In order to remain relevant and effective in meeting the growing financial needs of an expanding economy, DFIs need to increasingly draw funds from alternative sources, such as the capital market. Sourcing funds directly from the market would also help instil certain form of discipline on the operations of the DFIs. Allow me this opportunity to now share with you an overview on the roles and developments of DFIs in Malaysia. There are currently 14 DFIs in Malaysia. Like those found in other countries, the DFIs were established and funded by the Government to develop and promote identified strategic sectors, in line with the overall industrialisation and economic development objectives of Malaysia. The first DFI was the Malaysian Industrial Development Finance Berhad (MIDF), which was established in 1960, to provide medium to long-term financing to promote the development of private industrial enterprises. Subsequently, several major DFIs were established, including Bank Pertanian Malaysia (or the Agriculture Bank of Malaysia) to promote agricultural development, Bank Pembangunan Malaysia Berhad (or the Development Bank of Malaysia) to promote Bumiputera indigenous community development in commerce and industry, Bank Industri Malaysia Berhad (or the Industrial Bank of Malaysia) to support development in the industrial and manufacturing sectors, as well as the Export-Import Bank of Malaysia (EXIM Bank) and the Malaysia Export Credit Insurance Berhad (MECIB) to promote international trade and support export diversification and expansion, especially to the non-traditional markets.

This is critical so that the DFIs could fulfill their roles without continuously drawing resources from the government and the public sector. It is indeed heartening to note that many DFIs have been successful in balancing the challenge to fulfill developmental roles, while ensuring that their operations are financially sustainable. For instance, the  2/5  Development Bank of Japan, which is focusing on the provision of supplement long-term funding to qualified infrastructure projects, has shown favourable financial performance with a return on equity of 6.5% in 2004. Similarly, the Business Development Bank of Canada, a leading SME development bank in the country, has also recorded encouraging performance with an average return on equity of 7.1% in the past five years. The experiences of these DFIs have proven that despite the specific mandates to finance development activities, business operations of DFIs can be financially sustainable. These success stories essentially share several key factors, including a high focus on their mandates; dynamic leadership and proper accountability within the DFIs; continuous development of human resource capability; intensive use of information technology to improve efficiency; and last, but not least, the adoption of sound and prudent financial principles as well as best practices in their operations. At the same time, given their relatively limited access to funds, it is recognised that financial support from the Government is important to enable the DFIs to play their role on a sustainable basis. This, however, does not mean that DFIs should solely rely on government funding.