Microfinance is often defined as financial services for poor and low-income clients. In practice, the term is often used more narrowly to refer to loans and other services from providers that identify themselves as "microfinance institutions" (MFIs). These institutions commonly tend to use new methods developed over the last 30 years to deliver very small loans to unsalaried borrowers, taking little or no collateral.
More broadly, microfinance refers to a movement that envisions a world in which low-income households have permanent access to a range of high quality financial services to finance their income-producing activities, build assets, stabilize consumption, and protect against risks. These services are not limited to credit, but include savings, insurance, and money transfers.
Among issues covered in this study were the respondents' financial position and attractiveness of micro0financing offered by Bank Kerjasama Rakyat (M) Berhad.
In this study, researcher will be able to know the financial position of micro-financing's recipients and attractiveness of product offered by Bank Kerjasama Rakyat. With this research, Bank Kerjasama Rakyat will be able to strategize them in competing with other financial institutions which offered the same type of services. In addition, researcher will also be able to identify the factors that make their product attractive and also to improve their product features.
BACKGROUND OF THE BANK KERJASAMA RAKYAT MALAYSIA BERHAD
Bank Kerjasama Rakyat Malaysia Berhad or Bank Rakyat was established in 1954, which the first bank that offered financial business based on Shariah and Akad principles. From the year 1973, on January of 6th, the Bank Kerjasama Rakyat Malaysia Berhad was officially changed its name to Bank Rakyat which is authorized by its bylaws and Bank Kerjasama Rakyat (M) Berhad Act 1978 (Special Provision 202) where this act stated that non-members can do financial with this Bank Rakyat.
Bank Rakyat has been officially known as full-fledged Islamic Co-operative Bank in year 2002 which governed by the Development of Financial Institutions Act (DFIA). This is where the Bank Rakyat was placed under the Ministry of Land and Co-operative Development and the Ministry of Finance since year 1989.
All companies have its own vision and one of the Bank Rakyat's visions is its concern the customers' choice and put them as the first priority by giving them the best quality services where the vision's tagline is "Bank Rakyat your choice bank". Not only that, the Bank Rakyat also offers the best products and services that other banks have but the different is by giving to the customers with lowest interests.
Where else, the Bank Rakyat's mission is to improve the economy country especially for the Bank Rakyat members by providing them the financing facilities at the affordable rate and will make sure that they are avoid from taking "riba" to its customers. All these financial are such as marketing, production, transportation, agriculture, fishing, housing and business activities that give the benefit to the members and also to promote savings.
Besides, the objective of Bank Rakyat is to ensure a satisfactory profit towards its dividend payments to the members and Bank Rakyat also will make sure that they are not charging extra rates to its members but they will give a reasonable profit rates that will not burden its members.
From the history of the Bank Rakyat, in year 1967, Bank Agong has took place Bank Kerjasama Rakyat Malaysia Berhad by giving a chances to individuals to become a members in this Bank Rakyat which is normally cooperatives companies have this opportunity to become a members.
From the impact of Bank Agong, Bank Rakyat has opened its branches to serve its customers to make them easy to do financial transaction which give resulted in changing its laws. By doing this impact, Bank Rakyat now is continuing developed to manage the customer service in better ways and theirs target is to become the most leading Islamic cooperative bank in Malaysia within five years.
In the Bank Rakyat, customers do not have to worry about the products or services deliver especially to Muslim customer because this Bank Rakyat, its follow the concept of Shariah and Akad process for Muslim and non Muslim customers. Because of these Islamic systems that Bank Rakyat does, most of the customers are trusted when doing their financial because they know that Bank Rakyat offer the lowest interest rates among others bank in Malaysia.
RESEARCH OBJECTIVES
It is important to do a research because from here we can know the objectives of the research and interpret the information in order to complete the research efficiently and effectively. Research is important because it gives us a guideline on how to solve the problems that we get and also helps the researchers to study first about the problems that arise from the information. The reason why researchers need to study before they solve the problems because they need to proof that the answers that they get is correct and can think logically.
The objectives of this research are:
To determine how effectiveness and efficiency the Micro-i (MUsK) financing
To identify the customer recognition toward the Micro-i (MUsK) financing
To determine how the approval made for the successful application in Micro-i (MUsK)
To identify the insurance payments when the customer do Micro-i (MUsK) financing
To identify the Bank Rakyat role in convincing customer to do Micro-i (MUsK) financing
RESEARCH QUESTIONS
Bank Rakyat is one of the bank that do Micro-i (MUsK) financing to its customers where its offered the businesses to the cooperatives members or individually members to expand their business with the guideline of this Bank Rakyat. One of the main types of the businesses that offered by Bank Rakyat is such wholesaler and retailers, manufacturing, services and other sectors that approved by Bank Rakyat. This research will study about the Micro-i (MUsK) financing at Bank Rakyat.
