MME 4272

ENGINEERING MANAGEMENT
2
CASE STUDY : BANK RAKYAT
MALAYSIA BERHAD (BRMB)
NAME:
WAN ATHEERAH BINTI YAHYA
NOOR AMALINA BINTI AZLAN

MATRIC NO:
1124064
1124490

TABLE OF CONTENT

CONTENT
Executive Summary
Introduction
Literature Review
Organization Profile
Corporate Culture, Core Values
Management
Human Resource Management
Marketing Strategies
Technological Innovation and Commercialization
Branding
Financial Performance
Key Issues on the Challenges of Organization
Analysis
Findings
Conclusions and Recommendations
References
Appendices

PAGE

4. MANAGEMENT
Management is directing the actions of a group to achieve a goal on
most efficient manner. There are other management meanings such
as getting things done through people. Management also can be
defined as a process of achieving organizational goals by working
with and through people and organizational resources. Management
can be classified into one of four categories :
i.
An organizational or administrative process
ii.
A science, discipline or art
iii.
The group of people running an organization
iv.
An occupational career
4.1

: BANK RAKYAT MANAGEMENT

Bank Rakyat was established on 28 September 1954 under the

Cooperative

Ordinance

1948

(known

as

the

Cooperative

Societies Act 1993). Today, Bank Rakyat is the biggest Islamic

cooperative

bank

in

Malaysia.

Bank

Rakyat

applied

the

conventional bank system before.

On 8 May 1993, Bank Rakyat took a giant step towards becoming
a syariah cooperative bank. Bank Rakyat has introduced Islamic
banking product as four of its branches in Alor Star, Jalan Ipoh,
Kota Bharu and Sungai Besar. This change makes it the first bank
to switch course from a conventional banking system to a
Syariah compliant system (Islamic banking system). On 1993,
the bank becomes the first local bank to have a fully Islamic
baking branch in Jertih.
During 2002, Bank Rakyat has transformed the system to
Syariah based banking system. It became a full-fledge Islamic
cooperative bank. This transformation has enabled the Bank to
record encouraging profits year after year. Bank Rakyat has
introduced its first Islamic pawnshop outlet, Ar-RahnuXchange,
in Sentul, Kuala Lumpur on 2006. Bank Rakyat also offered
Tabung Haji services to customers at all Bank Rakyat branches,

ATMs and CDMs starting from year 2008. On 2011, the Bank
launched Bank Rakyat Debit Card-I which is also known as One
Retail Cash Islamic Debit Card (ORCHID Card).
Bank Rakyat has recorded a pre-tax and pre-zakat profit of RM
2.13 billion for the financial year ending 31 December 2013.
Bank Rakyat also has marked another milestone in history where
it became the third bank to offer total Islamic banking products
in Malaysia. Until now, Bank Rakyat has a total of 142 branches
offering Islamic banking facilities to its customers.
4.2

: MISSION, VISION, OBJECTIVE AND FUNCTION

Mission
To help improve the economic well-being of members by
providing financing facilities at an affordable rate for agriculture,
production, marketing, fishing, transportation, housing and
business activities deemed beneficial to members and to also
promote thrift and savings. (By Law Article 5(i))
Vision
Bank Rakyat is its members Choice Bank for all its product and
service offerings are the best compared with those provided by
other competing financial institutions. Since membership in Bank
Rakyat is very significant, there is no reason for them to look at
others.
This vision generates the tagline: Bank Rakyat Your Choice
Bank
Objective
To ensure a satisfactory profit towards meeting dividend
payments to its members while charging reasonable profit rates
that is not a burden to its members.
Function
The main function of Bank Rakyat is to provide financing and
accept deposits as well as producing satisfactory dividend
returns for betterment of its members.

4.3

: SHARIAH CONCEPTS AND BANK PRODUCTS

Bank Rakyat is an Islamic cooperative bank. It applies the Islamic

banking system. All the products, services and financial facilities
are based on Syariah concepts. It conforms to Islamic principle
which prohibits interest in all activities. Below are the products
and financing facilities concept applied by the bank :
No

Syariah Concept
Exchange Contract
Bai Inah
Bai Inah refers to a financing facility involves sale
and buyback agreement by the seller of an asset

with different price.

