and efficiently. bank negara malaysia was appointed as the single regulatory and supervisory body for dfis under the act. in carrying out the regulatory and supervisory function, the central bank's focus is primarily to promote the development of sound and robust dfis capable of performing their mandated roles effectively. seven dfis are currently placed under the purview of the act. recognising the unique characteristics of each dfi, regulations and policies have largely been tailored - made to suit the different roles and functions of each dfi with the view of facilitating and strengthening their operations. in general, the dfis are required to ensure that their operations and activities are in line with their mandated roles, underpinned by good corporate governance and best practices. they are required t o operate with transparency, especially with regard to information disclosure on their corporate performance, in order to enhance credibility and to harness greater confidence from the public that they serve as well as from the government. strategies formulated have also been focussed on enhancing the clarity in the roles and functions of the dfis, with a view of minimising the overlapping of functions and increasing dfis'effectiveness in serving the targeted sectors. this has led to a number of initiatives to realign and enhance the strategic focus through the restructuring of selected dfis. one is the merger of the exim bank and mecib to enhance their synergy in export promotion. the 4 / 5 other important initiative is the rationalisation of bank pembangunan and bank industri, which will result in the establishment of an sme bank. the sme bank, a specialised agency dedicated to the promotion of sme development, will commence operations in october 2005 and is envisaged to better serve the needs of smes through the provision of a comprehensive range of financial and non - financial services. in particular, the sme bank will focus on nurturing the smes and promoting entrepreneural development, through the provision of financial and business advisory services, including financial management, business diagnosis and marketing support. recognising the importance of human resource development as part of the capacity and capability enhancement strategy, several initiatives have also been undertaken to enhance the skills of dfis, particulary in the provision of advisory services and micro financing. in collaboration with the japan international cooperation agency, bank negara malaysia is currently embarking on a project to enhance the capabilities of dfis in providing advisory services to the smes.

basis, the commercially - driven and profit - maximising banking institutions would often tend to take a short - term view and consider solely the private benefit of a project, at the expense of the potential long - term social benefit that could be derived from financing a particular project. this has, therefore, created a gap in the market place whereby certain segments of the economy have been underserved by the banking system. these include development projects which involve high potential risk and long gestation period, but yet have significant long - term benefits to the overall economic development of a country. similarly, there are also some sectors or groups of businesses which, due to their business characteristics and lack of track record, limited credit history and inadequate collateral, do not have adequate access to financing from the banking system. these are clearly instances of market failure, and the establishment of the dfis is indeed an attempt to rectify this shortcoming. in this regard, in achieving national policies for economic and social development, the dfis are established as a strategic conduit to bridge the gaps in the supply of financial services, by channelling the resources and funds in the financial system to areas and sectors that are deemed as strategic for long - term economic development purposes. in essence, the dfis are complementing the banking institutions in meeting the financing requirements of the 1 / 5 economy, particularly in supporting the economic and social development of a nation. the establishment of dfis is part of the national development plan itself. as policy - based financial institutions, the dfis have roles and mandates which are linked closely to the country's national development objectives. this is evidenced from the establishment of dfis with specific purposes to promote development of identified sectors, ranging from industrial and agriculture sectors to areas such as export promotion, infrastructure development as well as the small and medium enterprises ( smes ). it is notable that the roles of dfis have evolved in the course of a country's economic development and transformation. this is important in ensuring that the dfis remain relevant to support the changing financing needs of the economy. in some instances, the dfis have widened and diversified their scope of activities, to cater to the financial needs of new growth areas, such as information and communication technology ( ict ), and biotechnology. many of them have expanded their financial products to include providing short - term working capital loans, equity participation and investment banking. while operating with the widened scope of activities, it is