A market research of bank loans in banking industry in Malaysia:
A case study of Maybank
A Research Proposal Prepared by
Ng Chung Yean 0126WLWL1013
Master of Business Administration Cardiff Metropolitan University
16 April 2014
Table of Contents
List of Tables
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List of Figures
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Chapter 1 Introduction
1.1 Background 1.2 Purpose and Problem Statement 1.3 Significance of Research 1.4 Research Questions 1.5 Research Objectives 1.6 Research Framework
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5 6 6 6 7 7
Chapter 2 Literature Review
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Chapter 3 Research Methodology
3.1 Research Methods 3.2 Sampling and Sample Size 3.3 Data Collection 3.4 Ethical Considerations 3.5 Expected Outcomes 3.6 Timeline and Gantt Chart
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10 11 11 12 12 13
References
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Appendix Questionnaire
16 i List of Table TABLE TITLE PAGE NO.
Table 1
Research plan
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ii
List of Figures FIGURE TITLE PAGE NO.
Figure 1
Theoretical framework
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Chapter 1 Introduction This chapter basically covers the introduction of company, research significant, problem statement, research questions and research objectives.
1.1 Background Malayan Banking Berhad (Maybank, 2012) is the largest banking and financial services group in Malaysia, founded in 1960. Maybank became the first bank in Malaysia, that computerizes its savings and current account services in October 1978, set up an ATM in Kuala Lumpur in September 1981, offer Autophone for making customers the convenience of conducting their banking transactions and payment of selected utility bills through a computerized telephone service in September 1992, offer internet Banking service through its online financial portal in June 2000. Maybank also is the first bank in Malaysia that offer Malaysia Bancassurance services and become the No.1 in Bancassurance business. Maybank is the leading banking group in South East Asia for over three and a half decades. Maybank expand internationally with a network of over 1750 branch offices in 14 countries and major financial centre in London, New York, Hong Kong and Singapore, it has correspondent banking relationships with 700 foreign banks throughout the world. Maybank also has the largest asset, amount more than USD100 billion, and about USD18.6 billion of market capitalization, USD9.1 billion of total equity and USD1.2 billion of total net profit. Maybank offers a range of services from commercial banking, investment banking, financial services, insurance, trustee services, factoring, asset management, stock broking, property and unit trust fund management to venture capital. Maybank set up vision of to be a regional financial services leader and mission of humanizing financial services from the heart of ASEAN, objectives of No.1 retail financial services provider in Malaysia by 2015, leading ASEAN wholesale bank by expand to Middle East, China and India, domestic insurance champion and emerging regional player, truly regional organization with 40% of pre-tax profit from international operation by 2015, become the largest Islamic bank in ASEAN, look for growth opportunities and maximize value of shareholder. Maybank operates with teamwork, integrity, growth, relationship building, excellence and efficiency as their core values (Maybank, 2012). 6
1.2 Purpose and Problem Statement Loan is called the convention that one of the parties (lender) transfers to another (debtor) the ownership of things (cash or securities normally) and the debtor has the obligation to repay the things of the same quality and quantity of paying or not interest on the loan. The loan taken by the debtor to cover needs that cannot meet with current revenue. Moreover, the loan is a form of capital by companies for the expansion of their business. As loans are becoming growingly more accessible via the Internet and expert loan companies are more willing to consider providing loans for people with a bad credit history, now is a good time to borrow money for home improvement or that new car. But, with the wide selection of loans available, how does debtor know the right type of loan that they need? Maybank is the largest commercial bank, be it in terms of asset, net profit, shareholder equity (or book value) and number of employees (Peek, 2005). Hence, the aim of the study is to gain a better understanding overview of bank loan industry and to analyse to what extent the factors that contributed to Maybank in the financial business.
1.3 Significance of Research To determine what is the main factors that affect Maybanks loan products toward of customers who applied. This research will benefit to customer or company who attempt to apply loans to build their business or property. Moreover, Maybank can provide better market analysis to show the currently market feasibility. A lot of companies apply loan to build or extend their business in order to achieve growth for their investment. From the students point of view, this can allow students to know what the importance of bank loans is and create their consciousness to build their business or personal use.