In this transaction, the seller sells an asset to a
buyer in deferred paymant term and subsequently

buys back the asset in cash at a lower price that the

selling price or vice versa.

The underlying assets used in Bai Inah transaction
at the Bank Rakyat are commodities acquired from

Bursa Suq As Sila (BSAS).

Bai BithamanAjil
Bai BithamanAjil (BBA) refers

sale

and

purchase transaction of an asser to be paid on later

date (deferred payment) based on a price, which

include

to

profit

margin

agreed

to

by

both

contracting parties.
Tawarruq (Murabahah Commodity transactions)
It refers to an arrangement to purchase

commodity or asset on deferred payment term by

way of Murabahah (cost plus profit) or Musawamah
(bargaining sale) from a financier and subsequently
sale the commodity /asset to a third party other
than the original seller on cash basis in order to

obtain cash.
It is also known as Murabahah commodity.

The concept is normally used for structuring deposit

products, financing, asset management and risk

management.
Istisna
It
is
a
sale

transaction

which

involves

manufacturing, production or construction of an

asset with certain specifications for an agreed upon
price and method of settlement whether in advance

or by installment or deferred in payment to a future

date between al-mustasni' (the ultimate buyer) and

al-sani' (seller).
It defers from Ijarah in that the raw material of the

subject matter are provided by the manufacturer.

Murabahah
The contract refers to a sale and purchase
agreement where the cost-plus-profit has been

made known to the client and it is agreed by both

parties.
The payment can be made in full or staggered basis.
Bai As Salam
It refers to a contract of purchasing certain asset

with certain specification.

The price shall be paid in advance during the
execution of the Salam contract while the asset will

be delivered at an agreed future date.

Savings and Deposits
Wadiah
A wadi`ah contract is a mechanism that allows an
individual to entrust his asset to another individual

for savings purposes.

The Bank is deemed as keeper or trustee for the

depositor's funds.
In general, the customers allow the Bank to use the

deposits entrusted to the Bank and the Bank is

responsible to guarantee the deposits.

The Bank at its own discretion, may give hibah to
the depositors.
Loan

Qard
It is a loan contract between two parties with the
purpose of social virtues despite of fulfilling the
8

short term financial needs of the borrower.

It is a loan contract between two parties with the
purpose of social virtues despite of fulfilling the

short term financial needs of the borrower.

Sharing
Musyarakah
Musyarakah is a profit and loss sharing contract
between two parties or more to finance a business
venture with all parties contributing in cash or any
other forms of monetary and tangible assets as the

capital.
Profit from the partnership will be shared according
to a pre-agreed ratio while losses will be borne by
each partner should be proportionate to his share in

the capital.
Mudarabah
Mudarabah is a form of special partnership with the
one

who

provides

capital

(rabbul

mal/capital

provider / investor) and the one who provides his

10

entrepreneurship (mudarib/ manager).

Any profit generated will be shared between the
Mudarib and the Rabbul Mal based on an agreed
profit sharing ratio whilst losses are to be borne
solely by the capital provider. The Mudarib will bear
the loss in term of time and effort invested in the
project.

11

Hybrid
Al IjarahThumma Al Bai (AITAB)
AITAB is a combination of two contracts, hire (ijarah)
agreement and followed by a purchase agreement

(al-bai`).
Bank will sign the ijarah contract with the customer
who is appointed as the agent to buy a vehicle
identified by the customer. Bank will rent the vehicle

to

the

customer

for

certain

period

at

predetermined rental rate.

At the end of the rental period, the customer will
sign the sale contract (al-bai`) and the ownership of
the vehicle is transferred from the bank to the

customer.
Wakalah bi Al Istithmar
AITAB is a combination of two contracts, hire (ijarah)
agreement and followed by a purchase agreement

(al-bai`).
Bank will sign the ijarah contract with the customer
who is appointed as the agent to buy a vehicle
identified by the customer. Bank will rent the vehicle

12

to

the

customer

for

certain

period

at

predetermined rental rate.

