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2014 Sustainability Report

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  • Sustainability Report 2014

    SME B

    AN

    K Sustainability R

    eport 2014

    Small Medium Enterprise Development Bank Malaysia Berhad (49572-H)Menara SME Bank, Jalan Sultan Ismail, 50250 Kuala Lumpur, MalaysiaTel +603 2615 2020 Fax +603 2698 1748 Call Centre 1800 88 3131www.smebank.com.my

  • VISIONA full-fledged specialised financial institution; an international benchmark for nurturing SME excellence.

    MISSIONTo develop SMEs to be the nations engine of growth, in line with the Governments economic agenda.

    CORE VALUES (PaCT)PASSIONPassion in all actions derive fulfillment while ensuring success

    COMMITMENTCommitment turns a promise into reality

    TRUSTFaith is meaningless without upholding trust & integrity

    Cover rationale: Our commitment to raising the quality of life for all is illustrated on the cover design. Our sustainability endeavours are aimed at creating vibrant citizens in a nation that is ever advancing. Lively and optimistic, the cover reaffirms our hope for a truly sustainable future.

  • WORKPLA

    CE

    ENVIRONMEN

    T

    COMMUNITY

    MARKET

    PLA

    CE

    CONTENTS2 ABOUTTHISREPORT

    4 SMEBANKSJOURNEYOFGROWTH

    6 HIGHLIGHTS2014

    7 CORPORATEVISITS

    8 AMESSAGEFROMTHECHAIRMAN

    12 GROUPMANAGINGDIRECTORSSTATEMENT

    16 BOARDOFDIRECTORS

    18 SENIORMANAGEMENT

    20 SHARIAHCOMMITEEMEMBERS

    22 ENGAGINGWITHOURSTAKEHOLDERS

    24 SMESASTHEENGINEOFGROWTH

    28 CORPORATEGOVERNANCE

    32 SUSTAINABILITYINTHEWORKPLACE

    54 SUSTAINABILITYINTHEMARKETPLACE

    72 SUSTAINABILITYINTHECOMMUNITY

    82 SUSTAINABILITYINTHEENVIRONMENT

    www.smebank.com.my

    1-800-88-3 131

    facebook.com/smebank

    This annual report is available on the web at

    http://www.smebank.com.my/publication/2014-annual-report/

  • 2 2014SUSTAINABILITYREPORT

    ABOUT THIS REPORT

    This is ourfirst sustainability reportmakingus thefirstdevelopment bank to disclose our annual sustainabilityprogress in linewith theGlobalReporting Initiative (GRI)Guidelines.Wearecommittedtooperatingsustainablyandefficiently. This includes assessing the impact of ourbusiness and making improvements when required.Protecting people and the environment, promoting localeconomicdevelopmentandpartneringwithcommunitiesarepartofbusinessoperations.Weintegratesustainabilitythroughoutourproductslifecyclesfromconcepttodelivery.

    Together with the annual report, which highlights thefinancialaspectsofourbusiness,thetworeportsprovideaclear,comprehensiveandtransparentrepresentationofourperformance in managing the economic, social andenvironmentalaspectsofoperations.

    This report follows theGRIguidelines,an internationallyrecognisedstandardforsustainabilityreporting.Wehavealso considered several other local and internationalguidelines that are relevant to our business. We havestructured this report according to the Bursa MalaysiaCorporate Social Responsibility (CSR) Guidelines, whichdedicates separate sections to Workplace, Marketplace,Environment and Community. We have also consideredinputfromstakeholdersincludingtheGRIandthejudgingpanelsofvariousCSRawards.

    Inproducingthisreport,wehavecollatedinformationonourCRpractices.Wehaveexaminedissuesaffectingourstakeholders both direct and indirect includingemployees,shareholders,thesurroundingcommunityand

    thepublicatlarge.Thisreportisstructuredinamannerwhichhelpsreadersunderstandourapproachtosustainingoureconomic,socialandenvironmentalresponsibilities.Wehavepresentedourdatainthemostaccuratemannerpossible.

    Thereportaimstobeinclusiveandaddressallmaterialissues our stakeholders may have. We have alsoendeavouredtoincreasetheleveloftransparencyandtheobjectivityofthisreport,usingquantitativeindicatorsforaccuracywhereverpossible.

    In2015,weaimtoproduceasustainabilityreportin-linewith theGRIG4guidelines for2015.Wewill conductadetailed stakeholder and materiality study to identifyareasthatarematerialtoourstakeholdersandus.Thisinformationwillincludebusinessareasthatsignificantlyinfluence our business and can potentially affectstakeholders.Thisstakeholderandmaterialitystudy isscheduled to commence in 2015. The results will bedisclosedinournextsustainabilityreport.

  • SCOPE OF REPORT

    Reporting period1Januaryto31December2014unlessspecified.

    Reporting CycleAnnually

    CoverageSmallMediumEnterpriseDevelopmentBankMalaysiaBerhad(SMEBank):ReferencestoSMEBank,theCompany,theOrganisation,theBankandwerefertoSmallMediumEnterpriseDevelopmentBankMalaysiaBerhad.

    REFERENCE AND GUIDELINES

    Principal Guidelines

    GRISustainabilityReportingFramework

    Additional Guidelines

    BursaMalaysiasCorporateSocialResponsibility(CSR)Framework

    ACCAMalaysiaSustainableReportingGuidelinesforMalaysianCompanies

    ISO26000:GuidanceonSocialResponsibility

  • SME BANKS JOURNEY OF GROWTH

    4 2014SUSTAINABILITYREPORT

    Self sustaining &Global Standard

    BankPerusahaanKecildanSederhanaMalaysiaBerhadorSMEBankwasestablishedasasubsidiaryofBankPembangunan dan Infrastruktur Malaysia Berhad inOctober2005. TheBankbecamea separateentity in2008tofurtherstrengthenitsmissiontodevelopSMEstobethenationsengineofgrowthwhichisinlinewiththeGovernmentseconomicagenda.

    In 2012, theBankhas takena significant decision tochangeitsconventionalbankingplatformtobecomeafullyfledgedShariahcompliantDFI.TheBankchangedits name and logo to Small Medium Enterprise

    DevelopmentBankMalaysiaBerhadin2013toreflectitsdevelopmentalroleinnurturingSMEs.

    TheSMEsectorplaysanimportantroleindrivingtheeconomy.Uptothispoint,SMEBankhashadnumeroussuccessesinvariousindustries.TheBankhadnurturedseveralentrepreneursfromthebeginninguntilsomehavealsoachievedinternationalsuccess.However,thelistgoesonbutwhatkeepsustickingisnotthelistofsuccessesthathasbeenbuiltbutwhatwearecurrentlybuildingforthefuture.

    Year

    2015

    2014

    2013

    2012

    2011

    2010

    INCORPORATING SUSTAINABILITY INTO BUSINESS MOVING TOWARDS A SELF SUSTAINING & GLOBAL STANDARD BANK

    Five-year Transformation Key Milestones

    Restructuring & Transformation

    Inclusiveness & Sustainable Growth

    Inclusiveness & Sustainable Growth

    Key functions re-alignment Service delivery enhancement Robust compliance framework Integrated IT infrastructure Human capital development Structural reform - balance sheet strengthening Self sustaining and value creation business model

    Leading Business Partners for SMEs Global referral for other DFIs

    Expansion and market outreach Well balanced and far reaching developmental role

    Inclusiveness & Sustainable Growth Towards Self Sustaining & Global Standards

    Initiatives

    Self sustaining &Global Standard

  • 5

    Sustainability has been a key driver since theCompanys formation. Over the years, we haveimproved our performance in many areas.We created a solid foundation on which we cancontinue to build a sustainable business.Weaggressivelypursueothergoals that touchallareasofbusinessincludingouremployeeshealthandsafety,environmentalfootprintandcommunityengagement.Reachingthesegoalsensuresthatwefulfilourcommitmentsandsurpasstheexpectationsofallkeystakeholders.

    In2014,we identifiedfourkeysustainability focusareas.Theyrepresentbothriskstobemanagedandsignificant opportunities. These focus areas arealigned with the delivery of our businesstransformation while also being responsive tostakeholders.Overthecomingmonths,theBankwillfocusonimprovingtheseareas.

    SME Banks Four Key Sustainability Focus Areas

    SME Bank Stakeholder Engagement Model

    Sustainability at SME Bank Moving Forward

    Our sustainability roadmap begins with activeengagementwithourstakeholderstounderstandtheirpriorities.Thisyear,weproducedourfirstsustainabilityreport to illustrate our commitment to superiorgovernanceandtransparency.Italsoservesasageneraloverviewofoursocialperformanceandenvironmentalstewardshipforemployees,surroundingcommunities,supplychainpartners,industrypeersandauthorities.In recent years, we have included stakeholders invariouscorporateeventsandengagementsessionstounderstandtheirperspectivesmoreclearly.

    We hope to conduct amateriality study to ascertainstakeholderpriorityareasandmatchthemagainsttheBanks businessgoals. Thiswill help to set a strongfoundationforoursustainabilitystrategy.

    Understandingtheareaswhichmatterthemosttoourstakeholdershelpsusfocusondeliveringexceptionalperformancewhichwillresultinlong-termmeaningfulstakeholderrelationships.

    Sustainability Reporting Stakeholders Inclusivity

    ActiveEngagementwithStakeholders

    Materiality Study Formalising a Sustainability Strategy

    IdentifyingStakeholderNeedsandAligningThemwithSMEBanksBusiness

    Addressing Stakeholders Needs Measuring Stakeholders Satisfaction

    DeliveringStakeholdersExpectations

    Preserving the Environment Promoting Environmental Awareness

    SMEBank'sKey

    SustainabilityFocusAreas

    People First

    Diversity and Inclusivity Training and Development Rewarding Achievements Health and Safety in the Workplace Nurturing Our Employees Welfare

    Environmental Protection

    Preserving the Environment Promoting Environmental Awareness

    Integrity in the Marketplace

    Delivering Service Excellence Prioritising Customers Growing the SME Industry

    Community Development

    Reaching out to the Community Nation-building

  • 6 2014SUSTAINABILITYREPORT

    HIGHLIGHTS 2014

    1,570 approvals for

    RM2.90BILLION of financing from

    January to December 2014

    More than

    3000participated in the

    ENGAGEMENT SESSIONS

    Entrepreneur Premises Programme (EPP)

    88.8% recorded occupancy rate

    An average of 55TRAINING HOURScosting RM3,900 per employee in 2014

    Customer satisfaction rate of

    93.3%

    GREEN BUILDING CONCEPTadopted for our newly renovated office building

    Impeccable health

    and safety record with

    ZERO injuries and

    ZERO fatalities

    from 2012 to 2014

    184 clients achieved upward migration under the Specific Intervention Programme

  • 7

    CORPORATE VISITS

    FEB12

    SEP19

    NOV05

    Visit by YB. Datuk Hj. Ahmad Bin Hj. Maslan, Deputy Minister of Finance

    Visit by Minister of Commerce, Republic of Guinea

    Visit by Delegation from Sri Lanka

    Visit by Delegation from Ministry of Micro Small and Medium Enterprises (MSME) Government of India

    JUL16

    Visit by YB. Dato Lee Chee Leong, Deputy Minister, Ministry of International Trade and Industry (MITI)

    Visit by YB. Datuk Chua Tee Yong, Deputy Minister of Finance

    SEP02

    AUG08

    DEC10

    AUG27

    AUG05

    Visit by YB. Dato Noraini Ahmad, Chairman of MATRADE

    Visit by IBFIM (Afghanistan Banks Association)

    Visit by YB. Datuk Ir Dr Wee Ka Siong, Minister in the Prime Ministers Department

    APR04

    JUN24

    Visit by Libyan and Islamic Development Bank (IDB) Delegations

    Visit by Saudi Credit & Savings Bank (SCSB)

  • 8 2014SUSTAINABILITYREPORT

    CHAIRMAN

    AS WE CONTINUE TO GROW, WE ARE GUIDED BY OUR SUSTAINABILITY FOCUS FOR THE NEXT GENERATION - FOR BOTH OUR BUSINESS AND SOCIETY.