1.4 Research Objectives i. To study the bank loan products that offered from Maybank in Malaysia. ii. To analyse the financial profitability of Maybank loans business in Malaysia. iii. To examine the impact of financial risk in bank loans of Maybank in Malaysia. iv. To explore how market factors affect bank loans industry of Maybank in Malaysia.
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1.5 Research Questions i. What are the bank loan products that offered from Maybank in Malaysia? ii. What is the financial profitability of Maybank in term of bank loans in Malaysia? iii. How does financial risk impact the Maybank loans business in Malaysia? iv. How does the market factor affect bank loans industry of Maybank in Malaysia?
1.6 Research Framework
Figure 1 Theoretical Framework
Financial risk of Maybank loans business Market factors of Maybank loans business in banking industry Financial profitability of Maybank loans business Bank loan products offered from Maybank Market research of Maybank loans business in Malaysia 8
Chapter 2 Literature Review This chapter discussed about the critical review of the literature related to this study. First of all, the factors that mentioned in theoretical framework will be discussed about the concept and overview of bank loan in different region view. Base lending rate is yet to be used by other researchers as one of the determinant of savings. BLR represents the lowest interest rate charged for bank loans. Changes in the rate will have a direct relationship with credit available to customers. Increase in the rate means higher cost of borrowing to customers and also serves as an indicator whether they can easily obtain financing for their needs as well as their capacity to pay back the loans. When people are refrained from extensive borrowings due to high BLR, they are induced to save in anticipation of future consumption needs that cannot be financed through credit. Therefore, BLR is expected to have a positive relationship with savings. This variable also can be used as proxy for financial liberalisation. In most cases, central bank is responsible in determining the BLR of banks in the country. One of the indicators for liberalisation is that banks are free to choose their rates. Hence, frequent changes in lending rates reflect the openness of the country. Based on this conjecture, we hypothesise that as a country becomes liberal, savings rate will rise in tandem with this development (Sudin and Wan, 2008). Another new variable introduced in this study is the KLCI. This variable represents the future growth in the economy and the confidence level of people towards the economy of the country. If people are optimistic about the economic growth, instead of putting their money in the bank accounts, they will buy stocks hoping that they will benefit from higher dividend rates and capital gains. Therefore, it is expected that this variable will have an inverse relationship with loan rates (Sudin and Wan, 2008). In the case of BLR, any increase in this variable should result in an increase in the amount of bank deposits. This is true for conventional but not for Islamic bank customers. One feasible explanation is that they believe Islamic bank will uphold Islamic teachings and continue its effort in providing services and giving out loans to its customers even during poor economic and financial conditions. In the case of current account, a negative relationship is found with the current account of conventional banks. A possible reason that can be forwarded is that most of these customers have credit facilities, and thus they have to pay more for their loans (Sudin and Wan, 2008). 9
According to Alkassim (2005), liquidity plays an essential role in determining the profitability of bank. By taking the net loans to total asset as a liquidity proxy, this ratio provides a measure of income source. Loans are the largest component of interest bearing assets of a bank and are expected to have a positive effect on bank's profitability (Vong and Hoi, 2009). Collateral is a widespread feature found in many loan contracts (Christian, 2007). According to Elsas and Krahnen (2002), the argument for the use of collateral is to create a strong relationship to the lender, which will become especially beneficial for a borrower in the case of financial distress. Under prudent loan management, a loan is free from default risk when it is fully collateralised. In this sense, the interest income is acquired by the lender without potential losses, since there is no uncertainty about loan recovery when the borrower fails to pay up. This is an extreme side of a financing contract, where the borrower bears the risk of bankruptcy, whereas the lender takes no risk at all. The lender is a risk avoider since he rejects taking risks with an expectation to gain in granting the loan. He desires to make money from the loan but refuses to face uncertainties of non-repayment.