At the end of the rental period, the customer will
sign the sale contract (al-bai`) and the ownership of
the vehicle is transferred from the bank to the
customer.

Agency
Wakalah
AITAB is a combination of two contracts, hire (ijarah)
agreement and followed by a purchase agreement

(al-bai`).
Bank will sign the ijarah contract with the customer
who is appointed as the agent to buy a vehicle
identified by the customer. Bank will rent the vehicle

13

to

the

customer

for

certain

period

at

predetermined rental rate.

At the end of the rental period, the customer will
sign the sale contract (al-bai`) and the ownership of
the vehicle is transferred from the bank to the

14

customer.
Penalty & Charges
Tawidh
AITAB is a combination of two contracts, hire (ijarah)
agreement and followed by a purchase agreement

(al-bai`).
Bank will sign the ijarah contract with the customer
who is appointed as the agent to buy a vehicle
identified by the customer. Bank will rent the vehicle
to

the

customer

for

certain

period

at

predetermined rental rate.

At the end of the rental period, the customer will
sign the sale contract (al-bai`) and the ownership of
the vehicle is transferred from the bank to the

customer.
Gharamah
AITAB is a combination of two contracts, hire (ijarah)
agreement and followed by a purchase agreement

(al-bai`).
Bank will sign the ijarah contract with the customer
who is appointed as the agent to buy a vehicle
identified by the customer. Bank will rent the vehicle

15

to

the

customer

for

certain

period

at

predetermined rental rate.

At the end of the rental period, the customer will
sign the sale contract (al-bai`) and the ownership of
the vehicle is transferred from the bank to the
customer.
Others

16

Ujrah
Ujrah is the commission or fee charged for the
services rendered.
Rahn
Rahn means pledges, mortgages or pawn.
It refers to an asset pledged in order to ensure the

17

18

payment of debt.
It will be redeemed in the event the borrower default

in payment of debt.
Kafalah
It is refers to a guarantee contract between two or
more parties whereby the Kafil (guarantor) will offer
certain

type

of

guarantee

to

assume

the

responsibilities for liabilities and obligations of the

party being guaranteed on any claims arising thereof.

Jualah
Ju'alah refers to a contract of specific rewards / wages
promised to be given in return to the successful

19

completion of a specific task.

Ibra
It refers to a rebate/waiver given by Islamic Financial
Institution on partial or total claim against certain
right or debt for early settlement of financing based

20

on buy and sell contracts

The Ibra' clause shall be incorporated in the
financing legal agreement in order to eliminate

uncertainties pertaining to customers' right.

Source :http://www.bankrakyat.com.my/syariah-concept-business

6. MARKETING STRATEGY
Marketing is defined as a social and managerial process by which
individuals and groups obtain what they need and want through
creating and exchanging products and values with others. There are
several terms and concepts of marketing definition such as :
Needs, want and demands
Products, services and experiences
Value, satisfaction and quality
Exchange, transactions and relationships
Market & marketing
Marketing strategy is one of the major concepts in modern
marketing. Marketing strategy can be defined as the set of
controllable, tactical marketing tools that the firm blends to produce
the response it wants in the target market. There are many
possibilities can be collected into four groups which is known as
Four Ps (product, price, place and promotion).

Bank Rakyat would further enhance its marketing strategy and

come out with new promotion activities to cater to its growing
customer base. The Bank wanted to strengthen its market share and
become the number one Islamic financial institution in Malaysia.
Below are the marketing strategies of Bank Rakyat :
i.

Market
To widen

and

penetrate

the

market

through

effective

marketing efforts.
ii.

Product
Determination of a unique product and its simple and timely
delivery.

iii.

Customer
Providing valuable offerings through a service that is sensitive
to its customers needs.

iv.

Social Responsibilities
Increasing contribution

towards

social

development

and

members needs.
v.