    Onbehalfof theBoardofDirectorsofSMEBank, I ampleased topresentSMEBanksSustainabilityReport2014.Thisyear,wehaveimplementedawiderangeofinitiativesaimedatfundamentallytransformingourbusinessanddevelopingthenation.Ourcommitmenttosustainabilityisintegraltothesuccessofour operations, whether it relates tostreamlining our supply chain, developinginnovative entrepreneurial activities,supportingthegrowthofemergingmarketsor creating professional developmentopportunities for employees. This is anincreasingly important part of being aresponsiblecorporatecitizenandimprovingcorporate performance. As we continue togrow, we are guided by our sustainabilityfocusforthenextgeneration-forbothourbusinessandsociety.Weintendtocontinuebuilding on our long track record of socialresponsibility.IamproudtosharetheBankssustainability milestones in this inauguralsustainabilityreport.

    A MESSAGE FROM THE CHAIRMAN

  • 9

    OVER THE YEARS, ENTREPRENEURSHIP AND ENTERPRISE HAVE GAINED STEADY RECOGNITION IN ECONOMIC THEORY FOR THEIR ROLE IN PROPELLING AND SUSTAINING A COUNTRYS ECONOMY.

    AspartoftheGovernmentscontinuedfocusonsteeringthecountrytowardsbecomingadevelopednationwithahigh-incomeeconomyby 2020, numerous programmes andincentives have been introduced by variousagenciesanddevelopmentbodiesinordertoencourageentrepreneurshipatall levelsofMalaysian society. SME Bank is one suchbodythatrecentlywelcomedanallocationofRM550millioninthe2014Budgetpresentedby the Prime Minister in October 2013.ThisfundingconsistedofRM50millionfortheGraduate Entrepreneur Fund and RM300millionfortheBumiputeraEquityFund.TheremainingRM200millionwasearmarkedfordevelopmentprogrammes inMalayreservelandlocatedinstrategicareas.

    Over the years, entrepreneurship andenterprisehavegainedsteadyrecognitionineconomic theory for theirrole inpropellingand sustaining a countrys economy.Entrepreneursareconsideredtobeeconomicagents that drive innovation and economicgrowth.Theyintroduceanelementofhumanproductivityandcreativityintothepreviouslyconsidered passive firms in the classicmodels of economic theory. At SME Bank,initiativestoencourageentrepreneurshiparenot limited to providing start-up funds foraspiringbeginnersandcapitalforsuccessfulbusiness.

    We recorded 1,570 approvals with RM2.9billion worth of financing for the period ofJanuary to December 2014. This has beenaffectedbythevariousengagementactivitiesandtheSpecificInterventionProgrammethatweundertake.

  • 10 2014SUSTAINABILITYREPORT

    TheSpecificInterventionProgrammefocuseson selected Bank customers. Directintervention is identified at the beginningthrough structured gaps analysis. Varioustoolswereappliedtoidentifycustomerswiththe ability tomigrate upward.We facilitateupwardmigrationbychangingdelinquentstoperforming clients; improving the risk orSCORE rating; improving from NEED toMERIT; moving from BEST to TERAS; andprogressing from local sales to exports.WeensureselectedcustomerscanestablishSMEs that can sustain their businesses,which ensures a quality portfolio for SMEBank.

    THE ULTIMATE AIM OF THIS INITIATIVE IS TO ENSURE SELECTED CUSTOMERS CAN PROGRESS AND SUBSEQUENTLY ESTABLISH SMES THAT CAN SUSTAIN THEIR BUSINESSES.

    Giventhefast-pacedchangesintheMalaysianeconomy,wewillcontinuetoplayanactiveroleindevelopingtheSMEsectorandbuildingour nation as a one-stop financing andbusiness development centre. Our strongcollaboration and close engagement withcustomers,regulators,employees,businesspartners and the public at large helps usaddress sector-related issues on a timelybasis.

    Finally, I would like to record my deepestgratitude to the Board of Directors,management teamandemployees for theirdedicationtodrivetheCompanytoachieveayearofimpressivegrowth.Iwouldalsoliketothank our valued shareholders, businessassociatesandallstakeholdersfortheirvoteof confidence. We look forward to yourcontinuedsupportinthemanyyearstocome.

    TAN SRI AB AZIZ KASIMCHAIRMAN

    A MESSAGE FROM THE CHAIRMAN CONTD

  • 11

  • DATUK MOHD RADZIF MOHD YUNUSGROUPMANAGINGDIRECTOR

    12 2014SUSTAINABILITYREPORT

    GROUP MANAGING DIRECTORS STATEMENT

    SME Bank has reached amilestone in therelease of its first sustainability report.We understand that being a responsiblecorporate citizen is essential for businesssuccessandourstrategyofcreatingvalueforour clients, employees, shareholders andcommunities.Stakeholdershavetoldustheycare deeply about corporate responsibility(CR),particularlyasitrelatestoworkplace,marketplace,communityandenvironmentalsustainability. This report examines thesefourareasofourCRstrategyextensivelyandIwelcomeyoutoreadeachaspectindetail.

    WE UNDERSTAND THAT BEING A RESPONSIBLE CORPORATE CITIZEN IS ESSENTIAL FOR BUSINESS SUCCESS AND OUR STRATEGY OF CREATING VALUE FOR OUR CLIENTS, EMPLOYEES, SHAREHOLDERS AND COMMUNITIES.

  • 13

    programmes covering functional, technicalandsoft-skills,wealsofocusedontwomaininitiativestomeettheBanksannualstrategicobjectives. Firstly, a full-scale trainingprogramme is delivered that supports theNewOperatingModel(NOM).ThisprogrammepromotessalesandmarketingtoensuretheBanks sustainability while supporting theGovernmentsagendaofdevelopingtheSMEentrepreneurs.Secondly,weinitiatedProjectWisdomwith the aim of achieving Shariahcomplianceby2015.

    SUSTAINABILITY IN THE MARKETPLACE

    Every day, we see examples of how oursupporthelpsfuelthesuccessofMalaysianSMEs,whetherbyenablingthemtopurchaseequipmenttofulfilnewcontracts,providingexpertise to manage their cash flow oradvancingfundstoexpandtheirportfolios.

    SMEBankalsoprovidesfactoryspacerental,financing,entrepreneurshiptraining,advisoryand technical assistance as well asoperational improvements under theEntrepreneur Premises Programme (EPP).ThisprogrammewascreatedforBumiputeraSMEsthatareinterestedinexpandingtheirbusinesses, establishing their businesspresence and eventually competing withindustryslargestplayers.

    OurEntrepreneurPremisesComplex(EPC)isunder the purview of the EPP unit thatprovides suitable factory space rental topotential business owners. Not limited tospace rental, the eligible tenants at EPCsacrossMalaysiahavetheprivilegeoffinancingfacilities,entrepreneurialtrainingaswellasfinancialandinterventionservices.

    The Centre for Entrepreneur Developmentand Research (CEDAR) was established inresponsetooneofthesixfocusareasundertheSMEMasterplan. It builds capacity andcapabilityofnotonlyentrepreneursbutalsothegeneralworkforceinvolvedindevelopingSMEentrepreneurs.Itconductsentrepreneur

    SUSTAINABILITY IN THE WORKPLACE

    Employees play a pivotal role in increasingstakeholder value and we focus on talentmanagement and developing a knowledgeculture. Building a strong foundation for amotivatedandtalentedworkforce,exemplifiesourcorevalueswithparticularemphasisonpassion and compassion. We expand ourinitiatives and improve the workingenvironment forouremployees.Embracingthecultureofflexibleworkinghours,in-linewithglobalbestpractice,hasallowedustobooststaffproductivity.

    We introduced a wide range of trainingprogrammestohelpemployeesdeveloptheircareers.ACertificateinIslamicDevelopmentBanking&Finance (CIDBF), SMEBusinessCounsellor Certification Programme,Graduate Trainee Programme (GTP) andOnboarding Programme are some of thecareerdevelopmentprogrammeswedeliver.In addition to standard core training

  • 14 2014SUSTAINABILITYREPORT

    GROUP MANAGING DIRECTORS STATEMENT CONTD

    development activities such as businesscoaching and consultancy; research anddevelopment;seminarsandconferences;andpublications.

    SUSTAINABILITY IN THE COMMUNITY

    WeenrichthelivesofourstakeholdersandbuildMalaysiashumancapitalinsupportofthe Governments vision of nurturinga knowledge-rich and skilled nation.We introduced a special CR initiative topromote entrepreneurship in Malaysiansecondary school students. This CR

  • 15

    programme is a competition entitledProgram Inovasi Usahawan Muda SMEBankY-BizChallenge.Weimplementedthisprogrammewith theMinistry of Education(MoE) to groom and nurture futureentrepreneurs. We created interest inentrepreneurship and helped studentsexplore their creativity and innovativeness.Theprogrammealsoprovidesstudentswithexperienceandspecificknowledgeso theycan envisage entrepreneurship as theirfuturecareers.

    Our CR programmes enrich the lives andfulfil the dreams of the underprivilegedincluding orphans. As we operate in amulti-cultural country, we are proud tocelebratemanyfestiveseasonsthroughouttheyearbysharingthejoywiththosewhoarelessfortunate.OneexampleofoursignatoryCR activities is the SME Bank AnnualRamadhanProgramme.InadditiontovariousactivitiesundertakenattheHeadOfficelevel,RM5,000isallocatedtoeachbranchnetworkto fund their own Ramadhan programmesincludingfooddistribution,zakatandbuburlambokdistributions.

    SUSTAINABILITY IN THE ENVIRONMENT

    Like other financial institutions, ourenvironmentalfootprintisrelativelysmallaswe are an office-based business. However,our initiatives minimise our environmentalfootprint ineachareaofbusiness, fromthedesignoftheofficebuilding,totheinstallationoffixturesandfittings.In2014,weintroducedagreenbuildingconceptintheupgradingofourofficebuildingbasedonMalaysiasGreenBuilding Index (GBI) rating. We have alsolaunched a number of initiatives that helpreduce our energy requirements and theamount of waste we produce, reuse andrecycle.

    ACKNOWLEDGEMENT

    Iwouldliketotaketheopportunitytoextendmy gratitude to all our stakeholders whoencourage us to perform better with theirfeedback, opinions and support while wecontinuetoinvestinthefutureoftheSMEsandourcountry.Onbehalfofthemanagement,I would like to express my deepestappreciation to all employees for theircontinuous dedication, commitment andcontribution.Together,webuildcapacityforgrowth in theSMEsector.Wemeasureoursuccessbyhowwehavehelpedcustomersdevelopandsustaintheirbusinessesforthefuture.Wehopeyoufindourreportusefulandinformativeandweappreciateyourfeedback.Yourinputisvitalforrefiningoursustainabilityinitiativesanddevelopingourfuture.

    DATUK MOHD RADZIF MOHD YUNUSGROUPMANAGINGDIRECTOR

    OUR CR PROGRAMMES ENRICH THE LIVES AND FULFIL THE DREAMS OF THE UNDERPRIVILEGED INCLUDING ORPHANS.