The objectives were made:
Whether the Micro-i (MUsK) financing can help the customer to do their finance effectively and efficiency or not
Whether the customers know about Micro-i (MUsK) financing in Bank Rakyat or not
Whether the approval for Micro-i (MUsK) financing is difficult to allocate or not
Whether the insurance payment offer to the customer worth it or not
What is a Bank Rakyat role on convince customer to do financing in Micro-i (MUsK)?
SIGNIFICANCE OF STUDY
To the bank
This research can be useful to Bank Rakyat in enhancing their performance or improving the Bank Rakyat product offering in achieving the organization's objectives. It will also help them to define several strategies in order to increase the percentage of product acceptance. Based on this research, Bank Rakyat will be more successful in the micro-financing industry and become strongest bank in the market.
Furthermore, Bank Rakyat should focus towards their customers' needs and wants besides concentrating the payment of the micro-financing. Moreover, from this research Bank Rakyat will get some information towards customer's level of satisfaction and the effectiveness of the strategies to promote the micro-financing. Besides, this research will serve as a good reference in future research.
To the researchers and public
The study will equip the researcher to be a person with additional knowledge in the future. Thus, this opportunity is an expose in process of learning. It also help the researcher expose with the real environment on how to implement research process hence giving a first hand experience in doing research.
Furthermore, the study can expose the researcher on how bank will provide micro-financing to the qualified customers. Researcher also will know that this product will helps customer in their business. Other than that, this is a good opportunity for the customers to express their feelings and any complain about their expectation and opinion towards Bank Rakyat's products especially micro-financing. Their willingness and honesty in giving the cooperation will be the basis for their future satisfaction.
To the University
This study also gives significant to the university. The study helps university to develop research material and reference as an education service organization. In addition, this study will help the students at university to have reference for their future research.
SCOPE OF STUDY
Among the issues covered in this study, the study of Micro-i (MUsK) Financing. This study is about customers' business profile, financial position, spending and attractiveness of product offering by Bank Rakyat. But to collect the data, there will be a few problems that will give limitation to gather or to collect accurate data.
Subject
Customer's financial position and attractiveness of product offering especially Micro-i Financing (MUsK) is the subject in this research. Customer business profile and spending also will be measures. Are they really know what is micro-financing mean and how do the scheme operate to stabilize their business.
Object
The subject in this research is the customers from Seremban area that come to the micro-financing section at the bank. The respondents are chosen based on the record of micro-financing's customers by Bank Rakyat. Some of them are not giving full commitment to this research such as not answer the entire question given.
Time Frame
The research only can be done at limited time which is at working hours only as this research needs to collect data from the customers who only come to the bank for their own business. The time frame of this research started at 9.00 a.m until 5.00 p.m from Monday to Friday. At Friday, the time frame is different which is at 9.00 a.m until 12.00 p.m. And then continue from 2.30 p.m until 5.15 p.m.
Among issues covered in this study were the financial positions of micro financing recipients and product offering by Bank Kerjasama Rakyat. These have been measured based on the customers' business profile, financial position, spending and features of product offering in Seremban, Negeri Sembilan. All the information that been gathered from all the respondents will be used to determine the objective of this study.
LIMITATION OF STUDY
Time constraints
The researcher was given a tight 4 month time to complete the final report. Within this limited time, the researcher has to analyze all the data of Bank Rakyat regarding this topic.So, the researcher needs to manage time wisely in order to finish this research on time.
Confidential of data
Bank Rakyat is very committed to provide information related to the study. However, there are some limitations where certain part of the information or secondary data is very confidential.
Respondent cooperation
Respondent cooperation always occurs in data collection of fieldwork. Inaccurate information may happen during data collection. The researcher needs to be very patient with the respondent. This is because; some of the respondents are unwilling to cooperate and commitment in answering the questionnaire. Therefore the respondents might give wrong and in accurate answer that will affect the result of finding analysis in this study. Other than that, they do not really understand certain part of questionnaire especially the likert scale question. So that, sometimes researcher needs to explain to them in order to get the answer from respondents.
Lack of information
The researcher is facing problem to get the information during research because the information is limited. Researcher also have problem in getting enough feedback from customers. This is because customers who apply micro financing are too busy with their business and does not have time to be an interviewee.
