scheme” to financially needy and qualified students who were otherwise turned away by local institutions to pursue higher education in overseas, thereby creating more opportunities for higher education.

Beginning primarily as a premium education loan provider, KOJADI has progressively diversified its business by adding business loans to its portfolio since the year 2012. KOJADI has been a model of stability and prudential management among co-operatives, and it was ranked 20th among the top 100 Best Co-operative Societies in Malaysia in the year 2016 and was placed 62nd in the year 2015 by SKM.KOJADI has managed to grow its assets from RM500,000 in the year 1981 to RM320 million in 2017 with an average of dividend payout rate of 4.5% to its members for the past ten years. The past five year’s financial performance as per figure 2.

RATIONALE FOR CHANGE

Decades later, education financing has become increasingly competitive and challenging due to socio-economic changes and competitive from the National Higher Education Fund under the Malaysia National Higher Education Act 1997 which shares the same objectives as KOJADI. To keep abreast with such changes in times and needs of its community and to ensure the sustainability and value added to members’/shareholders’ investment, KOJADI is going through a very critical and crucial moment; that is, to chart its future direction. It is also an opportune time to transform its business model.

In addition to the anticipated the growth in terms of volumes and returns, KOJADI has planned to pursue the unique path of being the transformation to a co-operative bank.

MARKET SEGMENTATION, TARGET AND POSITIONING‚Äč

Considering the level of maturity of the market, banking asset penetration likely to increase further but at a slower pace. Co-operative banking is a viable value proposition, and its share of retail banking assets is growing from 15% to 19%. KOJADI has to well define its strategy of market segmentation, target market, and its positioning.

MARKET SEGMENTATION

Geographic

Demographic

Behavioural

Psychographic

Urban

Youth

-Savings accounts/credit card for students

-Education loan

-Simple banking app with basic tool for saving plan

-eWallet at University ecosystem

Mass

- Lower level of education

-desire simple savings and insurance products

Always time constrained

-need credit but turn down by financial institutions

-underserve market

 

 

 

Rural

-leverage on the service kiosk with strategic partner

- partner with other co-operatives with wide distribution to reach and access co-operative base member as distribution channel

Entrepreneurs

-SME & Micro financing

- Women entrepreneur loan

-Overdraft facility

-SME financial advice/product branding

- SME bancassurance

   Micro

-low level of formal employment/education

-variable monthly income

-prefers soft loans and grants from government

-proximity is paramount

 

 

Mobile banking app

 

Families

-Savings for children’s education

-fixed rate deposit accounts

-personal loans

-Housing/property loans

-retirement savings

 

 

 

Co-operative Society

-financing

 

 

 

 

 

 

 

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