  • 16 2014SUSTAINABILITYREPORT

    BOARD OF DIRECTORS

    1 34 2

    1 TAN SRI AB AZIZ KASIM Non-Executive Chairman

    2 DATUK MOHD RADZIF MOHD YUNUS Group Managing Director

    3 ENCIK KHAIRUZZAMAN MUHAMMAD Independent Non-Executive Director

    4 DATO ADZMY ABDULLAH Independent Non-Executive Director

  • 17

    5 6 7 8 9 10

    5 ENCIK ISHAK ISMAIL Independent Non-Executive Director

    6 DATUK MOHD NASIR AHMAD Independent Non-Executive Director

    7 ENCIK ASRI HAMIDON Non-Independent Non-Executive Director

    8 DATO ABD MAJID KUTIRAN Non-Independent Non-Executive Director

    9 DATO JAMELAH JAMALUDDIN Independent Non-Executive Director

    10 PUAN HASMAH RAZALI Group Company Secretary

  • 18 2014SUSTAINABILITYREPORT

    SENIOR MANAGEMENT

    FROM LEFT TO RIGHT

    DATUK MOHD RADZIF MOHD YUNUS Group Managing Director

    DATO MOHD RIZAL MOHD JAAFAR Group Chief Operating Officer Finance & Corporate Services

    DATUK KAMALUDDIN ISMAIL Chief Operating Officer Banking

    DATO RAZMAN MOHD NOOR Chief Risk Officer

    DR. SHEIKH GHAZALI SHEIKH ABOD Chief Operating Officer CEDAR

    ENCIK ASBULLAH ADNAN Director Development Banking & Liaison

  • 19

    FROM LEFT TO RIGHT

    ENCIK MOHAMAD SABIR MOHAMAD SABRIDirector Group Financial Management

    ENCIK ISMAIL KAMARUDDIN Group Chief Internal Auditor / Director

    ENCIK SHAHRIR AMRAN Acting Director Group Human Capital Management

    ENCIK ABD KARIM AHMAD Director Enterprise Banking

    ENCIK MOHAMMAD HARDEE IBRAHIM Director Treasury, Investment and Corporate Finance

    PUAN ROKIAH RAJAK Director Operations

    PUAN HASMAH RAZALI Group Company Secretary

  • 20 2014SUSTAINABILITYREPORT

    SHARIAH COMMITTEE MEMBERS

    1 5 62 43

    1 PROF. DR. ABDUL BASIR MOHAMAD Chairman

    2 PROF. MADYA DR. AHMAD BASRI IBRAHIM Member

    3 HAJI JALIL HAJI SAID Member

    4 PROF. MADYA DR. YUSOF RAMLI Member

    5 PROF. DR. NORHASHIMAH MOHD YASIN Member

    6 DR. ASMAK AB RAHMAN Member

  • 21

  • 22 2014SUSTAINABILITYREPORT

    ENGAGING WITH OUR STAKEHOLDERS

    Stakeholdersplayanessential role inourcontinuedsuccess and we consider their varied perspectives.We engage with stakeholders worldwide to shareinformation; discuss our sustainability priorities,programmes and performance; and determinecollaborationopportunitiestoachievecommongoals.Operating responsibly and addressing the needs ofthese interconnected groups, help us maintaincommercialsuccess.Thisinturnallowsustodeliveronoursustainabilitypromises.

    We engagewith stakeholders on key aspects of ourbusinessandproducts.Stakeholdersaredefinedasanygroup or individual who can affect or be affectedby the achievement of the organisations objectives.Ourprimarystakeholdergroupsareillustratedintheadjacenttable.Examplesofthevaluewebringeacharesummarisedbelow.

    Bodies and Authorities

    Government, Regulatory

    Suppliers

    Investors

    and Shareholders

    Community

    Employees

    General Public

    Customers and

    SMEBank

  • 23

    Stakeholder Groups Value Provided Method of Engagement

    Government,RegulatoryBodiesandAuthorities

    CollaboratingwiththeGovernmenttoprovidesolutionsthatdevelopSMEs

    RealisingtheGovernmentsaspirationsincludingthe10thMalaysiaPlanandNationalKeyEconomicAreas(NKEA)

    Compliance Regularmeetings Certification

    NGOs,IPTAandBusinessOrganisations

    Assistingentrepreneursbyprovidingaccesstofinancing

    Briefingonaccesstofinancingissues Organisationsweworkwithinclude:

    BrandingAssociationofMalaysia UnitedMalaysNationalOrganisation(UMNO) AssociatedChineseChambersofCommerce

    andIndustryofMalaysia(ACCCIM)

    SpecialSecretariatforEmpowermentofIndianEntrepreneurs(SEED)

    Forumsandbriefings Paneldiscussions Helpdesk Collaborationandjoint

    initiatives Dialoguesessions

    CustomersandGeneralPublic

    Contributingtoeconomicgrowth HelpingaddresskeySMEneeds Identifyingopportunitiesandassistinginthe

    developmentoflocalSMEs

    Branchnetworks Socialmedia Website Onlineengagement Customerservicehotline

    Employees Workingtoprotectthesafetyandhealthofemployees

    Creatinganinclusiveanddiverseworkforce Providingemployeeswithprofessionalgrowth

    opportunities

    Regularengagement Get-togethersessions Performanceappraisal

    sessions Internalnewsletters

    Community Beinganexemplarycorporatecitizen Givingbackthroughphilanthropicactivities Nation-building

    Communityengagement Philanthropicactivities Donations

    ShareholdersandInvestors

    Creatingandmaintainingshareholdervalue Annualgeneralmeetings Annualreportsandother

    publications Performanceupdates

    Suppliers Transparentsupplychainprocess Sustainableeconomybyprioritisinglocal

    suppliers

    E-bidding Updatesthroughonline,

    writtenandface-to-faceengagement

  • 24 2014SUSTAINABILITYREPORT

    SMEs AS THE ENGINE OF GROWTH

    EnvironmentLegal an

    d Regulatory

    Technology Adopt

    ion

    Innovation an

    d

    Infrastructure

    DevelopmentHuman Capital

    Acce

    ss to Financing

    Market Access

    SMEMasterplan

    WehavealwaysconsideredthattheSMEsectorplaysan important yet varied role across countries andregions. In high-income countries, they support theeconomy; inmiddle and low-income countries, theycontributetoemploymentandGDP.

    Worldwide,morethan95%ofenterprisesareestimatedto be SMEs, providing approximately 60% of privatesectoremployment. Thismaybedue toSMEsbeingmore labour intensive and therefore providingsubstantialemployment.

    SMEsarealsoanimportantcontributortoinnovationineconomies. They tend to be more nimble andtechnologically driven, especiallywhen collaboratingwiththelargercorporatesector.

    TheSMEMasterplanwaslaunchedbytheMalaysianGovernment to boost economic growth through theactivecontributionofSMEsto thenationaleconomy.The plan outlines six factors thatmay influence theperformance of SMEs and the achievement of thefollowingfourstrategicgoals:Increasingtheformationofbusinessesbyanaverageannualincreaseof6%;

    Expandingthenumberofhighgrowthandinnovativefirmsbyanaverageannualincreaseof10%;

    Doublingproductivityincreasefrom2010to2020;andIntensifyingtheformalisationofSMEsattherateof15%oftheGrossNationalIncome(GNI).

    ThesefactorsalsoserveasfocusareastoformulatepoliciesthatimproveSMEsperformance.

    We work together with the Government to increaseAccesstoFinancing.Thisfactorismostrelevanttousand ensures that creditworthy SMEs have access tofinancing for working capital and investment.We achieve this through our comprehensive andconsistentdevelopmentandinterventionrolesto: Strengthenthecurrentcustomerbase; Improve the Banks customers business

    sustainability; Implement technology tools to improve client

    communicationandrelationships;and Programme-basedfinancing.

  • 25

    OUR ROLE

    As a development financial institution, it is ourresponsibility to bemore involved in developing thesector.

    WepromoteandhelpachievetheGovernmentsspecificsocialandeconomicobjectives.

    We do whatever necessary to help SMEs succeed.Thisrolefillsthevoidleftbycommercialbanksthataredrivenmorebymarketforcesandprofitabilitythantheoveralldevelopmentofsmallercompanies.

    Weprovidemediumandlong-termfinancingofprojects,whichrequirespecialisedskillsandfocus.Thistypeoffinancingcarrieshighercreditormarketrisksastheytypicallyhavelongerinvestmenttenures.

    WefocusonfiveNationalKeyEconomicAreas:oil,gasandenergy;wholesaleandretail;education;healthcareandtourism.Thepotentialandnumericalvaluebroughtto theeconomy isconsideredwhenassessingSMEsviability.

  • 26 2014SUSTAINABILITYREPORT

    SMEs AS THE ENGINE OF GROWTH CONTD

    Duringitsestablishmentin2005,SMEBanksIslamicfinancingwasonly15%ofthetotalbanksportfolio.InJune2011,SMEBankdecidedtotransformitsbusinessintoanoperationallyefficientIslamicfinancialproviderunderProjectWisdomwhichofficiallycommencedinMay2012.Allnewapprovalsonconventionalloanswerereplacedwith Islamicfinancing followingan internalcirculationdated22February2011.

    Weidentifiedgapsandraisedawarenessoftheprocess,people,productandsystem.InMay2012,theIslamicfinancing portfolio was estimated to be 44.5%; byDecember2014,theportfoliohadincreasedto85.4%withatotalamountofRM4.1billion.ThetotalIslamicfund acceptance increased to 100% from 57.6%, anincrease of 42.4%. The total Islamic fundplacementalsoincreasedto98.8%from51.6%,atotalincreaseof47.9%.Several Islamicfinancingcontractshavealsobeen developed. Commodity Murabahah and IjarahMuntahiah Bitamlik serve SMEs needs in serviceindustries.SincetheBanksportfolioandcompetencylevelshaveimprovedsignificantly,theBankhassetatargettobecomeafull-fledgedShariahcompliantDFIby2015.

    ThisdecisioncomplementsMalaysiabecomingthehubfor Islamic finance, which is part of Bank NegaraMalaysiasFinancialMasterPlan.ThegrowthofIslamicbanking in Malaysia has been impressive and thepotential for further growth is huge. The Islamicfinancialservicesindustryisnowatthethresholdofitsnext stage of development. Significant progress hasbeenmadeoverthelastdecadeandIslamicfinanceisnow more widely accepted as a form of financialintermediation.

    SMEBankhasbecomeacompetitiveformoffinancialintermediationthat isabletomeet thedifferentiatedrequirementsofeconomies.Inanenvironmentofrapidchange,akeyfactorinfluencingfutureprospectsoftheIslamicfinancialservicesindustrywillbeinvestmentstobuildthefoundationsonwhichfurtherprogresscanbe achieved. Investing in the future; research anddevelopment;anddevelopingtalentandexpertisewillbe differentiating factors that will contribute to theindustryseffectiveness,resilienceandcompetitiveness.Thisundertakingmustbethejointresponsibilityoftheprivate and public sectors to mutually elevate theindustrysperformance,therebyincreasingitswealthcreationpotentialfortheprosperityofournation.

    TheBanksShariahCommitteeensuresthatallaspectsoftheBanksIslamicbankingbusinessareconductedin accordance with the Shariah principles. It addsanotherlevelofoversightwhichinherentlysafeguardsagainstirresponsiblepractices.

