Research Report: Economic Impact on Malaysian Banking Sector Growth

This report investigates the impact of economic conditions on the growth of the finance and banking sector in Malaysia, with a specific focus on Malayan Bank. The research encompasses a comprehensive introduction, problem statement, study gap, research objectives, and significance of the study. A detailed literature review explores the economic value in the banking sector, the impact of economic conditions, and factors affecting the finance and banking sector. The methodology section outlines the research framework, hypothesis, design, approach, strategy, and ethical considerations. The report further presents descriptive statistics, response rates, reliability, and correlation analyses. Findings, discussions, and conclusions are provided, along with managerial implications, limitations, and suggestions for future research. The study aims to analyze the effects of economic factors such as interest rates, inflation, and government policies on the banking sector's performance, contributing to a deeper understanding of the relationship between economic conditions and financial growth in Malaysia. The report also includes a questionnaire and data analysis to support its findings.

RESEARCH METHODS

Table of Contents
RESEARCH TITLE.........................................................................................................................4
1) INTRODUCTION.......................................................................................................................4
(1.0) Background....................................................................................................................4
(1.1) Problem statement..........................................................................................................5
Study Gap...............................................................................................................................6
(1.2) Research objectives........................................................................................................6
(1.3) Significance of Research...............................................................................................7
Rationale of the research........................................................................................................7
TASK 2 (LITERATURE REVIEW)...............................................................................................8
To determine the significance of economic value in the banking sector..............................8
To ascertain the impact of economic condition on banking sector........................................8
To identify the factor that might affect the working of finance and banking sector..............9
To assess the factors affecting working of finance and banking sector...............................10
Ascertaining the relationship between economic condition and growth..............................11
Influence of inflation and recession on financial and banking sector of Malaysia..............12
Different techniques to measure financial and economic condition of the country.............13
To evaluate relationship between the economic condition and growth of Malayan bank.. .14
TASK 3 (RESEARCH METHODOLOGY).................................................................................14
3.1 Research framework.......................................................................................................14
3.2 Research Hypothesis......................................................................................................14
RESEARCH METHODS..............................................................................................................15
3.3 Research design..............................................................................................................15
(3.3.1) Research philosophy.................................................................................................15
(3.3.2) Research Approach...................................................................................................17
(3.3.3) Research Strategy.....................................................................................................18
(3.3.4) Research choice........................................................................................................20
3.3.5 Type of investigation...................................................................................................20
(3.3.6) Time Horizons..........................................................................................................21
(3.3.7) Data collection..........................................................................................................21
(3.3.7) Data analysis techniques...........................................................................................21

3.4 Research Ethics..............................................................................................................22
3.5 Research plan..................................................................................................................22
TASK 4..........................................................................................................................................22
4.1 Introduction....................................................................................................................22
4.2 Descriptive Statistics......................................................................................................23
4.3 Response rate..................................................................................................................24
4.4 Descriptive Analysis.......................................................................................................27
4.5 Reliability Analysis........................................................................................................28
4.6 Correlation Analysis.......................................................................................................28
4.8 Discussion and findings..................................................................................................33
4.9 Conclusion......................................................................................................................34
TASK 5..........................................................................................................................................34
5.1 Introduction....................................................................................................................34
5.2 Managerial Implications.................................................................................................34
5.3 Limitations of the research.............................................................................................34
5.4 Suggestions for future research......................................................................................35
5.5 Correlation analysis........................................................................................................35
REFERENCE.................................................................................................................................36
APPENDIX 1...................................................................................................................................1
Questionnaire..........................................................................................................................1
APPENDIX 2.................................................................................................................................12

