Case Study: SME Banking at Alliance Bank, Malaysia
Fullerton Financial Holdings acquired a minority stake in March 2005

Alliance Bank's Small and Medium Enterprise (SME) business was already a major contributor to profits when Fullerton Financial Holdings invested in the bank, but cost-effective growth was constrained by a lack of rigour in its processes. To remain competitive, the bank had to service a high volume of SME businesses in a low-cost manner. Mr Fung Kai Jin, Group Head, SME Banking said, "After seeing what FFH had accomplished with Bank Danamon, we were eager to assess the effectiveness of the business model in Malaysia."

Fullerton Financial Holdings was able to support a two-month pilot at Alliance Bank by bringing rich experience in all aspects of the business – from back office to sales, credit and underwriting processes – and working with the bank to instil disciplined risk management. Equally important, the team employed a commercial, aggressive, high-energy approach that did not impede daily workflow. Mr Jin said, "Fullerton Financial Holdings's experience was critical to the speed of transformation. We could trust them to keep us from making bad decisions in one area that would create problems in another area."

Dedicated products and processes

The Malaysian regulator is a strong supporter of the SME segment and yet few banks match Alliance Bank's commitment to operating a customer-centric business. It designed its new suite of products to meet the needs of SMEs and the bank purposely located more branches close to SME centres of business. By early 2008, the bank will have doubled the number of SME service centres, underlining its commitment to this segment.

Rapid transformation

Rapid transformation was important as the bank had to continue to service its portfolio of SME customers as well as sustain employee morale. Mr Jin said, "Fullerton Financial Holdings gave us the support we needed to produce a rigorous set of standard operating procedures and intensive training so that our staff can now easily identify target customers from a pool of loan applicants." The staff now perform critical tasks in a consistent way, and due to the thoroughness of procedures, the bank can hire less experienced staff to grow the business in a cost-effective manner.

Enduring results

Just a few months after the four-month roll-out, customer acquisition had tripled, and with a more diversified portfolio and fewer loans in high risk areas, the bank's loan portfolio had become more stable.