The Socio-Economic Contribution of Conventional Banks Assignment

CONVENTIONAL
BANKING

Table of Contents
TITLE..............................................................................................................................................1
CHAPTER 1: INTRODUCTION....................................................................................................1
Overview of the Research......................................................................................................1
Background of the Research...................................................................................................1
Problem statement..................................................................................................................2
Purpose of Research...............................................................................................................3
Research Aim.........................................................................................................................3
Research Objectives...............................................................................................................4
Research Question..................................................................................................................4
Research hypothesis...............................................................................................................5
CHAPTER 2: LITERATURE REVIEW.........................................................................................6
2.1 Roles of society and socio-economic factors to enhance conventional banking system in
Malaysia.................................................................................................................................6
2.2 Separate base or model regarding the conventional banking structure............................9
2.3 Impact of socio-economic factors' contribution in conventional banking growth.........11
2.4 Key elements to growth and development of conventional banking structure in Malaysia
..............................................................................................................................................14
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................15
CHAPTER 4 DATA COLLECTION AND FINDINGS...............................................................23
RESULTS.............................................................................................................................26
Discussion:...........................................................................................................................65
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS...................................................67
REFERENCES..............................................................................................................................71
APPENDIX....................................................................................................................................73

TITLE
“To analyse the socio-economic contribution of conventional banks in Malaysia.”
CHAPTER 1: INTRODUCTION
Overview of the Research
Banks and financial institutions are considered as a party or body that provides financial assistance to business, corporates,
individuals and groups to assess the requirement of business function, needs of individual or groups, providing care and safety of
deposits or savings of individuals. Conventional banking system is a common banking system followed by banking industries across
the world. Banking system of Malaysia is influenced by mainly two banking system; one is conventional banking system and second
is Islamic banking system. Traditional or conventional banking system is centralised around generating monetary reserves,
profitability and earning by spending financial resources in the form of loans, advances and bond to corporates. Revenues generated in
the form of interest which is considered as profitable factor and the analysis mainly associated with determining. Interest and profit-
oriented banking system is being widely considered in conventional banking system. Profitability is the main distinguish factor that
diversify the conventional banking system to the Islamic banking system. Mortgage loans, housing loans, card facilities, securities,
schedule payments, payment of interest and repayment of the principle are the main functions and services provided under
conventional banking system in Malaysia. Financing, banking facilities are mainly focused around getting more revenues and profit
through interest. The conventional baking system is analysed in respect of JOHAR city, Malaysia.
Background of the Research
Malaysia is one of the Asian country that retain top position in finance sector subject to provide finance assistance for Islamic
finance apart from the Middle east. The research elaborates the concept of banking. Conventional banks work as normal banks and
provides type of services as lending, depository and credit facilities. It is observed that the Islamic banking system abolish the interest
system and do not adopt the interest policy. Socio culture of banking industry in Malaysia sustain potential to those organisations and
1

corporates interested in taking loans and lending from commercial banking. These factors have positive impact subject to growth of
conventional system of banking in Malaysia. Most of the customers and community groups are willing to get low interest rates lending
and high interest rate of return subject to their investments. Banking satisfaction towards associated with increasing competitive
situations and the satisfaction due to focusing on intentions. Interest avoidance and theoretical framework of Islamic banking is the
base principle to enhance the banking structure and encourage profit and trade. Even having nil interest policy in Islamic banking
system, it is considered less profitable and less revenue generating system in comparison to conventional baking system. Socio
economic impact upon contribution was recorded increased in subject to enhance the growth of conventional baking system in
Malaysia. The potential factors and aspects associated with conventional banking structure are explained and evaluated on the basis of
social economic culture and system.
There are type of conventional banks working in Malaysia are working efficiently such as ABN banks, Bank of America,
Citibank, Standard Chartered and the Union bank of Switzerland. These banks have established their septate banking structure form
the Islamic banking system. A window system has been developed to manage the operate financial activities and transactions.
Conventional banking has been achieved a septate position subject to providing services and the products according to individual
needs, requirements and corporate requirements. It is analysed that various type of measurement tools and aspects were considered to
highlight the key emerging factors in conventional banking that assisted to create a separate base in Malaysia.
Problem statement
This research is formed to analyse the aspect and structure of conventional banking in JOHOR city in Malaysia. There are two
Major banking systems are found in Malaysia such as Islamic banking and conventional banking structure. It is observed that
conventional banks have faced lots of challenges to Islamic banking culture. Conventional banks had to go through tough
circumstances during the financial crisis. Lack of interest nature reduced the sustainability of Islamic banking that impacted the rights.
Tendency of people are shrieking towards traditional banking system in Malaysia and this was the main challenge in front of
commercial banks to enter in Malaysia. For economic, infrastructure and industry growth and development it was important to
2

