1. OPERATIONS AND TECHNOLOGY MANAGEMENT (BJMP 5023) MASTER IN BUSINESS ADMINISTRATION GROUP ASSIGNMENT GREEN BANKING OPERATIONS AT BANK ISLAM PRESENTED BY GROUP 7: NAJHAN BIN UMAR819437 NUR AIEDAH BINTI SABRI819439 MOHD AL-NAIM BIN ABDULLAH817205 MUHAMMAD SYAFIQ BIN SM ABDUL WAHID819436 NORAZIMAH BINTI MOHAMAD TAHIR819385 OPERATIONS AND TECHNOLOGY MANAGEMENT (BJMP 5023) MASTER IN BUSINESS ADMINISTRATION GROUP ASSIGNMENT GREEN BANKING OPERATIONS AT BANK ISLAM PRESENTED BY GROUP 7: NAJHAN BIN UMAR819437 NUR AIEDAH BINTI SABRI819439 MOHD AL-NAIM BIN ABDULLAH817205 MUHAMMAD SYAFIQ BIN SM ABDUL WAHID819436 NORAZIMAH BINTI MOHAMAD TAHIR819385

2. Introduction Green Banking is mainly about the practices and guidelines that position the banks into sustainability in economic, environment as well as social dimensions. The main objectives of implementing green banking is to increase the efficiency and effectiveness of the banking processes as much as possible. The end result should also provide zero or the least impact on the environment.

3. Introduction Environmentally, the effect of bank implementing green practices might seem to be too little, compared to any other sectors. However, the effort of the banking entities when combined will snowball and give significant outcome to the environment. The efforts are not limited to switching off the light during lunch hour, but also developing more sustainable products such as mobile banking, and paperless transactions.

4. Introduction The most famous current products that has been implemented in Malaysia is the online banking and mobile banking solutions. In our case, we have decided to discuss in the efforts to improve green banking initiatives at Bank Islam.

5. Company Background Bank Islam first opened its door in July 1983 with the enactment of the Islamic Banking Act 1983. Bank Islam’s initial authorized capital was RM500 million with paid-up capital of RM79.9 million. Bank Islam was listed on the Main Board of the Kuala Lumpur Stock Exchange (now renamed Bursa Malaysia) in 1992 Since Bank Islam was established in 1983 as the nation’s first Islamic bank, to date, the Bank has a network of 145 branches and more than 1000 self service terminals nationwide. To meet the diversity of the public’s financial needs, Bank Islam offers more than 70 Shariah based banking products and services which cater to Muslims and non-Muslims. Such as product offered by corporate banking, consumer banking, commercial banking, treasury etc. To maintain a good achievement and sustain growth, Bank Islam has decided to improve their services toward a green banking such as offer services for internet banking, mobile banking and express online application.

6. Bank Islam is established in 1983, it is well known as Malaysia’s maiden Shariah-based institution. Since its inception, it has emerged as the iconic symbol of Islamic banking in Malaysia. Not known by many but it is an undeniable fact that Bank Islam has been diligently practicing green banking. The bank vision to be “A Global Leader in Islamic Banking” illustrates the Bank’s status as the flag bearer of the country’s financial services industry. Define the industry Analysis  Industry

7. Green banking (environment-friendly banking, ethical banking or sustainable banking) can be defined in a number of ways, in a broader perspective; it is the environment-friendly banking practices that promote their customers to reduce the carbon footprint through their banking activities. Green Bank functions like a normal bank along with considering the social and environmental factors for the protection of the natural resources. According to RBI (IDRBT, 2013), green banking is to make internal bank processes, physical infrastructure and Information Technology effective towards environment by reducing its negative impact on the environment to the minimum level.

8. Banks Islam is focusing on the environmental protection with the purpose of fulfilling the dual role. The first role is to work towards ethically and socially responsible banking and second as an important role of their corporate social responsibility. Bank Islam properly manipulated the importance of triple bottom line in their day to day functioning and so its main motive of profit has now shifted towards three Ps. And this theme has worked as a drive towards ‘Green Banking’ concept. Living up to its pioneering spirit, Bank Islam has continued to provide innovative and enhanced products and services which later on resulted in a growing number of customers seeing Islamic banking and green banking as a true alternative to conventional banking. This growing list of clienteles in addition to truly groundbreaking and quality banking solutions have been recognized by the global industry which is reflected by the Bank’s position as one of the top banks in the country.

9. Tools used to describe the industry: The info analyzed mainly includes literature review from secondary data. The secondary data sources include reports of the respective banks and other relative information published on the banks and other internet sites. The study also includes the primary data collection through personal visit to the bank and in-depth interviews of the branch managers.