Product Range
Exploring business opportunities apart from consumer banking

9. FINANCIAL PERFORMANCE
The financial performance of Bank Rakyat can be analyzed in five
year period starting from 2009 until 2013. The operating income of
the Bank is increasing from 2009 (RM3.78Billion) until 2012
(RM6.23Billion), but there is a slight decrease during 2013 with total
of RM6.07Billion. The profit before tax and zakat is increasing from
year to year with the total of RM2.13Billion profit on 2013. The profit
after tax and zakat seems to be different form year to year. From
2009 until 2011, the profit is increasing, but it is decreasing on
2012. However, the profit has increased during 2013 with the total
of RM1.91Billion profit. There is an increasing in deposits and
savings

account

from

2009

(RM38.34Billion)

until

2013

(RM65.30Billion). It is good for the Bank as it is keep increasing from

year to year.

It is also same for the gross financing and advances account. The
total value keeps on increasing from year to year without
decreasing. It increase form RM37.30Billion on year 2009 until
RM57.30Billion on 2013. The return on shareholders equity before
tax and zakat seems to be decreasing from one year to another. The
percentage keeps on decreasing from 31.88% on 2009 until 19.84%
on 2013. However, the analysis is different for cost to income
account. It has a big decrease from 2009 to 2010. However, the
percentage starts to rise from 2010 until 2012. Even it is increasing,
the percentage start to decrease in 2013 which is 25.57%. the last
analysis is on gross impaired financing ration. The ratio is
decreasing from 2009 (4.00%) until 2013 (2.22%). The details of the
financial performance for five years can be found in the Appendices.
The total assets of the bank grew from RM72,453 million in 2012 to
RM82,879 million in 2013 charting a total growth of 14% within two
years. The financing and advances was main contributor to its
assets growth from RM49,179 million in 2012 to RM57,304 ended
2013, a growth of 17% in a span of two years. On the liability side
its customers deposits grew from RM58,507 million in 2012 to
RM62,279 million for the year ended 2013 (6%). The details can be
found in the Appendices.
In terms of profit, the Bank has recorded as high as 1,904 million in
2013 and the lowest of RM1,753 during 2012. The profit is increased
8.72%. the profit before tax and zakat remained strong at RM2.13
billion, matching the 2012s performance albeit revenues decreased
4.29% to RM5.55 billion compared to RM5.80 billion recorded in
2012. Table 2.2 indicates the Banks two years profit and loss
account statement.
For the cash flow statement, the operating profit before working
capital changes seems to be different in year 2012 and 2013. For
group, the profit during 2012 is RM3,193 million and RM2,855 in
2013. For bank, the profit is RM3,180 million in 2012 and RM2,830

million in 2013. The net cash from operating activities for group is
RM1,109 million in 2013 and RM2,577 million in 2012. For bank, the
net cash operating activities in RM1,098 million in 2013 and
RM2,577 million in 2012.
The net cash used in investing activities seems to be decrease from
2012 to 2013. In group, the value is RM2,966 million in 2013 and
RM4,606 million in 2012 while for the bank, the value is RM2,958
million in 2013 and RM4,601 million in 2012. The net cash from
financing activities during 2013 for group is RM164,830 and
RM1,148 million in 2012. In bank, during 2013 the value is
RM170,995 and during 2012 the value is RM3,593 million. Overall
the Bank has been making good profit in its retail banking business
for the past two years. The details can be found in the Appendices.

REFERENCES
Ahmad K. &Kazmi A. (2011), Case Study 5 - Bank Rakyat Malaysia : Vision
Remains while Mission is Revisited, IIUm Journal of Case Studies in
Management, vol. 2, no.1, pp. 41-48
Analysis of Bank Rakyat IS, Chapter 2

Bank Rakyat (2014), Annual Report 2013, [Online],

Available :http://www.bankrakyat.com.my/2009-2013 [13 Aug 2014]
Bernama, Bank Rakyat Opens 123th Branch In ShahAlam, [Online],
Available :http://bernama.com/finance/news.php?id=473298 [11 Aug
2014]