Therefore, financial institutions will need to deepen their understanding of these new growth industries, and build capacity to evaluate and manage the associated and related risks. Third, with the increasing adoption of e-commerce applications by SMEs such as internet and mobile banking, financial institutions can also encourage the deployment of technological capabilities to the SME’s business operations. This can include working with SMEs to provide end-to-end supply chain management solutions and the expansion into regional production networks. Such support for the growth of SMEs can bring substantial benefits to financial institutions as SMEs evolve into larger corporations. Role of the government While the economy is powered by private initiatives, Governments have a critical role in providing an enabling environment for private enterprises to thrive. In most economies which have a successful SME sector, the Government has had a major role in coordinating the support and in strengthening the capacity of SMEs and providing an enabling environment for SMEs to thrive. In Malaysia, a comprehensive approach has been adopted by the Government. In 2004, the National SME Development Council (NSDC) was established by the Government to formulate broad policies and strategies aimed at creating an enabling environment for the comprehensive development of SMEs across all sectors. The Council, Chaired by the Prime Minister is the highest policy making body for SME development in Malaysia and brings together more than 15 ministries and 60 agencies under a coordinated national strategy.

In spite of the island-wide CIT system introduced by the Central Bank and LankaClear, some banks prefer to send physical cheques through courier services to Colombo from outstation areas, where LankaClear regional offices operate. We are not certain yet whether bank customers get the T+1 facility for which the system was intended. 4  BIS Review 13/2008  Although the main purpose of the CIT system is to clear outstation cheque transactions, it is noted that the full benefits of this technology are not passed on to customers by way of speedy cheque clearing due to reluctance by some banks to upgrade their cheque imaging technologies partly because of the cost of acquiring new machines or for reasons known only to banks themselves. What is clear is that sophisticated and modern IT development has not been customer centric, aiming at reducing their transaction costs or enhancing service. The situation has improved after much persuasion by the Central Bank, but not through initiatives taken by banks. 8. Staying ahead  8.1 The banking sector is being driven by globalization, consolidation and convergence across the world with the pressure focused on achieving increased shareholder value through measurable investments in technology, cost reduction and performance management. Customers today require easily accessible services operating on a global platform, while investors strive for optimizing and maximizing returns. Successful banking institutions stay ahead and set the trends by adapting to market shifts, being proactive, keeping up with customer demands, and implementing change.