10. Key competitors: CIMB MAYBANK

11. Current Competitors CIMB - Group is a universal bank headquartered in Kuala Lumpur, operating in high growth economies in ASEAN. CIMB Group is an indigenous ASEAN investment bank, the largest Asia Pacific (ex-Japan) based investment bank and one of the world's largest Islamic banks. CIMB has a wide retail branch network with 1,080 branches across the region. Malayan Banking Berhad (trading as Maybank) is a Malaysian universal bank, with key operating “home markets” of Malaysia, Singapore and Indonesia. It is Malaysia's largest bank by market capitalization and total assets and one of the largest banks in Southeast Asia.  Competitors’ profile

12.  Competitors’ competitive offering CIMB - Consumer Sales and Distribution which oversees the sales network including branches and mobile sales teams. Retail Financial Services which is responsible for most of the retail banking as well as enterprise banking products. Commercial Banking which is responsible for SME and mid-size companies. Group Cards and Personal Financing which is responsible for credit cards businesses and personal loans portfolio.

13. Maybank - Maybank has an international network of over 2,400 branches and offices in 20 countries, employing 45,000 employees. In Malaysia, Maybank operates consumer, business and corporate banking as well as private banking services, through a network of 393 branch offices and more than 2,500 automated teller machines around the country. The company operates 22 branches in Singapore providing a full range of banking and financial products and services. Maybank, through Maybank Philippines Incorporated, has 79 branches in the Philippines. Maybank also has a banking presence in all of the other Southeast Asian markets.

14.  Competitors’ strategies CIMB - Group Strategy and Strategic Investments consists of Group Strategy, Private Equity and Strategic Investments. The division is responsible for undertaking the bank's initiatives in important regional markets. CIMB strived to achieve profits while at the same time fulfilling the needs of its client. Its strategy revolved around the concept of green banking. It can be seen through the approach of maintaining low amount of deal through the counter in order to minimize the use of papers and inks in order to apply the concept of green banking. CIMB automated teller machines can also be found in malls and supermarket as well as popular convenient stores such as seven eleven and such. CIMB also placed ATMs on petrol stations in order to satisfy the needs of its clients.

15. Maybank - Maybank issued the ATM and debit card for accessing the balance of the savings account. Maybank aim to maintain their top ranking, in terms of overall market share, across tier core retail financing products including mortgages, automobile financing, credit cards, unit trust financing, and individual deposits. They intend to reinforce their leadership position in touch points and distribution network as a key community destination and focal point. Their Customer Value Proposition centers on convenience and serving the needs of the community and they are committed to the values of a One-Stop-Shop, Needs Based Selling and World Class Services. They aim to become the leading ASEAN wholesale bank which will involve enhancing their corporate relationship model. Strategic initiatives will include: Improving domestic and regional market position for corporate and non-retail deposits; Building a regional investment bank; increasing contributions to revenue from non-domestic markets and increasing the fee-to-income ratio contribution. They also aim to expand to the Middle East, China and India.

16.  Competitors’ future strategies and goals CIMB - Enable top up service for all telecommunication company to simplify the process of reloading prepaid credit while at the same time support the concept of green banking. Create alluring discounts for the application of credit cards in order to attract people into spending without the need of carrying cash money.  Maybank - Maybank seeks to be the domestic insurance champion and an emerging regional player by 2017 through the growth of its clients’ life, general insurance and takaful business, carried under the Etiqa brand. To achieve organic growth in life/family business, they are aggressively growing the Assets Under Management (AUM) of life/family funds through product innovation. The strategy of Maybank’s asset management subsidiary is to build a leading asset management brand by providing strong investment management support for Etiqa funds, wholesale funds and institutional mandates as well as by leveraging on Maybank’s extensive distribution network.

17. Firm’s Current Operations and Technology Management Situations STRENGTHSWEAKNESSES  Strong profit and banking performance  Strong funding from shareholders – Tabung Haji  Among the largest Islamic Bank in Malaysia and region  Top Bank in retail financing portfolio  Absence of policy  Lack of management commitment on the green banking  Unstable culture and perception of business environment on green banking  Unattractive product features  Unstable current facilities in promoting the green banking  To incur high operational costs

18. Firm’s Current Operations and Technology Management Situations OPPORTUNITIESTHREATS  Government tax incentive for those companies that adopting green business operations  Promote healthier environment which may enhance bank’s image  Internet penetration to rural areas  Stiff competition from other banks.  Lack of public awareness  Reputational risk, as the failure of implementing the policy may give bad image

19. The advantages and disadvantages of green banking operation AdvantagesDisadvantages  Enhance the firm’s image and brand locally and globally  May generate more profit and increase shareholder’s wealth since customer may prefer those companies with green policy  Save the environment by using less paper and reducing the carbon released  Incentive from government of adopting green policy  May incur higher capital and operational costs  May reduce the profit and indirectly dividend to shareholders  Shareholders may dispute or offend on the implementation of the concept  Internal reluctant due need to change the culture and work process  Lack of public awareness may not give competitive advantage