RESEARCH TITLE
“To analyse the impact of economic condition on growth of finance and banking sector of Malaysia: A case study on Malayan Bank.”
1) INTRODUCTION
(1.0) Background
Malayan bank is public sector organisation of Malaysia which provides securities on deposited fund and financial aid through
loan and advances to public globally. It is wide spread, and trust worthy entity in all over the world whose revenue is RM21.24 billion
in 2015. However, there are so many evolutions identified in its banking system that win maximum satisfaction from public and
reliability on its operations. In this regard, there is around 45000 bankers perform job across country as well internationally also
remains able to increasing in financial services through net banking, mobile banking etc. Including this, management system of
Malayan bank is quite easy and understanding that provide effective comfort ability with its facilities as well social welfare. Along
with this, it uses CSR implementations for customer dealing and enhancing market value by setting interest rates on loan facilities in
accordance to people's standard and their social lives. Therefore, in present time, this bank is providing financial services on large
scale to a million customers over the globe. In addition to this, there are very huge importance of the banking sector in the world by
which customer and society can get their financial transaction. Economic condition of the country can directly impact the growth of
finance and banking sector in the Malaysia.
In the present research study, the scholar have major aim is to analyse the impact of economic condition on the growth of
finance and banking sector of Malaysia with respect of the Malayan bank. Economic condition of the country direct affect every
sectors like finance, bank, retail, hospitality etc. If country have effective economic condition then it because easy to grow the
business enterprise. On the other hand, if within the country there is ineffective economic condition then it becomes difficult to
survive the business. In the context of banking and finance sector, economic condition of the country plays a very crucial role in its
growth and progress. If country have well condition of economy then it becomes easy to improve banking performance. On the other
hand if country's economic condition is weak then banking sector directly influence. Thus, in the present research study investigator

have used various methods of the research methodology by which they can obtain an appropriate solution of the research issue. In
addition to this, in this research study, scholar have focused on the literature review under which various themes has prepared related
to the topic. Moreover, several recommendations are justified for effective financial and banking services in wide range. Besides this,
different research methods and variables are introduced for financial development and analysing organisation's role in country's
effectiveness is introduced. The major objective of this research study is to understand the importance of economic value in the
growth and development of banking sector. With help of this study, scholar can bale to understand the various factor which affect the
banking activities ad functions in the country.
Malayan bank is a public-sector organization which is functioning in Malaysia since June 1996. Its main objective is to provide
quality banking services to its customers. Flexible assistance is provided based upon financial needs of the client. Loan assistance and
financial aiding is another core objective of Malayan Bank in Malaysia (Impact of a banking crisis, 2017).
The present research has aim to analyse the impact of economic condition on growth of finance and banking sector of Malaysia
by making a comprehensive assessment of Malayan Bank. There is a significant and direct impact of prevailing economic conditions
of the country on banking and financial sector. Thereby, the research will help in understanding various aspects of economy so that
appropriate solution can be attained to the issue specified in research aim.
(1.1) Problem statement
In the environment, economic factor is one of the component which can change very frequent basis. In this component
includes financial condition of the country, interest rate, inflation, recession etc. The major issue in this present research study is
related to changing economic condition of the country which directly affect the growth and progress of the banking and finance sector.
In addition to this, there are also several issues in the economic condition of Malaysia like regular changes in government policies for
reserving fund as well securities and setting interest rates, Issues in increasing in NPA affects revenue and profitability of Malayan
bank for further operations. Another major issue related to the Cut throat competition and potential to contribute in nation's economic
growth. Thus, it can be said that there are several issue related to the growth and progress of banking sector due to the economic