INTRODUCTION
This research will be focus on the customer acceptance through one of the islamic banking product, Micro-i Financing (MUsK). This literature will be more to the business profile, financial position and attractiveness of Micro-i Financing (MUsK). This case study will be focusing on the financial position of micro-financing's recipients and features of product offering and also the services and facility provide by the bank.
MICRO-FINANCING
"Microfinance" is often defined as financial services for poor and low-income clients. In practice, the term is often used more narrowly to refer to loans and other services from providers that identify themselves as "microfinance institutions" (MFIs). These institutions commonly tend to use new methods developed over the last 30 years to deliver very small loans to unsalaried borrowers, taking little or no collateral. These methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an implicit guarantee of ready access to future loans if present loans are repaid fully and promptly.
Micro financing are small business loans ranging from RM500 to RM50,000 for micro enterprises. Micro financing is meant for business financing only, such as for working capital and for capital expenditure. It is not a personal loan.
Micro finance is a broad term that includes deposits, loans, payment services and insurance to poor. In general this concept is understood as providing poor families with small loans to help them to engage in productive activities or expand their tiny businesses (Josily, 2006).
As stated in Ramzan (1997), Roberts and Roberts (2003), and Afrane (2003), the injection of capital into ME not only has positive impact on business turnover, but also on the monetary value of micro enterprise's inputs, raw material or machinery and employment. Ideally microfinancing would be a "win-win" situation, where the MFI operates at a profit and the poor benefit from the credit program. This, however, is not the case for most MFIs (Morduch 1999).
Ditcher (1996), Hulme and Mosley (1996), and Montgomery (1996) report that microfinance institutions do not serve the poorest who are either not given loans or drop out of the credit schemes. Karim and Osada (1998) observe that there is a steady increase in dropout rate from Grameen Bank (15 percent in 1994) and that 88 percent of the total dropouts did not graduate to the status of non-poor. Assaduzzaman (1997) finds that whereas microfinance does increase the income level of the poor, the current operations of MFIs are not very effective in improving the lives of the extreme poor.
The bulk of the loan by microfinance institutions is targeted towards women. In reality, however, the male members of the household initiate taking loans and control the funds received by the female members. Furthermore, loans taken from the bank are often used for purposes other than those the loan is sanctioned for Rahman (1999). When loans are used for non-productive purposes, the chances of default increase.
Microfinance is defined as any activity that includes the provision of financial services such ascredit, savings, and insurance to low income individuals which fall just above the nationallydefined poverty line, and poor individuals which fall below that poverty line, with the goal ofcreating social value. The creation of social value includes poverty alleviation and the broaderimpact of improving livelihood opportunities through the provision of capital for microenterprise, and insurance and savings for risk mitigation and consumption smoothing.
According to International Labor Organization (ILO), "Microfinance is an economic development approach that involves providing financial services through institutions to low income clients".
In India, Microfinance has been defined by "The National Microfinance Taskforce, 1999" as "provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards". "The poor stay poor, not because they are lazy but because they have no access to capital."
The dictionary meaning of 'finance' is management of money. The management of money denotes acquiring & using money. Micro Finance is buzzing word, used when financing for micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal toempower under-privileged class of society, women, and poor, downtrodden by natural reasons ormen made; caste, creed, religion or otherwise. The principles of Micro Finance are founded onthe philosophy of cooperation and its central values of equality, equity and mutual self-help. Atthe heart of these principles are the concept of human development and the brotherhood of manexpressed through people working together to achieve a better life for themselves and their children.
INTRODUCTION
Research methodology is the basic guideline that the data collection and analysis faces of research process. This chapter will explain all the variables to studied, data collection method, sampling technique and the theoretical framework and so as the hypothesis. Research is designed as an organized, systematic, critical, scientific inquiry or investigation into a specific problem, undertaken with the objective of finding answers or solution thereto - Uma Sekaran "Research Methods for Business", 4th Edition, 2004.
Research methodology is a way to produce the best possible results and findings. It covers the accuracy and the quality of the research findings by using appropriate questionnaires, research sampling techniques and data analysis methods in order to develop a relevant, valid and reliable research find. For this study, it will uses the application records of customers from Bank Rakyat as an excellent tools for determining the acceptance of customers towards micro-financing.
This section discusses about the procedures, style and steps to fulfill the research objective requirement. It is important for a research to select and determine the appropriate research design for providing the framework in conducting the study. The objective of this section is to describe about the process and the technique involve in this research.
DATA COLLECTION
In order to complete this research, researcher should decide how to get and where to obtain the data. It is because the main tasks of the research are to gather information, process and interpret the data. The information needed can be obtained through collecting primary or secondary sources.
