KUALA LUMPUR, June 13 — Social finance initiatives such as iTEKAD are a way forward towards narrowing the gap that exists in communities in addressing social and economic disparities.

Bank Rakyat chief executive officer (CEO) Datuk Mohamad Hanis Osman said such an initiative should also be taken by more in the private sector whereby they could be more innovative in providing motivation or incentives to address challenges in terms of social and environmental needs.

"By taking such efforts, we (the private sector) would not restrict ourselves in relation to entrepreneurship. Perhaps, in the future, we can also play a role in other areas such as housing, education and even healthcare,” he said during a panel session titled "Social Finance (iTEKAD): Propelling Growth of Business” at the Sasana Symposium 2024 hosted by Bank Negara Malaysia (BNM) here today.

iTEKAD is an umbrella programme established by BNM. First launched in 2020, iTEKAD is a blended social finance programme to support low-income microentrepreneurs and to strengthen their financial management and business acumen towards generating sustainable income.

The programme provides business assets funded by social finance instruments (donations, social impact investment, zakat, and cash waqf), microfinancing, and structured training.

Mohamad Hanis also said in a move to encourage more financial institutions (FIs) to take up social finance, the government could perhaps mandate FIs to set up its own social finance programme or join the iTEKAD programme.

This is given that FIs, especially banks, see that social finance initiatives such as providing micro financing require a smaller amount of financing while the credit risk attached to the financing would be high, leading to the banks being unable to meet their respective key performing indicators.

Meanwhile, World Bank senior financial sector specialist Shahira Johan said good governance and credible information are crucial for building trust in social impact investing.

She said a strong governance system within an organisation could influence other actors in the ecosystem to improve their governance.

Besides, there is also a need for accurate reporting so that social impact investors could make more informed decisions and drive positive social impact.

"When we talk about social finance and philanthropic capital, the trust deficit issue is very important because one scandal would wipe out a programme entirely.

"Therefore, good governance is (required), and there should be standards and frameworks. In Malaysia’s context, I think we need to work with various stakeholders this year to come to a common framework,” said Shahira. — Bernama