condition of the country. Due to changes in government policies as rates in CRR, SLR, repo and reverse repo rate affect interest rates
and market structure for providing banking sector. Thus, it can be said that progress and growth of the banking sector is directly
related to the economic condition of the country. Thus, in order to understand the various issue of the banking sector and impact of the
economic condition on the growth of banking, scholar has used various methods of the research methodology. As per the research it
has been founded that in the 2015 the population of the Malaysia is 31.2 and it increased in 2016 by 31.7.The rate of GDP was in 2015
was 298 and it has increased 300 in the 2016.Thus, from this data it can be said that economy of Malaysia is continuously changed
and its directly impact on the banking sector. It fiscal balance and public debt has also increased by 3.1 to 3.5 in the 2016.
Study Gap
In the present study, the major aim is to analyse the impact of economic condition on the growth of finance and banking sector in the
Malaysia. In the previous study, only impact of the economic condition on the banking sector growth has addressed while in the new
terms, scholar have used various methods of the research methodology for obtain an appropriate solution of the research problem. In
the previous study there is not accurate statistical data about the economic condition of the Malaysia. The major reason for conduct
this investigation is to analyse the impact of economic condition of the banking sector in the Malaysia.
(1.2) Research objectives
In the present study, scholar have main aim is to analyse the impact of economic condition on the growth of the finance and
banking sector of Malaysia with respect of Malayan bank. In order to attain this aim, scholar required to attain various objectives
which are as follows-
 To analyse the importance of economy in the banking sector
 To identify the factor which affect the economic condition in the Malaysia
 To evaluate relationship between economic conditions and growth of Malayan Bank

(1.3) Significance of Research
In the present study, the major aim is to analyse the impact of economic condition on the growth of finance and banking sector
in the Malaysia. In order to attain this aim, scholar have to address various objectives such as determine significance of economic
value in baking sector, identify components which affect working of finance and banking sector in the Malaysia and evaluate the
relationship between the economic condition and growth of the Malaysia. However, various issues obtained for finance and banking
services evolving credit risk, market instability, economic slowdown etc (Fiegen, 2010). In addition to this, the report is able to
explain research frame including hypothesis for further operations. In addition to this, tools for conducting research and collecting data
are understood for analysing actual position of banking system and its management critically. Along with this, collected data is
presented and determined by using statistical tools such as reliability and normative tests proceed to prepare strategy for further
operations and enhancing economic position of bank systematically. Thus, it can be said that the present research study provide detail
understanding about the various issue in the banking sector and impact of economic condition on the banking sector. This report
provides effective understanding about the significance of economic value in the banking sector. With help of this study, stakeholder
of the company can also able to identify the beneficial point from the country economy. The decision maker can also beneficial by this
investigation because they able to know that how they should take the decision by analysing the economic condition of the country.
With help of this investigation, decision maker can able to take decision about investment in the company. With help of this study,
researcher can easily analyse the relationship between the banking sector and economic condition. They can understand that how
economic condition affect the banking function and activities.
Rationale of the research
It is important that the research that is going to be conducted by the researcher holds some relevance. Every study must have the
potential to serve some specific purpose. The study aims at analysing the impact of economic condition on growth of finance and
banking sector of Malaysia. The research has helped the scholar to gather knowledge regarding the subject matter. Since, the

researcher does not hold adequate amount of knowledge regarding various economic conditions prevailing in the banking and finance
sector of Malaysia. The research will help in gathering that information.
TASK 2 (LITERATURE REVIEW)
To determine the significance of economic value in the banking sector
As per the view of Gale and et.al., (2013) in the business environment, there are various components consist with it. Each
factor plays a very crucial role in improving and growing the business enterprise. In this manner, economic factor is one of the
component which affect directly and indirectly affect business firm. Economic factor consist with various things like inflation,
recession, interest rate, pricing policies etc. Economic growth is one of the ultimate goal of any economic system. Country's economic
condition plays a very crucial role as by which every sector like hospitality, banking, travel and tourism affected. If country's
economic condition is good and effective then it directly positively affect the progress and growth of the business sector. On the other
hand if country's economic condition is ineffective then it will negatively affect the growth and progress of the business sector. In the
opinion of (Andrews and Hampel, (2015) in the context of bank, economic value plays a very crucial role because while country have
effective economic condition then bank performance can automatically improve. Financial recession and inflation can direct affect the
growth of bank. There is a huge importance of the economy in the banking sector because the growth and development of bank is
largely depends upon the country's economic condition. If the economic condition of the country is good then public can more invest
and involve in the banking services. Economic condition reflects the entire progress, inflation, recession of the country.
To ascertain the impact of economic condition on banking sector
According to Usman and Khan (2012), prevailing economic factors play vital role in growth and development of banking sector.
There is a direct relationship between the two. An increase in economy will also increase and develop banking sector of a country.
There are higher chances of large amount of Non-Performing Assets (NPA) due to deteriorating economic condition of the country. It
shows that there is less amount of cash in the hands of businesses which thereby increases the chances of defaulters from the people
who have taken loan from the bank. Further, it also becomes difficult for the bank to maintain inflow and outflow of cash within the