    Moving Towards Becoming A Full-Fledged Shariah Compliant DFI

  • 27

    IslamicPortfolio

    ConventionalPortfolio

    Banks Islamic Financing and Treasury Portfolio

    As at December 2014

    As at 31 May 2012

    44.5%-RM

    1.81

    5b

    55.5%-RM2.266b

    14.6%- R

    M704m

    85.4%-RM4.133b

    42.4%-RM

    1.52

    4b

    57.6%-RM2.071b

    100.0%-RM3.461b

    48.4%-RM

    1.64

    9b

    51.6%-RM1.760b

    1.2%- RM21.5m

    98.8%-RM1.727b

    FinancingsPortfolioComposition

    BanksTotalFinancingPortfolio:

    RM4.081b

    FinancingsPortfolioComposition

    BanksTotalFinancingPortfolio:

    RM4.837b

    FundAcceptanceCompositionTotalFundAcceptance

    RM3.596b

    FundAcceptanceCompositionTotalFundAcceptance

    RM3.461b

    FundPlacementCompositionTotalFundPlacement:

    RM3.409b

    FundPlacementCompositionTotalFundPlacement:

    RM1.748b

  • 28 2014SUSTAINABILITYREPORT

    CORPORATE GOVERNANCE

    TheBoardofDirectors (Board) is committed tohighstandards of Corporate Governance. The Boardsubscribes to Bank Negara Malaysias Guideline onCorporateGovernanceStandardsonDirectorship forDevelopmentFinancialInstitutions(BNM/RH/GL005-14)toachieveanoptimalgovernanceframeworkandmaximiseshareholdervalue.

    BOARD OF DIRECTORS

    TheBoardisgovernedbyninemembersconsistingofoneNon-Executive Chairman, oneNon-IndependentExecutiveDirectorwhoistheBanksGroupManagingDirector, two Non-Independent Non-ExecutiveDirectorsrepresentingMinisterofFinanceIncorporated(MOF)andMinistryofInternationalTradeandIndustry(MITI)respectivelyandfiveIndependentNon-ExecutiveDirectors.

    The diversity of theDirectors backgrounds from thefieldsofManagement,Banking,Finance,Accounting,LegalandEntrepreneurDevelopmentwereaccumulatedwhileservinginbothprivateandgovernmentsectors.ItbringsthenecessaryrangeofexpertiseandexperiencerequiredbytheBoardtoeffectivelyperformitsfunctions.

    The Chairman and all Directors are experts in theirrespectivefieldsandhavecontributedsignificantlytothe Boards decision making process. The GroupManagingDirectorexecutesthepoliciesoftheBoardandmanagestheday-to-dayaffairsoftheBank.

    TheBoardisresponsibleforensuringtheeffectivenessoftheBanksoperations.ThisincludestheresponsibilityfordeterminingtheBanksoverallstrategicdirection,approvalof performance targets, monitoring of managementachievements, providing overall policy guidance andensuringthatpoliciesandproceduresfortheinternalcontrolsystemandsuccessionplanningareinplace.

    The Board meets at least once a month to discussmattersrelatingtopolicies,strategies,performance,resources,overallconductoftheBanksbusinessandfinancial matters as well as to monitor the Banksoverallperformance.

    TheappointmentoftheChairmanandalltheDirectorsare with accordance to the Guidelines on CorporateGovernance for DFIs and the Banks Articles ofAssociation.

    ThecompositionoftheBoardofDirectorsduring2014ispresentedbelow.In2014,fifteenmeetingswereheld.

    Board of Directors Meetings Held in 2014

    No. Name of Director Designation No. of Meetings Attended

    1. TanSriAb.AzizbinKasim Non-ExecutiveChairman(appointedw.e.f.1May2014)

    9/9

    2. DatukMohdRadzifbinMohdYunus GroupManagingDirector(Non-IndependentExecutiveDirector)

    15/15

    3. DatoAbdMajidbinKutiran Non-IndependentNon-ExecutiveDirector(representingMITI)(appointedw.e.f.1October2014

    2/2

  • 29

    No. Name of Director Designation No. of Meetings Attended

    4. EncikAsribinHamidon Non-IndependentNon-ExecutiveDirector(representingMOF)

    14/15

    5. DatukMohdNasirbinAhmad IndependentNon-ExecutiveDirector 15/15

    6. DatoAdzmybinAbdullah IndependentNon-ExecutiveDirector 14/15

    7. EncikIshakbinIsmail IndependentNon-ExecutiveDirector 15/15

    8. EncikKhairuzzamanMuhammad IndependentNon-ExecutiveDirector 14/15

    9. DatoJamelahJamaluddin IndependentNon-ExecutiveDirector(appointedw.e.f.1February2014)

    12/13

    10. DatoAbdulGhafarbinMusa Non-IndependentNon-ExecutiveDirector(representingMITI)(ceasedw.e.f.1May2014)

    *4/5

    *ThenumberofmeetingsattendedduringthetimetheDirectorheldoffice.

    SUPPLY OF INFORMATION

    DirectorsareprovidedwithnoticesandboardpaperspriortoBoardmeetings.ThisgivesDirectorstimetodeliberateonissuesraisedatmeetings.

    AllDirectorshavedirectaccesstotheservicesoftheGroup Company Secretary and seniormanagement.IndependentprofessionaladviceisalsomadeavailabletoDirectorsinfurtheranceoftheirdutiesintheeventsuchservicesarerequired.

    TRAINING OF DIRECTORS

    ItistheBankspracticethateachnewDirectorisgivenaBoardKit.Anon-boardingsessionbriefstheDirectorson the Banks history, operations and financialperformance to enable them to have first-handunderstandingoftheBanksoperations.

    The members of the Board keep abreast withdevelopments in the banking industry by attendingconferencesandseminarsheldinMalaysiaandabroad.

    TheBankalsoorganisesAMLAandtalksonrelevancetopicsandencouragesDirectorstoattendtalks,trainingprogrammesandseminars toupdate themselvesonnewdevelopmentsinthebusinessenvironment.

    TheDirectorsoftheBankin2014attendedtheFinancialInstitutions Directors Education (FIDE) Programme

    organised by The Iclif Leadership and GovernanceCentre.

    BOARD COMMITTEES

    Therearefiveboardcommitteesestablishedtoassistthe Board in discharging of its duties andresponsibilities,namelytheAuditCommittee(AC),RiskManagement Committee (RMC), NominationCommittee (NC),RemunerationCommittee (RC) andAssetQualityReviewCommittee (AQRC) (establishedeffective28October2014).

    SMEBankBoard

    Committees

    Audit Committee

    Risk Managem

    ent

    Committee

    Nomina

    tio

    n

    Committe

    eRemuneration

    Committee

    Asset Quality Review

    Committee

  • SUSTAINABILITY IN THEWORKPLACE

    HUMANCAPITALDEVELOPMENT

  • 32 2014SUSTAINABILITYREPORT

    Ourcompetitivebenefitspackagehelpusattractandretainaskilledworkforcesowecanremainrelevantinthe market. Our rigorous career developmentprogrammes are specifically designed to increaseproductivity, maintain a safe environment, boostemployee engagement and encourage innovation.Weengagewitheachandeveryemployeeregularly.Oureffectivesafetyandhealthprogrammeshaveresultedinzeroinjuriesandfatalitiesoverthelastthreeyears.

    AN EMPLOYER OF CHOICEOurambitionistobetheemployerofchoicebothforourcurrent and future employees as this will lead tobusinesssuccess.Whilewecontinuetoattracttalentedandqualifiedindividuals,wealsochallengeourselvesto do whatever necessary to remain an attractiveemployer. Our approach is straightforward. We takefeedbackfromcurrentandpotentialfutureemployeesand act to continually improve our employmentperformance. We measure this through employee

    engagement and benchmarking ourselves againstindustrybestpractice.

    Companiesfocusingonorganisationstrategy,systems,organisational structure and climate, shared values,workforce skills, individual attitudes, beliefs andcompetencies are able to transform themselves intohighlyeffectiveandefficientbusinesses.Thisprocessisusedbyalargenumberofnationalandglobalorganisationsto achieve superior performance. It supports leaders,managers and teams to drive change and transformsituationsintheirrespectivebusinessunits.

    Our transformation journey commenced with theCorporateTeamBuildingProgramme(CTP)from2010to2011. It continuedwith the InternalisingBusinessMindsetandSharedValuesProgramme(InMINDs) in2012;followedbyServiceTransformationforExcellentPerformance(STEP)in2013.TheBrandInternalisationProgramme(BRAIN)commencedin2014.

    SUSTAINABILITY IN THEWORKPLACE

    CultureTransformation

    Service

    Transform

    ation

    For Exce

    llent

    Performan

    ce (ST

    EP)

    Brand

    Internalisation

    (BRAIN)

    Corporate Team

    Building

    Program

    me (CTP)

    Internalising

    Business Mindset

    Shared Values

    Programme (InMINDs)

    TheProcessof Changeand

    Transformation

    Organisational

    Performance

    Change

    Initiatives

    Struct

    ure, Sy

    stems

    ,

    Style

    Shared Va

    lues,

    Tech

    nology

    Strateg

    y,

    Sk

    ills,

    Beliefs,

    Superstitions

    Mindset,

    Attitudes,

    Organisational

    Behaviour

    CHANGE MANAGEMENT - CULTURE TRANSFORMATION

  • 33

    BRAIN encompasses our core values of Passion,Commitment and Trust (PaCT); and behaviourcompetenciesofLeadership,Integrity,Performance,CompetentandInnovation(LIPCI).Wedevisedabrandidentity that is demonstrated through the BrandPersonality of Care, Empathy and Subject MatterExpert(S.M.E.).

    BRAINwasofficiallylaunchedbyourGroupManagingDirectoron14April2014andincorporatedaspartoftheBanksstrategicplan.ProgressisassessedduringthemonthlyBRAINSteeringCommittee(BSC)meetingchairedbytheGroupManagingDirector.

    Brand Personality We Desire Employees to Demonstrate

    i. Care-befair,sincereandattentivetoallinternalandexternalcustomers.Severalprogrammesandactivitieswereconductedtoinstilthispersonality:

    Iron Man & Iron Lady: A designated SMCmember for each regionwasassistedby co-agents from head office, regional office andenterprisecentres.

    Acknowledgementsandsmallcelebrationssuchasweddings,childbirthandchildrensexaminations

    Recognition:Longserviceawardsandexcellentserviceawards

    NGOassociationii. Empathyberesponsive,reliableandgotheextra

    mile.Hospitalisationvisits,deathorfuneralvisitsaresomeoftheactivitiesandprogrammesofferedtoinstilthispersonality.Kita-KitaAje,areinformalsessions with respective Iron Men or Ladies todiscusspersonalorworkrelatedissues.

    iii. Subject Matter Expert (S.M.E.)-beknowledgeable,solutionproviderandgoodlisteners.Plannedactivityisbeareferralpointbyestablishingareferralpointgroupwithin theorganisation foremployeeseasyreference. A newcomer induction programme(CorporateOn-boarding), talksbyguestspeakers,benchmarking visitsand trainingaresomeof theactivities and programmes that emphasise thispersonality.

    BRAIN commenced with TeamBonding and BRAINLaunch Pad sessions. A total of 31 sessions weredeliveredthroughoutAugustandSeptember2014.In2014,1,000employeesenrolledandgraduated.

    TheSMEBankWayconsistsofSALAM,SAPA,MESRA,SOPAN, MATA, HATI, HELO and CLEAN. It wasintroducedtostandardisebankbehaviourstointernaland external customers. The SME Bank ways arepromotedviavariouscommunicationchannelssuchasposters,quizzesandevents.

  • 34 2014SUSTAINABILITYREPORT

    PRIORITISING LOCAL TALENT

    Wemakeadifference to the communitieswhereweoperateandseekwaystoassistthem.Thehiringanddevelopmentoflocalpeopleareprioritisedandweworkwith local supply chainswherever possible.We takepart invariouscareerfairstoattractgraduatesfromour country and offer various forms of workopportunitiesincludinginternshipprogrammes.

