Promoting a Progressive and Inclusive Financial System

iTEKAD: An Ecosystem Approach in Scaling Up Social Finance

‘We will adopt a nurturing approach to support financial institutions’ explorations to better integrate social finance within
their businesses.’ – Financial Sector Blueprint 2022–26

Mainstreaming social finance is a continuous journey

One of the visions under the Financial Sector Blueprint 2022–26 is for financial institutions to increasingly align its
intermediation activities with positive social impact – aligned with the ESG principles. In 2023, we saw greater efforts by
various stakeholders to integrate social finance into the financial system. Notable social finance programmes include
iTEKAD, myWakaf and myZakat.

iTEKAD emerged as a key social finance initiative by the financial sector. At its inception in 2020, there were only 57
participants, but now, it has assisted over 6,000 participants in 17 business sub-sectors across the country. iTEKAD
programmes by financial institutions have supported low-income microentrepreneurs in generating sustainable
earnings (Diagram 1).

‘… the three elements of a successful social finance system can be summarised as follows
– it should be inclusive, impactful and integrated.’
Governor Abdul Rasheed Ghaffour at Majlis Jalinan Kerjasama iTEKAD, 22 August 2023

Prime Minister YAB Dato’ Seri Anwar Ibrahim and Governor Abdul
Rasheed Ghaffour on stage with iTEKAD financial institutions
and implementation partners during Majlis Jalinan Kerjasama
iTEKAD.

Prime Minister YAB Dato’ Seri Anwar Ibrahim, Deputy Finance

Minister I YB Datuk Seri Ahmad Maslan and Governor Abdul
Rasheed Ghaffour visited kiosks of iTEKAD microentrepreneurs.

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Diagram 1: Elements of a Successful Social Finance System and its Application in iTEKAD

Inclusive

Benefits everyone Nurturing target segment

in the society
iTEKAD benefits low-income
microentrepreneurs
nationwide, especially those
new to the market.
Cohesive network of providers

Alignment of objectives of financial

institutions and implementation
partners to leverage their individual iTEKAD
strengths and harness their features
collective synergies. embed these
key elements
Integrated
Impactful
Support and
expertise of all Emphasis on
stakeholders improving
livelihood and
elevating
socioeconomic
status

Empowering for impact

Beyond financial support (seed capital and

microfinancing), iTEKAD also provides
structured training, mentoring and impact
monitoring. This creates paradigm shift,
sustainable business outcome and improved
livelihood.
Source: Bank Negara Malaysia

Creating an enabling ecosystem to grow iTEKAD

Availability of a blended funding structure, regulatory support, wider awareness on iTEKAD, enable better market
access and alignment of objectives by stakeholders’ interest form the critical building blocks to successfully scale up
iTEKAD (Diagram 2). These building blocks address the needs of microentrepreneurs in their business journey.

iTEKAD is currently offered by 131 financial institutions with over 70 implementation partners. 2 This wide network of
partners allows each iTEKAD programme to grow within the ecosystem. For example, low-income microentrepreneurs
may have risk profiles that limit them from getting financing under traditional credit scoring method. Working with
implementation partners allows financial institutions to consider alternative data when assessing eligibility of
participants 3 into iTEKAD programmes.

Bank Negara Malaysia (BNM) advocates an ecosystem that is flexible for financial institutions to choose implementation
partners and run iTEKAD programmes efficiently. They can support iTEKAD’s growth by offering different value
propositions based on each partner’s capacity and strength. This includes fintech solutions as a tool to track business
transactions, end-to-end assistance in setting up pre-franchise businesses and leveraging waqf land for agricultural
activities. These partnerships are also prelude towards social finance collaborations in other sectors including
supporting housing solutions, healthcare and education to those who need it.
1
Data as at February 2024.
2
Implementation partners refer to any organisations and/or institutions that work with financial institutions to roll out iTEKAD programmes. These include, but
not limited to State Islamic Religious Councils (SIRCs), fintech solution providers and NGOs.
3
Potential participants of iTEKAD programmes are low-income individuals who aspire to become microenterpreneurs and/or already have existing
businesses. According to SME Corp. Malaysia, microenterprises have sales turnover of less than RM300,000 or less than 5 full-time employees. To date,
iTEKAD participants are selected based on recommendation by SIRCs and members/communities of the implementation partners.