organization. However, in contrast to this, as per the views of Joshi and et.al. (2013), a bank tends to generate income by lending
money at a higher rate of interest from the one which is provided by it on deposits. A severe and prolonged bad economic condition
leads to high rates in bankruptcy higher NPA results in less profits to the organization. The economic condition of the country exerts
strong pressure on risk and profitability of the bank. The main element of any bank in to operate with different strategies and keep on
adapting the change that is occurring in the economy. Otherwise, the survival of bank becomes difficult in the market. It also reduces
the risk of failure in the market and also helps in increasing the profitability. Failure of bank then reduces credit availability in the
market which leads the market to less profitable then before.
According to Panneerselvam (2014), prevailing economic conditions of the country can upgrade or degrade present banking
sector in the economy. The core functions of the banks can be divided in primary and secondary. Primary functions of the bank
include, accepting deposits and granting loans. However, secondary functions of the banks are, agency and utility functions such as,
fund transfer, periodic collection and payments, collection and deposition of cheques, managing portfolios. Certain facilities are also
provided to the people in the form of locker, underwriting, drafts etc. To serve these functions properly, a bank must be able to
manage its credit and liquidity risk properly. Any change in the economic functions can reduce or increase the loan advancing power
of people in the market. Moreover, change in the power can directly impact paying off capabilities of the people who have taken loan
from the bank. However, in contrast to this, asper the views of Sufian and Habibullah (2012) a healthy economic condition in the
country helps in adequately delivering its functions to the people and attaining the profit objectives as well. It is important for the bank
to measure their risk appropriately so that the harm from the same can be reduced to minimum. Further, dynamic economy can will
not be able to affect the profitability of the bank.
To identify the factor that might affect the working of finance and banking sector
According to the view of Speight and et.al., (2016) inflation rate is one of the factor which affect the bank working and its
performance. This affect the value of currency and this can huge affect the banking sector. In addition to this, liquidity structure and
processes inflation causes instability in currencies. On the contradicting view O'Leary, (2013) stated that exchange rate across the

world also largely affect the banks all over the globe. While the rate of exchange for the currencies decrease then banking sector may
face the major problem in its working. In the opinion of Ricciardi and et,al,, (2015) stated that income of the country and its economic
level can also affect the banking sector. Income flow in a country affect banks in terms of the amount of capital. In the opinion of
Huang and et.al., (2013) laws and regulation of the country can also affect the working and performance of the bank. In every country
there are various rules, regulation, code of conduct, legislation which follow the bank in order to process its activities and functions. In
order to survive the banking function, bank have to follow all legislation, regulation and code of conduct. While government change
any policies, practices, code of conduct and legislation then it directly affects the banking process. Thus, it can be said that
governmental rules, regulation, legislation is one of the major factor which affect the working of finance and banking sector. The
income of the country and its economic level always affect the banking sector. Income flows in a country affect banks in terms of the
amount of capital they can access and customer that are ready to bank with them. In addition to this, economic policies,
macroeconomic policies can have far reaching influence on the banking sector. While in the country there may develop unfavourable
policies then the banking sector is bound to lose on the other hand while in the country there may effective macroeconomic policies
then country's bank can able to grow. Thus, from the entire discussion it can be said that there are various kinds of the components
which can affect the growth and development of banking sector. These factor includes inflation rate, economic policies, exchange
rates, law and regulation. Income of the country etc.
To assess the factors affecting working of finance and banking sector
According to Sufian and Shah Habibullah (2013), there are various internal and external factors that can directly impact working
of finance and banking sector. Some of the internal factors include, earnings and reserve of the bank that has been gathered by the
bank or any other financial institution. It helps in coping up with the working capital requirement of the entity which further assist in
its smooth functioning. Other internal factor that has direct impact is the interest rates that has been decided by the bank so as to
extend loan to the customers. However, the important external factors that affect the functioning of financial institutions and banks are
as follows;