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Chapter 3 Research Methodology There are two types of research methodology, known as qualitative and quantitative research. Qualitative research is defined as a mixture of rational serendipitous and intuitive in which the personal experiences of the organizational and researchers are often key events to be understood and analysed as data (Maanen, 1979). Meanwhile, quantitative research is to be defined as explaining phenomena by collecting numerical data that are analysed using mathematical based methods (Aliaga and Gunderson, 2002). The designed methods of this research are exploratory and analytical in nature. Exploratory research is to gain better understanding to the bank loan concept while analytical research is to perform financial analysis for existing companies and project their future performance. This study aims to study the bank loan industry and also to investigate to what extent did bank loan contributed to the Maybank. Since the research project makes extensive use of quantitative research, therefore it can be conclude that the qualitative research does a minor require in this part. This chapter covers the research method, sampling design, data collection, ethical considerations, expected outcomes and timeline.
3.1 Research Methods The research method use in this study is quantitative research design. Quantitative research method usually for finalize the result. Besides it is also can proving and disproving a hypothesis persuasively. In order to generate the result, having a complete data is crucial. Data can categorize into two forms which are primary and secondary data. Primary data can be obtained by questionnaire. While secondary data can be collected from books, census data, journals and article. In this study, both methods are conducted to collect the relevant information that is important to this study (Shuttleworth, 2008). The research approach can be dividing into different type for carry out a research. One of the command types of scientific research is correlation research studies. These studies are used for relationship between variables. It is important to have a good understanding of related research and cooperation between variables. Therefore, apply correlation into this study is because need to investigate the relationship between the factors and Maybank towards bank loan products. In others words which mean this study was to find out whether 11
the factors do really have relationship in influencing Maybank business growth towards bank loan products.
3.2 Sampling and Sample Size Sampling design can be defined as measuring a small group of peoples, the sample who are to provide the researcher data to draw a general statement about the whole thing. Basically is select a number of units for a study in such as have been form, then the data process can be soon started. Before start to process, there are two types of data can be collect by the researcher which is primary data and secondary data. Respondents are asked to complete a survey through paper questionnaire. There were 10 questions have been asked in the questionnaire. For factors that influencing consumer to apply bank loan will be allocated at section B, which contain questions that affect consumer attitude toward applying bank loan. Five Likert Scale was mainly used in conduct the survey. This is because Five Likert Scale allowed respondents to speak out their strength of agreement toward each of the statements regarding to the respondent own feeling (Wuensch, 2005). Respondents are required to indicate their degree of agreement by choosing only one of 5 point ordinal scale (5 = Strongly Agree; 4 = Agree; 3=Neutral; 2 = Disagree; 1 = Strongly Disagree).
3.3 Data Collection There are several types of research instruments to obtain the data such as secondary data, surveys and observation. To create questionnaire for the respondent researcher will use paper survey to conduct the survey. This is because the paper survey can speed up their survey, efficient, accurate, moreover can distribute into large quantity. The questionnaire was separated into two sections which are Section A and Section B. Section A is demographic which profile of respondents, including were 5 close ended questions. Section B contained 5 questions that covered the hypothesis. To do an online survey, first have to create survey questions in Google doc than send to all respondents through social network such as Facebook and E-mail. Despite can collect back 20 sets of online survey but it take 10 days to collect it, this is because some of the respondents will ignore it although they have seen it and they only will do the online survey 12
when they are free. Besides that, many of respondents might feel troublesome when see all survey question so refuse to do it. In addition, some of respondents will feel that is not important and waste time to fill in the survey question. In the end distributing survey questionnaire would use as sampling method. Through distribute survey questionnaire, its save a lot of time to collect all the data and efficient. Thus, the questionnaire was distributed in Maybank branches around Klang Valley. The purpose would be let respondents clearly understand the purpose of the research and will tell them all of the information and data will keep confidentially. This is important because some of the respondents might scare their personal details will disclose to the third party might make respondents refuse to do the survey questionnaire.