    Internship Programme

    We recognise our community service role to provideMalaysian students with an opportunity to join theInternship Programme for a specific duration. TheInternship Programme is offered to students fromrecognisedhigherlearninginstitutionsthat:

    HaveobtainedacurrentcumulativeGPAofatleast3.0;

    Areundergoingadiploma,degreeorequivalentprogrammeinafieldofstudyspecifiedbytheheadsofdepartmentfromarecognisedhigherlearninginstitution;

    Demonstrateanacceptablelevelofinterpersonalskills;

    Areactiveincurriculumactivitiesinuniversitiesorcolleges;and

    Havestronginitiativeandareabletoworkindependently.

    The internship period varies betweenuniversities orcollege programmes. Most candidates had abackgroundineconomics,accounting,finance,Islamicbanking,ITorhumanresources.In2014,wewelcomed10internshipcandidateswhowereattachedtovariousfunctions.

    Breakdown of Internship Candidates in 2014

    COMPETITIVE BENEFITS AND REMUNERATION

    Afairandadequateremunerationsystemiscriticaltomotivate, attract and retain competent and high-potentialemployees.Ourinternalequitypromotesfairand equitable compensation for all employees withremunerationthatisproportionatetotheircontribution.We also believe in external equity, which deliversremunerationpackagesthatarefairandequitableincomparisontotheexternalmarket.

    We conduct remuneration reviews regularly todetermineadequateremunerationforemployees.Thishelps us align our remuneration packages with thechangingbusinessenvironment.Itallowsustobemoreequitableinrewardinghighachieversintheworkplace,develop employee talent and determine ourcompetitivenessvis--visthemarket.

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Finance and Accounting

    Human Capital Development

    Human Capital Services

    Information Technology

    33

    21

    1

  • 35

    ApercentageofemployeesbasicsalariesisgiventotheEmployees Provident Fund (EPF) as per statutoryrequirements. This is inclusive of the employerscontributiontoEPFrequiredbylaw.

    Benefits are defined as forms of value other thanpaymentthatareprovidedtoemployeesinreturnfortheircontributiontotheorganisation.Weoffervariousemployment benefits to all levels of employees.Keybenefitsareillustratedinthediagramabove.

    Practices for Retiring Employees

    Retirement Age

    On 16 August 2012, the Malaysian Governmentannouncedtheenforcementoftheminimumretirementage forprivatesectoremployees,upon reaching theageof60years,throughtheenforcementofMinimumRetirementAgeAct2012.

    Employeesmay opt to retire early at any time oncereaching50yearsofage.However,approvalissubjectto themanagementsdiscretion.Employeeswhoarenotmedicallyorphysicallyfittoworkmaybeadvisedto

    retireearlierbyadoctorfromoneofourpanelclinics,hospitalsoranygovernmentmedicalpractitioner.

    Employeesretiringinthenormalcourseofservicewhohavereachedtheretirementagereceiveonemonthspaidleave.

    Retirement Benefit

    Employees who joined the Bank are eligible forretirement benefit in terms of additional employersEPFcontributionsbasedontheyearsofservice.ThesebenefitsvaryslightlydependingonwhentheemployeejoinedtheCompany.

    Additional EPF Contributions

    Additional Contributions (% Basic Salary)

    LengthofService

    Joinedbefore1July2012

    Joinedafter1July2012

    10years 6.5% 5.5%

    Key BenefitsAllowances

    MedicalBenefits

    Leave

    EducationStaff

    Financing

    Others

    InsuranceScheme

    East Malaysia, COLA for Non-executives, car, petrol, mobile phone, treasury dealers, subsistence, accomodation, mileage, miscellaneous, short-term placement and secondment

    Group Term Life (GTL), Group Personal Accident (GPA) and Group Hospitalisation & Surgery (GHS)

    Staff financing subsidy scheme for housing

    and vehicleCorporate club m

    emberships, flexible w

    orking

    hours, shift working hours, em

    ergency cash advance,

    discretionary retirement gifts and interest free

    festival cash advance for Non-Executives

    Intere

    st free

    educa

    tion fin

    ancing

    and E

    mploy

    ee

    Educat

    ion As

    sistan

    ce Prog

    ramme

    Generous annual leave, m

    edical, com

    passionate,

    marriage, maternity/paternity, special paid, Hajj,

    replacem

    ent and retitrement

    Unlim

    ited

    outpa

    tien

    t, hospitalis

    ation an

    d surgical for

    employee

    s, maternity, health screen

    ing, den

    tal and

    spectacles

  • 36 2014SUSTAINABILITYREPORT

    LEARNING AND DEVELOPMENT

    Employeesneedtodeveloptheirtechnical,behaviouraland leadership competencies in relation to theiremployment functions, which are aligned with theBanksbusinessstrategy,visionandmission.

    Theaverageannualtrainingrequirementisfivedaysforexecutivelevelandaboveandthreefornon-executives.Theaveragenumberofhoursoftrainingspentperyearperemployeeforthepastthreeyearsislistedbelow.

    Superiors are responsible for nominating theiremployeestoattendprogrammesintheannuallearningand development calendar as and when required.Employees areprovidedwith opportunities to attendexternal training that is not in this calendar. Suchtraining is assessed on a needs basis and requiresapprovalbytherespectivedivision.

    Annuallearninganddevelopmentneedsareidentifiedforallemployees.Itisconductedduringtheperformance

    appraisalprocessandconsidersinformationfromtheappraisal form and competency assessment. TheHuman Capital Development and Learning andDevelopment divisions determine the appropriatetrainingandnon-traininginterventions.Theydevelopatrainingplanbasedontheperformanceappraisalandcompetencygapresults.

    Employees learning and development needs areidentifiedasaresultof: Corporate,organisationrequirementsandbusiness

    plan; Theperformanceappraisalprocessandcompetency

    gaps; Feedbackfromsuperiorsorheadsofdepartment;

    and Regulatoryrequirements.

    Backgroundinformationfromsomeofoursignificanttrainingprogrammesheldin2014ispresentedbelow.

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Averageannualtrainingbudget

    peremployee

    2012 2013 2014

    RM Hours

    60

    3,70

    0

    3,90

    055

    56

    4,00

    0

    4,000

    3,900

    3,800

    3,700

    3.600

    3,500

    62

    60

    58

    56

    54

    52

    Training Budget and Hours

  • 37

    Name of Programme Background Objective

    CertificateinIslamicDevelopmentBanking&Finance(CIDBF)

    Currently,SMEBankistransformingintoanoperationallyefficientIslamicFinancial Provider under ProjectWisdom. All new approvals forconventional loans have ceased andbeenreplacedwithIslamicfinancing.TheBankidentifiesgapsandcreatesawareness on the process, people,product and system. 278 employeesenrolled and 202 graduated from acourse in Certified IslamicDevelopment Banking (CIDB). 305employeesenrolledand287graduatedfromacourseinProfessionalIslamicDevelopmentBanking(PIDB).

    TobuildcapacitybyprovidingfundamentalknowledgeforDFIexecutivesconsideringincorporatingIslamicfinancingproductsintheirbusinessoperations

    ToimproveDFIexecutivesappreciationofthe concept and application of Islamicfinance and its relevance in day-to-daybankingoperations

    On-boardingProgrammeforExecutive(COPE)

    COPEispartoftheTalentManagementProgrammethatprovidesasystematicand comprehensive approach toorientingnewemployees.

    ToallowemployeestounderstandsomeoftheCompanysvaluesandpriorities

    Toencouragesocialisationandcreateasenseofbelonging

    TobuildanoptimisticattitudetowardstheCompany

    ProfessionalCreditCertification(PCC)

    Developed by AICB in consultationwith senior credit practitioners, thespecialist PCC professionalcertification demonstrates theachievement of the minimumprofessional standard of corecompetencyforcreditpersonnelinthebankingandfinanceindustry.

    Toraisecreditmanagementawarenessof the Malaysian financial system andregulationsgoverninglendinginMalaysia

    Tobriefemployeesontypesofborrowers,securitiesandcreditsupportaswellascreditprocessesspecifictoconsumerorbusinesslending

    SalesandMarketing(Mastersalesprofessionalprogramme)-MSP

    TheMSPisundertheValueCreationProgramme to support the Bankstransformationalagenda.

    Toequipandimproveofficersskillstobemoreconfident insellingandfinalisingdeals

    To inculcate a mentally tough sales-orientedmindsettoovercomeobjectionsandincreasetheclosingrate

  • 38 2014SUSTAINABILITYREPORT

    Staff Training Fund

    TheStaffTrainingFund(STF)actsasadeterrentagainstrecruitingexperiencedpersonnel fromotherfinancialinstitutions.ThehiringinstitutionisrequiredtocontributeamaximumofsixmonthsofthepersonnelsnewgrosssalarytotheSTF.TheSTFisapplicableiftherecruitmentismadewithinsixmonthsoftheemployeesresignationwhoseprevious salary exceededRM5,000permonth.In 1993, staff pinching rules were liberalised andredefinedtorefertotherecruitmentofnewemployeeswhohadnotbeenreleasedbyapreviousemployer.

    AllcontributionstotheSTFareusedtofundtrainingcourses for banking personnel. This scheme is incollaborationwithAsianInstituteofCharteredBanker,which was previously known as Institut Bank-BankMalaysia.

    International Mobility Programme

    We value employees with global skill sets andinternational technical exposure. SME Bank andselectedinternationalfinancialinstitutionscollaborateon the International Mobility Programme. Thisprogrammeexposesemployeestovariousinternationalassignments and provides international exposureopportunities. It supports the development andretentionofbankingprofessionals.

    Secondmentsorengagementsvaryfromashort-termof between three and 12 months, to long-term ofbetweenoneandthreeyears.

    The programme is designed to improve globalknowledge, teach skill sets, build cross-culturalcapabilities and develop leadership or managementcompetencies. Employees selected to undergo thisinternationalprogrammearebondedforaminimumofoneyear,dependingonthetotalcost.Theseemployeesareexpectedtosharetheirknowledge,experienceand

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Name of Programme Background Objective

    Up-skillingandRe-skillingRedeploymentProgramme

    NewoperatingmodelstrengthenstheBanks operation by moving staff todifferent job functions. Theredeploymentprogrammeequipsstaffwith relatedskillsandknowledgeofoperations.

    To ensure proper learning anddevelopmentinterventionsareprovidedtoemployees

    SMEBusinessCounsellorCertificationProgramme

    This programme is an adaptation ofsimilar certification from Japan.Certified business counsellors arehighly sought after and play aimportant role in improving SMEbusinesses in the country. 26employees enrolled and graduatedfromthisprogramme.

    TodevelopapoolofexpertiseaccessibletoSMEs to improve competitiveness inlocalandglobalmarkets

    To ensure high quality counsellingservicesareprovided

  • 39

    newly acquired skills with the Bank upon theprogrammescompletion.

    Tobeeligibleforthisprogramme,employeesmust: BeproficientinEnglish; Beofmanageriallevelwithatleastthreeyearsof

    experiencewithSMEBank; Possessadegreeorequivalenttechnical

    qualification; Haveexceededexpectationsinthepasttwo

    performanceappraisals; Beagedbetween35and50yearsoldwith

    potential;and Bewillingtorelocateduringtheprogramme.

    In 2014, we collaborated with Kalkinma on thisprogramme,whichranfrom26Mayto6June.ThreecandidatesweresecondedtotheDevelopmentBankofTurkeyforthisprogramme.

    Graduate Trainee Programme (GTP)

    The SME Bank Graduate Trainee Programme isdesigned to accelerate learning and developmentopportunities to prepare young talents for futuremanagerialandleadershiproleswithintheBank.GTPprovides young talent with an opportunity to launchtheircareersindevelopmentbankingthroughanon-joblearningtraineeship.TheBankselectstraineesfromlocalandinternationaltertiaryinstitutions.