 Income of the country and it economic level: Fluctuating income level of the country can have direct impact on the
functioning of banking sector and financial institutions. It is considered as one of the most important sector of the economy
and hence a regulation on it from the side of government is important for smooth functioning.
 Inflation rates: A high rate of inflation is the duration when the banks suffer the most. The reason is that it has significant
impact on the value of currency of the country and hence affect banking sector. Instability in the currency causes liquidity
issues. The confidence of client is affected specially the foreign investors who are liable to assess the requirement of
particular currency.
 Economic policies: There are certain economic policies that can affect the environment of the bank. Further, it also has
significant impact on growth of the bank as well. However, there are certain policies that can also promote growth in the
banks as well.
 Exchange rates in the world: Prevailing interest rates in the world can also affect the functioning of the banks. Effect of
some strong currencies such as, US Dollar, Japanese Yen, European Euro, British Pound and Canadian Dollar, have direct
impact on the currency exchange rate of all around the world which certainly affect banks functioning. A drop in these
currency increases the problems for banking sector.
 Laws and regulatory framework: Each country designs its own regulations and policies for banks and financial institutions
in order to guide, supervise and monitor their roles. It plays an important role in taking key decisions such as, interest rates,
banking services, rules for loans and even the small aspects of working hours of banking sector. A change in regulatory
framework of the country can also affect profits of bank.
However, in contrast to this, as per the views of Husna and Rahman (2012), it is important for the companies to have risk
assessment and management plan so that as and when the risks arise in the market, plan of action can be implemented on the banks
and financial institutions.

Ascertaining the relationship between economic condition and growth
According to Ariffin (2012), economic growth refers to outward shift in Production Possibility Curve (PPC) which is considered
as an alternative way to define the output being gathered from the country in the form of Gross Domestic Product (GDP). It also helps
in increasing the production of the country as well. Higher the GDP of the country, higher will be the growth. It has direct impact on
different sectors of the country as well such as, financial aspects, foreign direct investment etc. A major turn is taken by financial
institutions and banks. The relationship between the two terms, that is, economic development and economic growth is positive.
However, economic growth is a narrow concept in comparison to that of economic development. It helps in increasing the real level
output of the country by offering quality resources to the citizens of the nation. The common method of measuring the growth is with
the help of GDP. In case of economic growth, it is a inflation adjusted market value of goods and services being offered to the market.
However, in contrast to this, as per the views of Usman and Khan (2012), Banks have direct impact of economic growth and
development of the country. A significant amount of increase of decrease in demand of loan has been noticed which reduces the
profitability of the banks. Further, decrease in purchasing power of the people in Malaysia can also reduce the affect growth of
banking sector in the economy.
According to Kyzy, Thim and Choong (2012), the principal objectives of banks and financial institution functioning in Malaysia
is to promote financial and monetary stability in the market so that Malaysian economy can experience sustainable growth. A
significant role is played by banks to instigate progress and growth in financial sector of the nation. It helps in preserving core
foundation of the country and has immediate contribution towards growth and development. Inclusive and sustainable growth in this
sector can be initiated only if the policies of this sector are constantly changes as per the changing economic conditions of the world.
The performance of the bank is important to be improved otherwise it can have direct impact on the overall growth of the economy.
However, in contrast to this, as per the views of Cooray (2012), an ineffective economy can have negative influences on the outcome
of the country and its sectors. The majorly affected sector in this case is finance and it is important to have adequate amount of
policies with this regard in the bank and from the side of government as well.