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 Promoting a Progressive and Inclusive Financial System

Diagram 2: Building Blocks Supporting the iTEKAD Ecosystem

Steer ecosystem
Funding initiatives e.g. Regulatory development, facilitate
Government’s matching support coordination and undertake
Government grants and BNM’s Micro BNM regulatory intervention to
& BNM Enterprises Facility. Funding availability Innovative address market failures.
ecosystem
Strategies on mobilisation enhancements Facilitate fatwa rulings and
Diversified funding State Islamic outreach to asnaf to allow
of commercial and social sources for to induce growth
Financial Religious innovative use of zakat/waqf.
institutions finance funds. programme Councils
sustainability
Enable key policies,
Active financial contribution encourage interlinkages and
Public, corporates towards social finance Government & syncing entrepreneurship
& private programmes. local authorities development programmes.
philanthropists
Alignment Attract greater participation
of interest of financial institutions and
Various wider network of
Integrate social finance into Alignment of Awareness stakeholders implementation partners.
Financial core business offerings. expectations
institutions and actions Accurate Address inclusive target
towards articulation segment i.e. low income
Invest in long-term uplifting the of programme to microentrepreneurs from all
socioeconomic impact of target segment gain traction Beneficiaries walks of life, regardless of
Funders target segment. faith or ethnicities.
Enhance competencies of Market access
target segment e.g. Intervention via financial
Implementation digitalisation and technical Viable access to institutions, anchor
partners certification. digital and companies, government
physical agencies and marketplace
Commit to improve their marketplaces to Various
stakeholders providers e.g. online
socioeconomic status, with enable long-term shopping platforms and
intention of giving back to impact
Beneficiaries business space owners.
the society.

Source: Bank Negara Malaysia

Support from all stakeholders remain key

Stakeholders’ involvement within the building blocks of the iTEKAD ecosystem is crucial to further scale up iTEKAD.
While financial institutions and implementation partners coordinate iTEKAD at programme-level, equally important is the
support from others in the ecosystem. These include government agencies, State Islamic Religous Councils (SIRCs),
corporates, non-governmental organisations (NGOs), fintech providers, social enterprises and foundations.

These parties have played a key role in making it easier and cheaper to onboard more B40 or asnaf microentrepreneurs
into iTEKAD. For example, SIRCs, government agencies and other implementation partners work together with financial
institutions to identify potential participants. Financial institutions also work with fintech providers, NGOs and corporates
to come out with new and innovative solutions and effectively channel social finance funds.

Moving forward, financial institutions together with relevant stakeholders can further support the ecosystem in scaling
up the programmes. This could be done through various approaches including the following:

i. Embed financial education and protection

iTEKAD can also provide training on financial education. This builds good financial management skills and habits
among the participants. Takaful or insurance coverage can also provide the protection needs of iTEKAD participants.

ii. Promote greater integration within the ecosystem

Developing a shared infrastructure to link up diverse platforms in the ecosystem can reduce barriers to introducing
new iTEKAD programmes and facilitate expansion of the existing ones. This will also improve process flow and
information sharing through:
• a data repository to identify potential iTEKAD participants;
• effective crowdsourcing of funds based on programme needs; and
• transparent and timely updates of programme impact.

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iii. Explore potential use of capital market instruments

Issuance of sukuk and social impact bonds can support larger funding needs of iTEKAD and other social finance
initiatives. This may include tapping on funds outside of Malaysia.

iv. Instil the mindset of giving back to the community

Successful microentrepreneurs who benefitted from iTEKAD can continue the virtuous cycle by helping others.
These include creating job opportunities and inspiring other participants through sharing business know-hows.
BNM, financial institutions and implementation partners can facilitate this exchange by featuring these successful
microentrepreneurs at various platforms (Diagram 3).

Aligned with the ecosystem approach, active contributions from various stakeholders are key to enhance these four
dimensions and scale up social finance.

Diagram 3: Reinforcing the Virtuous Cycle of Social Finance

aspires to uplift the unserved and underserved segment

1 From unbankable to bankable 2 From zakat recipients to zakat payers

Unbankable Bankable Zakat recipients Zakat payers

3 From business mentees to business mentors

Business mentees Business mentors

… as per sharing by iTEKAD participants

‘With the seed capital received from iTEKAD, I managed to upgrade my kitchen appliances such as
stoves and freezers to meet customers’ growing demands. After a year, my income flow has
improved. My business has expanded to four stall locations and I am able to hire more employees.’
A frozen food producer in Melaka

‘Through the support of iTEKAD, we have expanded from a home business to a physical store
along with multiple booths in malls around Klang Valley. Along with this growth, we are collabo-
rating with organisations advocating mental health and women empowerment.’
A chocolate producer in Selangor

‘I am grateful to receive the grant when joining iTEKAD. This seed capital helps to support asnaf
microentrepreneurs like me to grow from being a zakat recipient to a zakat payer.’

A food & beverage operator in Johor

Source: Bank Negara Malaysia, financial institutions and Bank Negara Malaysia’s video ‘Three (3) Things You Should Know About iTEKAD’, which can be viewed
at https://youtu.be/Rq1369wQjgQ

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