    Traineesundergoatrainingprogrammeconsistingofformal training, on-job training and assessments tomeettheBanksentrylevelofrequirements.Mentorsareassignedtocoachandguidetraineesthroughouttheprogramme.

    In 2014, 30 new trainees have undergone thisprogramme and have been placed in variousdepartments within Enterprise Banking, CorporateFinanceandEnterpriseCentres.

    On-Boarding Programme

    Ourguidelinesensureallnewemployeesareeffectivelyandefficientlyintroducedtotheirnewpositions.Theyaregivenaccesstoallrelevantpolicies,systemsandprocessestoperformanddeveloptheirroles.

    Theobjectivesofthisprogrammeareto: Facilitatenewemployeesabilitiestocontribute

    tothenewrole; Increasenewemployeescomfortlevelsintheir

    newroles; Reinforceemployeesdecisionstostaylongerin

    theirroles; Enhanceproductivity;and Encouragecommitmentandemployee

    engagement.

  • 40 2014SUSTAINABILITYREPORT

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Expected Outcomes

    Anemployeewhohasparticipatedintheon-boardingprogrammewill:Understandtheirroleandtheworkrequired

    ofthemFeelvalued,supportedandinvolvedinthe

    organisationWorksuccessfullyinthecontextofdepartmentUnderstandandknowhowtoaccessrelevant

    policies,guidelinesandproceduresUnderstandtheprofessionalstandardsand

    behaviourexpectedofthem

    New Operating Model

    In2014,wefocusedontwomaininitiativesinadditiontoour core functional, technical and soft-skill trainingprogrammesthatsupportourstrategicobjectives.

    Ourfull-scaletrainingprogrammesupportedtheNewOperating Model (NOM) that covered sales andmarketing.ThisprogrammecontributedtotheBankssustainabilityandsupportedthegovernmentagendaofdevelopingSMEentrepreneurs.

    WealsosupportedoneprogrammefromProjectWisdomthat aimed to make the Bank fully Shariah compliantby2015.

    Up-skilling

    Re-skillingProfessional

    Master Sales

    NewOperatingModel

    Non-executive to Relationships Managers (RMs) Non-operations to RMs Credit Admins (CAs) to RMs

    RMs to RMs Credit Admin to General Intervention

    Stage 1 (Professional selling methods, continuous learning mind-set and commitment to win methods, continuous learning mind-set and commitment to win)

    Stage 2 (Review, difference applications and C-level approaches)

    Training Programmes that supports NOM

  • 41

    Up-skilling and Re-skillingWeintroducedNOMtostrengthenoperations,whichincludedmovingnon-operationsstafftodifferentjobfunctions.

    Our Redeployment Programme ensures that properlearning and development initiatives are provided toemployeesdeployedtobusinessoperationalfunctions.

    Thetrainingisdeliveredbyinternaltrainerstoequipstaffwith the necessary skills and knowledge required forrelationship management job functions and generalintervention. We deliver the programme in batchesdependingon thenumberof traineesandnewfunctionscreated.Thisapproachensuresemployeesareequippedwith thenecessaryskillsandknowledge for thespecificfunctiontheyareassignedto.

    Redeployment Programme - Job Familiarisation

    Weupskillednon-operationsstafftoRelationshipManagersfrom3to5June2015atthePremiereHotel.30selectedemployees attended the programme. We also trainedexistingrelationshipmanagerstoimprovetheirskillsandknowledgebasedontheNOM.64employeeswereinvolvedinthisredeploymentprogramme.

    Master Sales Professional OurMasterSalesProfessional(MSP)programmeinculcatedamentallytoughsalesachievingmindsettosustaingrowthandachievequantumhighperformance.Achievingsalestargetsisnolongerthesoleresponsibilityofthesalesandmarketingteam.Everysingleemployeemustworktogethertomeetthequantumsalestargetquickly.

    MSPraisedthecommitmentoftheRelationshipManagementTeamtobelievethatmarketingcanmakeadifferenceandeverysmallcontributioncounts.326relationshipmanagersand30headsofdepartmenttookpartinthisprogramme.

    MSPcoversfourstages:

    Stage1.Professionalsellingmethods,continuouslearningmindsetandcommitmenttowin;

    Stage2.Review, different applications and C-levelapproaches;

    Stage3.Creative applications and high performancemotivation(MSPTransformation);and

    Stage4.MSP,assessment,gradingofsalesprojectsandcertification.

    MSPtaughtparticipantswaystostaymotivatedtoachieveextraordinary targets inacompetitiveenvironment.TheylearnedtheroleofRelationshipManagerssotheycouldfullysupporttheteams,applytheMSPQuantum-leapmindsetandsupporteachothertoachieveambitioustargets.

    RelationshipmanagementstaffattendedthefirstStage1courseon28January2014atthePremiereHotel.Atotalof326employeesattendedStages1and2.Stage3isscheduledforcompletionin2015.

    Project Wisdom

    InJune2011,wedecidedtotransformintoanoperationallyefficientIslamicfinancialproviderunderProjectWisdom.All new conventional loan approvals ceased and werereplaced with Islamic financing following an internalcirculationon22February2011.

    ProjectWisdomofficiallycommencedinMay2012withanIslamic financing and treasury portfolio. Our initiativesincluded identifying gaps and raising awareness of theprocess, people, product and system. Our learning anddevelopment training programmes focus on people.InitiativescarriedoutbyHumanCapitalDevelopmentwiththecooperationofCEDARand theShariahManagementDepartmentarehighlightedbelow.

    Certified Islamic Development BankingOur Certified Islamic Development Banking (CIDB)programmeofferspracticalworkingknowledgeofIslamicfinanceandbankingwithanemphasisondevelopmentalroles.Itcaterstomiddleandupper-levelexecutiveswithindevelopmentfinancialinstitutions(DFIs).

    Thescopeof Islamicfinancehasbroadenedsignificantlywith related products and their mode of transactionsgrowingrapidly.TheprogrammeincreasesDFIexecutivesunderstandingofIslamicfinanceanditsrelevancetoday-to-day banking operations. These executives acquiredfundamentalknowledge to incorporate Islamicfinancingproductsintheirbusinessoperations.

    In2014,atotalof305hadcompletedCIDBtrainingand287passedtheexamination.

  • 42 2014SUSTAINABILITYREPORT

    Professional Islamic Development Banking

    Professional Islamic Development Banking (PIDB) isadvancedlevelcertificationforbankofficersinIslamicdevelopmentbankingandfinance.Themodulescover: Financialmanagement and controls in SMEs and

    developmentbanking BusinessprocessandbestpracticesofSMEsand

    developmentbanking RiskmanagementinSMEsanddevelopmentbanking CreditanalysesandentrepreneurprofilinginSMEs

    financing ContemporaryissuesofDFIsandentrepreneurships

    PIDB was delivered to 10 groups and attended bycustomer-facing employees. Approximately 278employees have attended PIDB and 127 passed theexamination.

    Structuring Job Training

    The Learning and Development Section of HumanCapitalDevelopmentdepartmentsalsoworkwith theShariahManagement Department on structuring jobtraining.Thistrainingenrichesandincreasesemployeesunderstanding,competencyandknowledgeof Islamicbanking. It focuses on outcomes and translates intoapplicationandexecution.

    Themodulescoveredinthisinitiativeinclude: ContinuousstructuredtrainingmodulesonIslamic

    bankingoperationsand theapplicationofShariahrequirementson legalandsecuritydocumentsviaSOJT at our headquarters, enterprise centres,businesscentresorregionalcentres;

    Islamicbankingfinancingpackagingandstructuring; The application and execution of standardised

    transactiondocuments; Shariahapplicationsand requirementsof security

    documentationsforallIslamicfinancingcontracts; Performingassessmentsofparticipantsandlearning

    facilitators;and Developingresourcepersonsintheirworkplaces.

    TALENT MANAGEMENT AND SUCCESSION PLANNING

    Talent management and succession planning is theprocessofpinpointingkeyneedsforintellectualtalentandleadership.Itpreparesemployeesforpresentandfuture work responsibilities needed by the Bank.Itemphasisestheinternaldevelopmentofpeople.Talentmanagementandsuccessionplanning is treatedasabusinesscontinuityplanforoursustainability.

    Each year, all heads of department name threeperformingemployeeswiththepotentialtorisetothenextlevel.

    Candidatesareselectedobjectivelybasedonsetcriteria.Thepotentialsubordinateswillbeassessedforsuitabilityand will be provided with learning and developmentopportunitiesaswellasrelevantexposureonaprioritybasis.TherespectiveheadsofdepartmentsandHumanCapital Development jointly develop the career pathsanddevelopmentplansforthenamedsuccessors.

    SUSTAINABILITY IN THEWORKPLACE CONTD

  • 43

    COMPETENCY ASSESSMENT

    Theongoingdevelopmentoftheemployeespersonalandprofessionalcompetenciesisessential.Eachpositionhasa defined set of core competencies and functionalcompetencieswhicharerequiredatspecificproficiencylevels.

    Thecompetencyassessmentisperformedasandwhenrequired for specifically measuring and evaluating anemployees competencies. The outcomes of thecompetencyassessmenthelpinidentifyingthelearninganddevelopmentneeds.

    Theassessmentprocessesmayincludemultiple-choicetests,structuredinterviews,profilingquestionnaires,job-knowledge tests, social skills inventories, executiveassessmentcentres,language-learningabilitytestsandprofessionalexaminationsformanagersandexecutives.

    Theresultsofthecompetencyassessmentareanalysedtoidentify the learning and development requirements ofemployees. The employee competency assessment isconductedbyHumanCapitalDevelopmenttomeasuretheemployeescompetency.

    MANAGING PERFORMANCE

    We are committed to inculcating a high performancework culture. We provide each employee with clearperformance objectives, professional development,ongoing performance coaching and feedback. Werecogniseperformersandrehabilitateunder-performers.

    PerformancemanagementisongoingandlinkedtotheBanksfinancialcycle.Therearethreemainactivitiesinperformancemanagement: Performanceplanning; Mid-yearperformancereview;and Year-endReview.

    Employeesatexecutivelevelandaboveundertakeallthree activities; non-executive level employees onlyreceiveayear-endreview.

    Management may adjust performance ratings forevaluationconsistency.Wemayalsouse informationfrom performance management forms in decisionsinvolvingpromotions,performance-baseddisciplinaryaction, performance-based salary increases and

    workforceresizing.Performancemanagementformsbecomepermanentlyenteredonemployeespersonalfiles.

    Performance Planning

    Weperformallperformanceplanningatthebeginningofeachfinancialyear.ManagementcommunicatesandcascadesdowntheBanksKeyPerformanceIndicators(KPIs) to all heads of department who align theirrespective divisional or departmental KPIs with theBanks.TheapproveddivisionalanddepartmentalKPIsareraisedtothenextsupervisionlevel.Thisprocesstakesplaceforindividualemployeesineachrespectivedivision,department,sectionorunit.

    Atthisstage,clearperformanceplanningisestablishedand communicated to employees. Expectationsregarding employees performance are established.Thecriteriabywhichemployeesactualperformancewill be measured and their success determined isspecified.Employeesarealsoclearabouthowmeetingtheseexpectationswillcontributetotheachievementofdivisional,departmentalandtheBanksKPIs.

    Employeesandtheirimmediatesuperiorsmustagreewith theperformanceplanning. In theevent that thepartiesdonotagree,themanagersdecisionisfinal.

    Mid-year Performance Review

    Employees meet informally with their immediatesuperiorsthroughouttheperformancecycletodiscussa broad range of issues and resolve any problems.Employees are responsible for meeting theirperformance expectations. Immediate superiors useappropriate supervisory techniques that helpemployees meet or surpass their performanceexpectations.