3.4 Ethical Considerations Throughout entire of this questionnaire survey, respondents will be informed consent before answering any question from the survey. The reason of this is to assure that the data collected is genuine for the research of this study. The information that collected from respondents is protected in privacy and confidentiality. Respondents are also having the right of refusal from accept the questionnaire survey. This is to ensure that the information being collected does not affected from any unwilling circumstances. The entire process of collecting data form questionnaire is done by professionalism and impartiality. The research of this study will be completed with quantitative and qualitative research data with exceptionally from plagiarism. . 3.5 Expected Outcomes The research of this study will be completed in 12 weeks. The outcome of this research is to investigate and understand the factors that affect customer preferences from applying bank loan with Maybank. The issues that will be study in this research is supported by questionnaire survey. This is to ensure that the information collected is sufficient enough to prove the factors are related.
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3.6 Timeline and Gantt chart April May June No. Task Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4
1 Writing of proposal
2 Proposal approval
3 Collection of data
4 Data analysis
5 Draft report
6 Supervisor's feedback
7 Revise report
8 Final report submission
Table 1 Research plan
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References Alkassim, F.A. (2005), "The profitability of Islamic and conventional banking in the GCC countries: a comparative study", Journal of Review of Islamic Economics, Vol. 13 No.1, pp.5- 30. Aliaga, M. and Gunderson, B., 2002. Interactive Statistics. 2 nd ed. New Jersey: Prentice Hall. Asubel, L. M., 1991. The failure of competition in the credit card market. American Economic Review, 31 (1), pp.50-81. Christian, K. (2007), "Do good or bad borrowers pledge more collateral?", International Journal of Managerial Finance, Vol. 3 No.2, pp.132-63. Elsas, R., Krahnen, J.P. (2002), "Collateral, relationship lending and financial distress: an empirical study on financial contracting", University of Frankfurt. Maanen, J. V., 1979. Reclaiming qualitative methods for organizational research. Administrative Science Quarterly, [e-journal] 24 (4), Available through: < http://connection.ebscohost.com/c/articles/3980549/reclaiming-qualitative-methods- organizational-research-preface> [Accessed 16 April 2014]. Maybank, 2012. Online annual report 2012. [online] Available at: < http://maybank.listedcompany.com/misc/maybank_online_annual_report2012/home.html> [Accessed 16 April 2014]. Pek, C. G., 2005. Intellectual capital performance of commercial banks in Malaysia. Journal of Intellectual Capital, [e-journal] 6 (3). Available through: < http://www.emeraldinsight.com/journals.htm?articleid=1513192> [Accessed 16 April 2014]. Shuttleworth, M., 2008. Qualitative research design. [online] Available at: < https://explorable.com/qualitative-research-design> [Accessed 16 April 2014]. Sudin Haron and Wan Nursofiza Wan Azmi, 2008. Determinants of Islamic and conventional deposits in the Malaysian banking system. Managerial Finance. Vol 34 No.9 pp.618-643. Vong, P.I.A., Hoi, S.C. (2009), "Determinants of bank profitability in Macao", Macau Monetary Research Bulletin, No.12, pp.93-113. 15
Wuensch, K.L. (2005), What is a Likert Scale? and How Do You Pronounce 'Likert?', East Carolina University, Greenville.
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Section A: Respondent Background Please tick () the relevant boxes and fill in for the line. 1. Gender: Male Female
2. Age: under 18 years old 18 to 25 years old 26 to 30 years old
31 to 39 years old above 40 years old
3. Monthly income: Less than RM2500 RM2501 RM5000 RM 5001 RM10000 RM10001 and above
4. Do you own a loan with Maybank? Yes No
5. What did you apply loan for? Personal Education Business expansion Others____ 17
Section B: Please indicate your degree of agreement that influence your attitude on applying of bank loan from Maybank by ticking () on the relevant boxes to show your degree of agreement.
Strongly Disagree Disagree Neutral Agree Strongly Agree 1 Maybank has the best reputation in banking industry
2 Maybank offered loan that more suitable to my personal/business use
3 I have saving/current account or credit card with Maybank
4 Property/housing authorised Maybank as their preferred bank
5 Loyal customer of Maybank and has more privilege than any other banks.
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