20. Firm’s current operation the Bank has a network of 145 branches and more than 1000 self-service terminals nationwide. To meet the diversity of the public’s financial needs, Bank Islam offers more than 70 Shariah based banking products and services which cater to Muslims and non-Muslims. To maintain a good achievement and sustain growth, Bank Islam has decided to improve their services toward a green banking such as offer services for internet banking, mobile banking and express online application. This will help Bank Islam to improve the asset quality of the banks. In pursuit of greater innovation, Bank Islam rolled out the Transact at Palm or TAP Mobile Banking-i (TAP-i) service in 2010, making it the first bank in Malaysia to offer mobile banking services without internet requirement

21. Issues in Green banking operations Customer’s account must active and required customer to active use the internet banking For mobile banking, Customer is required to buy new device of TAP-I to enjoy the latest version of this service Customer is required to visit any Bank Islam branch within 30 days from the date of the online application to open the account for further process Internet penetration is only 67% in Malaysia, difficulties for customers in rural areas The reliability and sustainability of ATM, CDM and online banking High capital and operating costs Short of talent and experienced staff in green banking facilities Lack of promotional and marketing activities on green banking Absence of green banking policy Lack of management commitment and oversight function Lack of public awareness on green banking and green environment

22. Strategy Analysis Based on the above mentioned issues, there are areas that need to be further improvised in implementing the green banking operations: Products features and facilities provided to customers Policy for green banking operations Human resource management Management oversight function Marketing and promotional activities Maintenance and enhancement of those facilities Campaign or corporate social responsibility program for public Reporting and communication of current status and future plan Continuous monitoring

23. Strategy Analysis Continuous improvement in business strategy for green banking operations need to be performed first in order to ensure adequate and effective strategies being developed and adopted  Research of the product to find out if the product will be well accepted locally and meet the green banking objectives.  Research new territories, market and target group.  Assess the size of the market  Work with giant company and related partners  Cost Value Analysis.  Adjust the media mix

24. Recommendation  Development of green banking policy for internal process and banking operations  Improvement of the facilities and product  Improvement in the management commitment and tone of the organization  Improvement in the promotional and marketing the green banking  Improvement in the value offered to customers and operational costs incurred  Improvement in the communication and monitoring  Improvement in the human resource management

25. Recommendation Development of green banking policy for internal process and banking operations activities and operations and green banking are the actions established through the policies and procedures to ensure that necessary actions are taken to address and mitigate risks to the achievement of the Bank's objectives to be performed at all levels of the Bank, at various stages within business processes, and over the technology environment. Management need to implements and reinforces the expectations at the various levels of the organization.

26. Recommendation Improvement of the facilities and product should consider the design of the online products as well as features of facilities proper maintenance for current facilities such as ATM, CDM and Online banking need to be executed increase the online application instead of currently just focusing on opening of savings account having e-statement for all related customer’s statement

27. Recommendation Improvement in the management commitment and tone of the organization demonstrates a commitment to green banking operations board of directors and management demonstrates and exercises oversight of the development and performance of green banking policy and culture Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in the pursuit of green banking objectives; The organization demonstrates a commitment to attract, develop, and retain competent individuals in alignment with objectives. The organization holds individuals accountable for their assigned responsibilities in the pursuit of objectives.

28. Recommendation Improvement in the promotional and marketing the green banking develop motto that give indication where Bank Islam is adopting green banking actively involve in exhibition event engage with the sales executive and telemarketing channel Advertising the facilities and features through television and radio, social media and internet such as youtube, imoney.com and ringgit plus Promotion through Website of Bank Islam

29. Recommendation Improvement in the value offered to customers and operational costs incurred product’s features online facilities customer services complaint handling Costs analysis Cashback and higher deposit rate for online transaction

30. Recommendation Improvement in the communication and monitoring Management obtains or generates and uses relevant and quality information from both internal and external sources information is disseminated throughout the organisation green banking policy and initiative taken can be included in the annual report assesses the quality of the system's performance over time On-going evaluations and monitoring occurs in the course of operations Findings are evaluated against criteria established by management and the board of directors, and deficiencies are communicated to management and the board of directors as appropriate

31. Recommendation Improvement in the human resource management requires competence and skilled of the entity's people process for attracting, developing, and retaining competent individuals Comprehensive and effective training program green banking need to be part of Key Performance Indictor (KPI) performance measures, incentives, and rewards need to be part of human resource improvement to drive accountability for performance and the level of attention and direction provided by the Board of Directors and management

32. Conclusions Implementing sustainable practices in banking operations has proven to gives benefits to the bank. The operational costs, waste management cost and many transaction cost could be reduced to minimal level.

33. Conclusions Green banking practices provide huge impacts to the environment. The benefits are not only limited to the bank sector itself, but also all of its clients and the environment. In brief, the Bank Islam has done a good job so far in adopting green banking.