    Aformalmid-yearperformancereviewisheldduringaninformalsupervisionmeeting.Generally,thistakesplaceinthesixthmonthaftertheperformanceplanning.Performance expectations are measured, reported,discussedanddocumentedduringthisreview.

    When expectations alter during the course of theperformance cycle, managers communicate thesechangesandmodifyperformanceplanningaccordingly.Modificationsmustbeagreedbybothparties.

  • 44 2014SUSTAINABILITYREPORT

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Year-End Review

    Superiors conduct year-end reviews to measureemployees performance against agreed KPIs. Theevaluationisperformedattheendofthefinancialyearandtheprocessisastransparentaspossible.

    Supervisors use verifiable information collected anddocumentedthroughoutthecycle.Theydeterminetheextent to which actual performance has met theexpectationsdefinedintheperformanceplanning.

    The evaluation is documented in the PerformanceManagement System. The annual performanceappraisal uses a six-level rating scale for reportingoverallperformance.

    Performance Improvement Plan

    Wearecommittedtofosteringanenvironmentinwhichemployeescanperformtothebestoftheirability.ThePerformance Improvement Plan (PIP) promotes anorganisational culture that educates and improvesunderperformers. We do not terminate employeesemployment contracts without first giving them achancetoimprove.

    ThePIPspecificallyaddressesemployeesperformancethatrequiresimprovementincriticalareas.Weensureafairandconsistentapproachtoenforcingperformancestandardsacrossalldivisions.

    The PIP does not apply to employees who are underprobation and periodic or temporary employees,outsourcedemployeesandcontractorswhoarenotunderourdirectemployment.

    Employeesunderstandwhatisexpectedofthemandwaysthey can contribute to achieving organisational goals.Immediatesuperiorsguidetheiremployees inachievingtheirgoalsandobjectives.Theyensureemployeesknowwhatisexpectedofthemhowtomeetspecificgoalswithinareasonabletimeframe.

    EMPLOYEE ENGAGEMENT

    Weencouragecloserandstrongerrelationshipsbetweenemployees.Variouseventsareheld throughout theyearsuchasfamilydays,annualdinners,employeegatheringsduring the festive season, employee competitions andsports tournaments. These events increase employeeengagementandtheircommitmenttotheBank.

    EmployeeeventmanagementisfacilitatedbytheEmployeeRelations Section. Annual events are aligned with thecorporatevisionandmission.Anannualemployeeeventcalendarispreparedbasedontheannualbudgetallocation.

  • 45

    Methods of Engagement in 2014

    Regular Engagement

    Details Frequency

    KnowledgeSharingTalk Monthly

    RamadhanGiftGivingtoAllEmployees Annually

    IftarRamadhan:DistributionofIftarforThoseDoingOvertimeDuringRamadhan

    AnnuallyduringRamadhan

    QuarterlyAssembly:GMDDisseminatingInformationtoEmployees Quarterly

    GroupMDWalkabouttoBranches Monthlyandwhenrequired

    EmployeeEngagementSurvey Annually

    GrievanceProcess Asandwhenrequired

    DonationDrivesuchasFiresorFloods Asandwhenrequired

    Table Get Togethers

    Details Frequency

    FamilyDayorAnnualDinner Annually

    ChineseNewYearLunchwiththeSeniorManagementCommittee(SMC) Annually

    DeepavaliLunchwiththeSMC Annually

    KuliahZohor Monthly

    KuliahMuslimat Monthly

    HariRayaCelebration Annually

    MITIGatheringinSMEBank Annually

    Recognition

    Details Frequency

    EducationIncentivestoEmployeesorTheirChildrenAccordingtotheGuidelines

    Annually

    TaskaPintarGraduationDayforChildren Annually

    RetirementEvent Asandwhenrequired

  • 46 2014SUSTAINABILITYREPORT

    PROMOTING EMPLOYEES WELLBEING

    Weare committed to helping our employeesachievewell-beinginmanyfacetsoftheirlives.Whetherhealth,financial, personal or professional well-being, weconductnumerousprogrammesthathelpthemachievetheirpersonalgoals.SomeofthemanyprogrammesprovidedattheBankarehighlightedbelow.

    Childcare Centre (Taska Pintar)

    Our childcare centre provides a family-orientatedworkplace environment to employees with youngchildren.Thechildcarecentre ismanagedefficientlywithsetrulesandregulationsforchildrenssafetyandsecurity.

    Employeesmayenrol theirchildrenonafirst-come,first-servedbasisattheBanksdiscretion.Thecentredeliversanaccreditedchilddevelopmentcurriculumand programme. It is regulated by requirementsstipulated in the Child Care Centre Act 1984 andDepartmentofSocialWelfarepolicies.

    Thecentreisopentoallemployeeswithchildrenagedbetween two and four years old. It has amaximumcapacityof25children.

    Flexi Hours

    AtSMEBank,weunderstandthatindividualswhoareabletobalancetheneedsofworkandhomearemoreeffective employees andmore successful family andcommunitymembers.Werecogniseblendingpersonalandprofessionallivesisdifferentforeachpersonandcan also vary over time. We strive to provide ouremployeeswithasupportiveworkenvironmentandachoiceofflexibleworkhoursfrom8.30amto5.30pmor9.00amto6.00pm.

    EMPLOYEES PERSONAL DATA PROTECTION

    Ouremployeespersonaldata issubject toapplicabledataprotectionandprivacyrequirementsasmandatedby the PDPA. We only process employees personaldataif: It is for a lawful purpose directly related to

    employment; Necessary and directly related to managing the

    employee; It is adequatebut not excessive in relation to the

    employmentpurpose; Theemployeesconsentisobtainedtouseit;and Explicit consent of the employee is obtained to

    processsensitivepersonaldata.

    Wewillnotdisclosetheemployeespersonaldataforotherpurposesortothirdpartieswithouttheemployeesconsent.

    EMPLOYEES RIGHTS AT WORKWe acknowledge our responsibility to respectemployeesrightsinaccordancetotheHumanRightsCommissionofMalaysia(SUHAKAM).Wedonottolerateanyformofworkplaceharassment,discriminationorviolence. We are governed by our own Terms andConditionsofServicebutalsocomplywiththelabourpracticeandlegislationsuchasEmploymentAct1955andCodeofConductofIndustrialHarmony.

    We respect employees rights to bargain collectivelyunder the National Union Commercial Workers(NUCW). 20% of our non-executive workforce wasrepresented by NUCW as at 31 December 2014.Weconductregularmeetingsandenjoygoodrelationswiththeunionanditsrepresentatives.In2014,issuesraisedincludedpromotionandworkinghours.Theseissueswereresolvedwithmutualunderstandingbetweentheparties.

    SUSTAINABILITY IN THEWORKPLACE CONTD

  • 47

    We also protect supply-chain personnel and localcommunitymembers. The Human Resources Policyrecognises that while governments are primarilyresponsibleforhumanrightsprotection,therightsofindividuals may be affected by company activities.Alloperations: Provideasafeandhealthyworkplaceforassociates; Donotusechild,forced,prison,indentured,bonded

    orinvoluntarylabour; Prohibitdiscriminationintheirhiringand

    employmentpractices; Forbidactualandthreatsofphysicalabuseand

    harassmentofassociates;and Supportfreedomofassociationandtherightsof

    workersandemployerstobargaincollectively.

    All employees are governed by their Terms andConditions of Service; contractors and vendors aregovernedbytheirgeneralcontractwiththeBank.Allstandardagreementsprotectallparties.

    Everyoneshouldbetreatedwithdignityandrespectandweconductbusinessinamannerconsistentwiththisprinciple.Wecomplywithallapplicableemploymentandhumanrightslawsandregulationswherewehaveoperations and our suppliersmust do the same.Allemployees, including security personnel, are issuedwith an Employee Handbook and Code of Conduct.Thesedocumentsclearlydefinethescopeofourethicalresponsibilities.

    We comply with the Children and Young Persons(Employment)Act1966.Individualsagedbelow18yearscannot be employed as mandated in the MalaysianEmployment Act 1955. Although we do not have adedicated non-discrimination policy, there is ampleprotectionintheEmployeeCodeofConduct.Thiscodegoverns all aspects of employment includingdiscrimination.

    Wehavehadnoincidentsofdiscriminationorrisktofreedomofassociationandcollectivebargaining.Therehavebeennoreportedincidentsofrisksofchild,forcedorcompulsory labour.NoviolationsofhumanrightsinvolvingtherightsofindigenouspeoplehaveoccurredatanytimeintheCompanyshistory.

    EMPLOYEE GRIEVANCE HANDLING

    A grievance is defined as reasonable and legitimatedissatisfaction by an employee in his or her workenvironment.Grievancehandlingisperformedasandwhenissuesoccur.Problemsareresolvedpromptlyandemployeeshavetheoptiontoelevatetheirgrievancestohigherlevelsofauthorityifnecessary.

    Itiseachandeveryemployeesrighttoairemploymentgrievances or raise complaints about workingconditions. The employees future employmentprospectsarenotaffectedinanyway.

    Anemployeewhohasagrievanceorcomplaintmaywrite or complete the Grievance Information Form.The complaint must be submitted to an immediatesuperior, head of department or Human CapitalRelations.

    We try to resolve grievanceswithin the department.Theemployeesimmediatesuperiororheadwillreviewandrespondtothecomplainant.

    If a grievance cannot be resolved, it is escalated toHumanCapitalRelationswhowillassessthecaseandleadtheinvestigation.Ifthereisacase,HumanCapitalRelations will take necessary disciplinary action inaccordancewiththeIndustrialRelationsprocess.Ifnot,HumanCapitalRelationswillrespondtothecomplainanttoresolvethecaseamicably.

    Year No. of Grievances Received

    No. of Grievances Solved

    2012 0 0

    2013 0 0

    2014 4 4

  • 48 2014SUSTAINABILITYREPORT

    OCCUPATIONAL SAFETY AND HEALTH (OSH)

    Wearecommittedtoprovidingasafe,healthyandsecureworkplace forallemployees, contractors, visitorsandcustomers.Ourcommitmenttoimplementingasafetyandhealthpolicyisintegratedintothedailyactivitiesofallpeoplefrequentingourplacesofworkeffectively.

    Wemeetoursafetyandhealthcommitmentsby: Acknowledging our legislative requirement and

    ensuring compliance as the minimum acceptablestandard.

    Holdingalllevelsofmanagementaccountableforthesafetyandhealthofemployeesundertheirleadership.

    Establishingacontinuousandorganisedoccupationalsafetyandhealthmanagementsysteminaccordancewiththelaw.

    Creating safe and healthy working conditions andprovidingappropriatesafetyequipment.

    Providing our people with information, training,instructionandsupervisionsotheyhavetherequiredskillsandcompetenciesfortheirroles.

    Investigatingallaccidents,illnesses,injuries,poisoningand dangerous occurrences and taking preventativemeasurestoensureincidentsdonotrecur.

    Raisingstaffawarenessofoccupationalsafetyandhealth awareness so they view good health ascommonpracticeinworkorsociety.

    Providingemployeeswithbasicwelfarefacilities. Reviewingandrevisingthepolicywhennecessary.

    TheOccupationalSafetyandHealthAct,1994requirestheappointmentofasafetyandhealthcommittee(SHC).OurSHCisrepresentedby0.9%of theworkforceandwasestablishedto: Assistinthedevelopmentofsafetyandhealthrules

    andsafesystemsofwork. Review theeffectivenessof theexistingsafetyand

    healthprogramme. Conductstudiesontrendsofaccidents,near-misses,

    dangerousoccurrences,occupationalpoisoninganddiseasethatoccurintheworkplace.