Primary Data
The primary data collected through face-to-face interview with the questionnaire that is distributed to selected respondents, customers that apply micro-financing. From the questionnaires that have been given to the respondents, researcher can identify the most factors that effect the default payment from borrowers. Besides distributing questionnaires, researcher also has conducted some reference from the customer's files. The references were done in order to gain more depth and sufficient data.
Secondary Data
Additional information is gathered from the secondary data. The secondary data can be collected easily, quickly and inexpensive. There are several types of secondary data that have been used in data collection such as pamphlet that are related to the scope and perspectives of micro-financing that are available at the Bank Rakyat, which can be used to assist the researcher to complete the research. Besides that, the secondary data can be collected from journals reports and internet that give a lot of information from various sources all around the world in the most economical and fastest way.
TARGET POPULATION
SAMPLE SIZE
TIME FRAME
SAMPLING TECHNIQUES AND SELECTION OF SAMPLING UNIT
The technique used in this research is systematic sampling which is under the probability sampling. The collection of the population data is referred by the customers that have record micro-financing at Bank Rakyat. The questionnaires were given to the customers when they were visited by the staff of Bank Rakyat. They were being selected because they have default payment and interviewed using prepared questionnaires.
QUESTIONNAIRES DESIGN
According to Malhotra (2004), there are several advantages of using questionnaires. There are questionnaires are simple to administer, the data obtained are reliable because the responses are limited to the alternatives stated, use of fixed-response questions reduces the variability in the result that may be caused by differences in interviewers and coding, analysis and interpretation of data are relatively simple.
In this research, the questionnaire covered 5 sections which are from Section A to Section E. Section A focuses on demographic of respondent personal detail with 7 variables that include gender, marital status, race, age, education level, occupation, and income level.
Section B has been constructing to examine business profile of the customers. It consists of from, nature, location, period of business and the purpose of borrowing. While Section C covers about financial position which to identify the level of income of customers and the transactions by customers.
Section D covers other spending by customers. It was divided into 2 parts. One part is about commitment of borrowers and another one is about the expenses by customers on their entertainment activities. In the commitment part, it was includes the numbers of dependent and the expenses for it. While in entertainment part, it analyzes the weekend activities and expenses on that purposes. This part was used Likert scale question. By using the Likert Scale, the respondent can tell how they feel about the answer from very positive one to very negative. It is divided into 5 answer or alternatives for each question. Which is strongly agreed, agree, neither agree/disagree, disagree and also strongly disagree.
Section E explains about the product offering in micro-financing which authorized Bank Rakyat. In this section, it will analyze the perception by customers towards that product. It also will be used to improve the quality of micro-financing. And it also used Likert scale questions.
THEORETICAL FRAMEWORK
The theoretical framework elaborates the relationship among the variables, explains the theory underlying these relations and describes the nature and directions of the relationships.
A theoretical framework guides the research, determining what things will be measure, and what statistical relationship will be look for. A framework is simply the structure of the idea or concept and how it is put together. A theoretical framework, then, is an essay that interrelate the theories involved in the question.
3.7.1THE MODEL OF THEORETICAL FRAMEWORK
3.7.1.1 Independent variable
An independent variable is one that influences the dependent variable in either a positive or negative way. The variance in the dependent variable is accounted for by the dependent variable. The independent variables for this research are effective of micro financial, customer recognition, approval for success application, the insurance payment and the Bank Rakyat roles.
3.7.1.2 Dependent variable
The dependent variable is the variable is the variable of primary interest to the researcher. The researcher's goal is to understand and describe the dependent variable, or to explain its variability or predict it. The dependent variable for this research is customer profile of Micro-i (MUsK) financing.
EFFECTIVE OF MICRO FINANCIAL
CUSTOMER RECOGNITION
APPROVAL FOR SUCCESS APPLICATION
MICRO-i (MUsK) FINANCING
INSURANCE PAYMENT
BANK RAKYAT ROLES
INDEPENDENT VARIABLE DEPENDANT VARIABLE
Theoretical framework
This study is to measure the relationship between Micro-i (MUsK) financing and the acceptance of the customers who acquire this facility. The selected ratios under acceptance of customers are problems faced by citizen in Malaysia, opportunities of success of people who apply this facility and improvement of socio-economic.
DATA ANALYSIS
Once the data are collected, the information was coded and appropriate data analytic techniques are used to identify financial position of micro-financing recipients and features of product offering by Bank Rakyat. In this study, the researcher has used the data entry process named Statistical package for Social Science (SPSS). SPSS will be used to relate the data with the findings of the study to produced reliable results. Data analysis is important to get a feel for the data will give preliminary ideas of how good scales and how well the coding.