introduce different commercial and non-commercial banking system to Country. The Central bank of Malaysia build up a sustainable
base with significant changes among its subsidiary banks. The challenges at initial stage faced by conventional banking industry will
be separately highlighted in this report. As per the annual statistical report of banking statistics Negara Malaysia (2016), the
contribution of assets was counted as approximately $65.6 billion with average growth rate of 18 to 20% at annual basis. It indicates
towards the Malaysian domestic culture diversified with conventional banks. The major challenge is to develop a conventional
banking structure and financial institutions in Malaysia that was completely depended on awareness of Public and other financial
institutions, public education and campaigns are required to clarify the concept of conventional and its futuristic benefits to them.
Purpose of Research
This purpose of this research project is to elaborate the conservative aspects of conventional banking system and ruin the
myths and conflicts between the traditional banking system comparative to Islamic banking system. On the basis of critical analysis
and review it is tried to analyse the impact of socio-economic factor in terms of dividing the plans and structure of business. The
importance of conventional banking system is subject to enhance the profitability and revenues in JOHOR city, Malaysia. There is
lack of clarity found in different type of research regarding the banking culture in Malaysia. Various discussions, Arguments and
matters were created in terms of diversify the nature of banking system in Malaysia but it do not provide proper Justification and
conclusive information regarding. This research is prepared to elaborate a separate concept and evaluation of conventional banking
system in Malaysian banking industry. Users will be able to correlate the traditional banking and Islamic banking system in terms of
maintaining the customer satisfaction and improving the profitability by considering the concept. Socio economic contribution is
evaluated and counted in order to improve the conventional banking structure of in Malaysia.
Research Aim
Aim is considered as cumulative or summarised statement regarding attain the research objectives and criteria. It helps to
validate the reason of acquiring the research and conducting the plan with specific structure. It is a document that defines the major
objective and purpose of assessment of research. As the above research is formed to address the mean value of customers and evaluate
3

the contribution of socio economic to emphasise the conventional banking structure in Malaysia. A clear description and analysis
formed to define the banking system considering different type of groups whether, individual groups and corporates.
Aim of this research is - “To analyse the socio-economic contribution of conventional banks in Malaysia.”
Research Objectives
A clear information, summarisation and statements that present clear vision of research or plan are considered as research
objectives. Information and details are organised in the sequential manner to justify the investigation. Variables and relevant factors
are analysed with proper direction and clear basis of the statement. The objectives are considered in terms of analysing the
performance related to deliver the required criteria in specific and significant manner.
 To identify the roles and contribution of individual, group and corporates to emerge the conventional banking system in
Malaysia.
 To examine a separate structure to understand the conventional banking.
 To analyse the performance of conventional banks after getting contribution from society
 To find out the key elements subject to emerging structure of conventional banking in Malaysia
Research Question
Research questions remain based upon the objective that clarify the clear vision and direction to meet the criteria of research.
All the research questions are elaborated in descriptive manner in literature review section. Research questions helps to frame the
research objective in predetermined and classified format to understand the key characteristics of research aim.
 What are the roles of society and socio-economic factors to enhance the conventional banking system in Malaysia?
 Is there any separate base or model regarding the conventional banking structure?
 Whether any significant impact fall upon conventional banking structure after getting contribution form socio-economic
factors?
 What are the key elements associated with development and growth of conventional banking structure in Malaysia?
4

Research hypothesis
A research based hypothetical analysis also carried out by implementing different type of hypothetical analysis such as
descriptive analysis, T-test, reliability test, probability value, r-square, result analysis and discussion. It is evaluated that the derivative
ad the variable was based upon the analysis of realistic data and segmentation test that are taken on the basis of sample-based
overview and aspects from public. To analyse the impact of socio-economic factor the analysis of index list provided by central banks
are considered in research.
5

CHAPTER 2: LITERATURE REVIEW
Literature review is a review of article, scholar paper or theoretical description given by a writer or specialist. It is considered
as a secondary source of getting information and analyse the subject in own understanding and knowledge. It is a very important part
of research that validates the academic work. Most of the literature review are found as secondary sources and reported original
experimental that appears in publications.
2.1 Roles of society and socio-economic factors to enhance conventional banking system in Malaysia
Banking industry in Malaysia influenced by both Islamic and traditional banking culture. At global level conventional banking
nature is a common banking structure assist manager for better financial control and management. Most of the consumer groups and
corporates interest and tendency is shrieking towards conventional banking due to wide options for financial growth. Different type of
financial instruments and products are offered to customers in conventional banking system. Clients can avail the offers and plans as
per their requirement. Customers prefer conventional banking due to its diversity of products and flexible loans of and of the main
aspect considered essential in terms of gross proceeds. Loans, mortgage, credit cards, short term and long-term loans credit are the
main facilities provided by banks. All the products are retaining the same nature and revenues from these products are earned in the
form of interest. Rate of interest drive as per nature of products and services. Home financing and the facilities remain more flexible
and strong in terms of providing financial help to individual and social economic project. Restrictions and guidelines are more strict
and comprehensive in terms of getting financial credit from banks and financial institutions. Revenues from lending and interest
income are prohibited at some certain limits.
Relations of stakeholders, clients and customers get increased due to conventional banking system. There were some financial
agreements between the conventional and Islamic financial institutions that played significant role in order to maintain effective and
efficient customer relations. After global financial crisis lots of financial challenges faced by conventional banks and had to struggle to
maintain the social economic value among customers, clients and stakeholders. Society put interest subject to build an effective
financial structure for economic growth and development. Government reduces the burden and legislation to encourage the household
6