    Report any unsafe or unhealthy conditions orpracticesintheworkplacewithrecommendationsforcorrectiveaction.

    Review workplace safety and health policies andrecommendanyrevisions.

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Health Safety and Environment (HSE) Committee

    Dato Mohd Rizal Mohd JaafarChairman(COO,Finance&CorporateServices)

    EMPLOYER REPRESENTATIVES EMPLOYEE REPRESENTATIVES

    Zainal OsmanPresident,KSRSME

    Yoshran ZaidonBusiness,Continuity

    Management

    Saipul MD RamliInhouseCommitteeChairmanofNUCW

    Mohamad Ridzuan Mansor

    Head,GeneralServices

    Mustafar MaarofHead,EmployeesRelations

    Mohamed Khairil Mohamed Khalid

    Head,FacilityManagement

    Zaihani Abdul HamidDirector,Operations

    Noor Nazmi AhmadHead,OperationalRisk

    Shahrir AmranActingDirector,GroupHumanCapitalManagementMohd Zuhar Mohamed Nor/Mohd Tarmizi Mohamad

    SecretarySHO

  • 49

    SHCmeetingsareheldatleastquarterlyorasrequiredbytheOccupationalSafetyandHealthAct,1994.Minutesof eachmeeting are recorded to document problems, issues, proposed corrective action and actions taken.Attendanceiscompulsoryandcommitteemembersfailingtoattendareremoved.

    Safetyandhealthinspectionsofindividualdepartmentsareconductedperiodicallyto: Identifyhazardsandunsafeactsforcorrection; Evaluateprogrammeeffectiveness;and Assigncorrectiveresponsibility; Reportidentifiedproblemsandprogresstoimprove

    workplacesafetyandhealth.

    SafetyandHealthCommitteeresponsibilitiesareguidedbytheOccupationalSafetyandHealthAct,1994to Identifypotentialhazards; Recommendcorrectiveaction;and Evaluatethesehazards; Followuponimplementedrecommendations

    Occupational Safety and Health (OSH) 2012 2013 2014

    AbsenteeRate(AR)forTotalWorkforce* 957 631 1.833

    InjuryRate 0 0 0

    FatalityRate 0 0 0

    *SickLeaveTaken

    Safety and Health Training

    Wecollaboratewith theNational InstituteofOSH Indicator indeliveringemployeesafetyandhealth trainingmodules.Wehavedevelopedcomprehensivehealthandsafetyproceduresthatareupdatedregularlytocomplywithgovernmentalregulations,standardsandbusinessbestpractice.Jobsafetyanalysesandriskassessmentssupportthesepoliciesandprocedures.Weconductauditsandinspectionstodeterminetheeffectivenessofthesemeasures.

    Training Programme Relevant to Safety and Health Conducted in 2014

    Programme Title Organiser No. of Participants

    ErgonomicsandManualHandlingintheWorkplace NIOSH 1

    OccupationalSafetyandHealthinOffices NIOSH 1

    FireSafetySeminar2014 BOMBA 1

    EmergencyPreparednessandResponsePlan NIOSH 3

    OilandGasSafetyPassport NIOSH 1

    OSHManagementSystem:MS1722&OHSAS18001Interpretation&Implementation:Module1of2(LeadAuditor)

    NIOSHCertificationSdnBhd

    2

    Understanding,EvaluatingandImplementinganEffectiveHIRARCatWork NIOSH 1

    ConstructionSafety&HealthOfficer(CSHO) CIDB 1

    EffectiveSecurityManagementA21stCenturyPerspective UPerformaResources

    1

    SafetyandHealthOfficerCourse CONSIST 1

    OccupantSafetyBriefingandIndoorEvacuationProceduresattheSMEBankTower BOMBA 21

  • 50 2014SUSTAINABILITYREPORT

    DIVERSITY AT THE WORKPLACE

    Webelievediversityandinclusionareessentialtolivingourvalues,achievingourbusinessgoalsandbuildingastrongerSMEBank.Webelievethatdiversityandan

    inclusivecompanyculturearekeydriversofcreativityand innovation.Embeddingdiversityand inclusion inourcorporateculturehelpsusdeliverexcellentresults.

    SUSTAINABILITY IN THEWORKPLACE CONTD

    Executive

    NonExecutive

    Total

    PermanentStaff

    NonPermanent

    Staff

    Female

    Male

    Malay

    Chinese

    Indian

    Others

    < 3030-50

    > 50

    Workforce by Employment Type

    Workforce by Gender

    Workforce by Ethnicity

    Workforce by Employment Contract

    Workforce by Age Group

    No. of Employees

    No. of Employees

    No. of Employees

    No. of Employees

    No. of Employees

    1,200

    1,000

    800

    600

    400

    200

    0

    1,200

    1,000

    800

    600

    400

    200

    0

    1,200

    1,000

    800

    600

    400

    200

    0

    1,0601,0401,0201,000980960940920900880

    1,100

    1,050

    1,000

    950

    900

    850

    2012

    2012

    2012

    2012

    2012

    2013

    2013

    2013

    2013

    2013

    2014

    2014

    2014

    2014

    2014

    935

    964 1,024 1,044

    1,00

    816

    1,02

    227

    422

    694

    76

    29

    488

    920

    476

    634

    0

    542

    982

    482

    60

    31

    488

    627

    055

    61,00

    5

    731

    777

    247

    809

    235

    233

    245

    657

    62

    278

    676

    70

  • 51

    Employee Turnover 2012 2013 2014

    EmployeeTurnoverRate 4.90% 6.60% 7.90%

    Male 27 34 43

    Female 18 34 39

    AgeGroup

    < 30 16 26 2830-50 28 41 50

    > 50 1 1 4

    Women in Management

    %WomeninManagement 12.50% 11.30% 13.30%

    %WomeninTopManagement 0 0.40% 0.40%

  • FINANCING PROGRAMMEFOR WOMAN ENTREPRENEUR

    SUSTAINABILITY IN THEMARKETPLACE

  • 54 2014SUSTAINABILITYREPORT

    Weengageregularlywithourcustomersthroughavarietyofprogrammesandinitiatives.Weprovidethenecessarysupportsoentrepreneurscanconcentrateoninnovationand running their businesses. Our client charterdemonstratesourdesiretoprovideefficientandeffectiveservicestoallourcustomers.Ourstand-alonecoachingcentre,CEDAR,buildsthecapacityandcapabilityofbothSMEandDFIemployees.

    PRIORITISING OUR CUSTOMERS

    Maximisingcustomerlifetimevaluehelpsuscompeteina competitive environment. We develop long-termrelationships with customers through our products.Providing the right information at all times ensurescustomersareabletomakeinformeddecisions.Two-waycommunicationsallowustoserveallmarketsegmentseffectively. We prioritise relationships over buildingbrandstoremaincompetitiveinthemarketplace.

    Close to the Customer: Competent Contacts, Comprehensive Services

    Wesupportourcustomersanddealwithanyconcernsorcomplaints they may have. Our customer servicedepartmentwelcomesfeedbackinperson,bytelephone,postoremail.Wehandlerequestspromptlyandreliablywithout any unnecessary bureaucracy. Complaintshandlingisalearningprocess.Wetrytomeetcustomersexpectationsthebestaswecansotheycanbeinspiredandcontinueinnovating.

    Keeping the Customer Happy: Our Complaints Management

    Complaintsreceiveapromptandsympatheticresponse.Ourdetailedguidelinesstatethatcomplaintsmustbedealtwithpolitelyandcompetently.Goodwillmustbeshown to customers. Our up-to-date database is

    SUSTAINABILITY IN THEMARKETPLACE

    ClientCharter

    We strive to provide efficientand effective services tocustomers based oncharter as follows:

    with

    in 30 working days f

    rom rec

    eipt

    of com

    plete docum

    entation

    .

    as possible and a decision sh

    all be

    given

    All finan

    cing

    app

    lications will be pr

    ocess

    ed as s

    oon

    conditions will be processed

    within working days.

    complete and fulfil the predisbursement

    All financing disbursement applications that are

    related to ank financing w

    ill be

    ischarge and release of guara

    ntors

    completed within 0 working da

    ys

    from full settlement date.

    Theclientscharterwillbereviewedfromtimetotimetoim

    proveit

    seffectivene

    ss.

  • 55

    analysedandmanagementupdatesseniormanagementregularly. This analysis helps identify problems socorrectiveactioncanbetaken.Itisalsousefulinthedevelopmentofnewconcepts.

    Customercomplaintsorimprovementsuggestionsarevaluable to us. Customers who highlight potentialweaknessesareanasset.Theypresentanopportunityfor us to improve our service quality and makecustomershappyoncemore.

    How to keep in touch with us

    Type Details

    1-800-88-3131

    [email protected]

    www.smebank.com.my

    AllnearestSMEBanksbranches

    Allfeedbackrelatedtoproducts,financingfacilitiesandservicesare: SubmittedtotheHeadofCustomerRelationsand

    Liaison; Treatedasconfidentialandcannotbeaccessedby

    unauthorisedemployees; Recordedordocumented;and Handledinaccordancewiththetimelinesetinthe

    procedures.

    Customersareinformedtheyhaveanoptiontoescalatetheir complaints, suggestions or appeals within theorganisation.TheyalsohaveanalternativeforumiftheyarenotfullysatisfiedwiththeBanksresponse.

    Customer Service Management works to resolvecomplaints,suggestionsandappealsoncetheybecomeawareofthem.Complaintsrootcauseanalysisisalsoperformedperiodically.

    Innormalcases,weaimtoprovideasolutionwithin10workingdays.Solutionsandstatusupdatesmustbesubmitted to customers within 30 working days forcomplexcases.

    ENSURING CUSTOMER SATISFACTION

    Wework to improveourservicestandard.An internaldeliverycharterandclientcharterguideemployeesinmonitoringcustomersatisfaction.Datafromourinternalandexternalcustomersatisfactionsurveysareusedasayardstick for our Customer Satisfaction Index (CSI).The surveys measure the overall customer servicesatisfaction performance we provide to externalcustomersandinternalservicedeliverytoemployees.

    External customer satisfaction survey respondentsconsistofbothexistingandpotentialnewcustomers.Results for thepast threeyearsshowthatcustomersatisfactionhas increasedeach year: 87.2% in2012,92.2%in2013and93.3%in2014.Whilerespondentsaregenerallysatisfiedwithouroverallservices,theyalsooffer suggestions for further improvement. Thesesuggestions help us understand and respond toemerginginternalandexternalissuessuchaspolicies,process,systemsandservicedelivery.

    Internal Customer Satisfaction Survey (ICSS) and External Customer Satisfaction Survey (ECSS)

    The biannual ICSS solicits feedback from internalcustomers. It gauges satisfaction levels of servicesprovidedbythevariousdepartmentswithinSMEBank.

    The quarterly ECSS solicits feedback from externalcustomerstodeterminetheirsatisfactionlevelsoftheBanksservices.Thissurveymeasurestheeffectivenessoftheoverallcustomerservicesatisfactionperformanceprovided.Thesurveycoversnewandexistingwalk-incustomersexperiences at the point of entry and EPC tenantfeedback.

    Customer Service Management is responsible forpreparingbothsurveysandpresentingthefindingstoseniormanagement. Periodically, Customer ServiceManagementreviewsthequestionnairebasedon: Feedbackfromstakeholders; Managementrequirements; Theobjective;and Thenatureofthesurvey.

  • 56 2014SUSTAINABILITYREPORT

    SUSTAINABILITY IN THEMARKETPLACE CONTD

    Customerserviceisatthecoreofeverythingwedoandgoes beyond simply listening to customer feedback.Itbeginswithunderstandingcustomersneedsclearlyandidentifyingtheirexpectations.Wepropo