iTEKAD Public Disclosure Authorized JUNE 2025 Making Inroads Into Social Finance Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized In collaboration with What’s Been Achieved, What’s Been Learned and Where We Go From There iTEKAD : MAKING INROADS INTO SOCIAL FINANCE What’s Been Achieved, What’s Been Learned and Where We Go From There JUNE 2025 In collaboration with © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretation, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Because The World Bank encourages dissemination of its knowledge, this work may be reproduced in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution: Please cite the work as follows: Johan Arief Jothi, Shahira Zaireen Bt and Aminan, Puteri Zahrah. (2025). iTEKAD: Making Inroads Into Social Finance, World Bank. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photo: © Nur Ashikin Binti Hussin @ EurekartStudio. Used with the permission of Nur Ashikin Binti Hussin. Further permission is required for reuse. Cover design and layout: Joe Art Studio Acknowledgements This report was prepared by a World Bank team consisting of Shahira Zaireen Bt Johan Arief Jothi (task team leader) and Puteri Zahrah Aminan. Valuable inputs were provided by Abayomi A. Alawode, Marie Stella Ambrose, Adriana Asmaa Binti Mohd Ezane, and Philbert Tiki Yong, and peer reviewers Aamir A. Rehman, Tushar Arora, and Kamal Siblini. The team worked under the overall guidance of Ilias Skamnelos and Judith Green. The report benefited from a close partnership and extensive discussion with the staff of Bank Negara Malaysia, particularly Nor Rafidz bin Nazri, Dr. Hamim Syahrum bin Ahmad Mokhtar, Mohd Shah Shukree bin Salim, Suzana binti Mokhtar, Nur Hadina binti Zolhaili, Nurhani Hazamah binti Anuar, Puteri Iffah Zulaikha Tarmizan and Nor Ainaa binti Abdul Rahim of the Financial Inclusion Department and the staff of Association of Islamic Banking and Financial Institutions of Malaysia (AIBIM), particularly Ratna Sha’erah Kamaludin, Mazura Mohamed Jamil, and Norhisham Mohamed. The team is also grateful for the cooperation of AIBIM iTEKAD Working Group members, Centre of Excellence for Islamic Social Finance of INCEIF University, Entrepreneur Development Division of Majlis Amanah Rakyat (MARA), Institute of Islamic Banking and Finance of International Islamic University Malaysia (IIUM), Institut Keusahawanan Negara Berhad (INSKEN), Lembaga Zakat Negeri Kedah, Majlis Agama Islam Wilayah Persekutuan, Masverse Sdn. Bhd., and Teraju Ekonomi Asnaf Sdn. Bhd. Production of this report was managed by Joe Art Studios. Azlina Binti Ahmad edited this report. Jeannette Goon Chern Yet and Dina Murad led external communications. Marie Stella Ambrose provided administrative support at different stages of this report. 2 iTEKAD: Making Inroads Into Social Finance What’s Been Achieved, What’s Been Learned and Where We Go From There Contents List of Figures..........................................................................................................4 List of Tables ...........................................................................................................4 Glossary of Terms....................................................................................................5 Acronyms................................................................................................................6 Executive Summary.................................................................................................7 CHAPTER 1 Introduction..........................................................................................................11 1.1 Context And Rationale: Why This Review Matters................................................12 1.2 Unpacking iTEKAD: Objectives, Structure, and Performance.............................13 1.3 Review Approach: Implementation and Impact Monitoring Mechanisms........14 CHAPTER 2 Implementation Practices: How Are the iTEKAD Programs Deployed Across the Industry?..............................................................................................16 2.1 Human Resource Allocation....................................................................................18 2.2 Participant Selection.................................................................................................19 2.3 Program Interventions..............................................................................................22 2.4 PFI–IP Collaboration.................................................................................................24 CHAPTER 3 Monitoring and Reporting: What Does Program Success Look Like?...................29 3.2 Methodology............................................................................................................30 3.3 Reporting Practices...................................................................................................33 3.4 Challenges.................................................................................................................35 CHAPTER 4 Participants’ Reaction: What Do iTEKAD Participants Think About the Program?..............................................................................................37 4.1 Participants’ Demographics....................................................................................38 4.2 Participants’ Perception............................................................................................41 4.3 Lessons Learned.......................................................................................................43 CHAPTER 5 Summary and the Road Ahead..............................................................................44 5.1 Key Findings..............................................................................................................45 5.2 Limitations and Future Research.............................................................................46 5.3 Recommendations...................................................................................................47 Appendix 1: Literature Review.............................................................................51 Appendix 2: List of PFI..........................................................................................53 References.............................................................................................................57 What’s Been Achieved, What’s Been Learned and Where We Go From There iTEKAD: Making Inroads Into Social Finance 3 List of Figures Figure 1.1: An Overview of iTEKAD ..................................................................................13 Figure 2.1: Generic Lifecycle of iTEKAD Program............................................................17 Figure 2.2: Average Experience in Microfinance of PFIs’ and IPs’ Staff.........................18 Figure 2.3: PFIs’ Perceptions on the Role of Philanthropic Capital in Expanding Risk Appetite.............................................................................21 Figure 2.4: iTEKAD Funding—Source of Funds (top) and Terms of Funding (bottom) by PFI Count......................................................23 Figure 2.5: Roles of IPs under iTEKAD...............................................................................26 Figure 2.6: Perceptions on PFI-IP Collaboration...............................................................27 Figure 2.7: PFIs’ and IPs’ Perceptions on the PFI-IP Working Relationship....................28 Figure 3.1: Progress and Impact of iTEKAD in 2023 (top) and 2024 (bottom).............32 Figure 3.2: Top Three Challenges of Impact Monitoring and Reporting......................35 Figure 4.1: iTEKAD Participants’ Demographics..............................................................39 Figure 4.2: iTEKAD Participants’ Perceptions About the iTEKAD Program..............................................................................................................42 List of Tables Table 1.1: Key Statistics of iTEKAD...................................................................................14 Table 2.1: Selection Practices Among PFIs......................................................................20 Table 2.2: iTEKAD Interventions Across PFIs...................................................................22 Table 2.3: PFI–IP Collaboration Matrix (Number of Institutions)...................................25 Table 3.1: Overview of Industry’s iTEKAD Impact Monitoring Practices......................31 Table 3.2: Additional KPIs Monitored by PFIs and IPs....................................................33 Table 4.1: Cohort Stratification..........................................................................................38 4 iTEKAD: Making Inroads Into Social Finance What’s Been Achieved, What’s Been Learned and Where We Go From There Glossary of Terms Vocabulary of Impact Monitoring and Evaluation Inputs Resources at the project’s disposal, including staff and budget. Impact Data on outputs and outcomes that can be used to evaluate impact. indicator Impact An objective assessment of program effectiveness that uses evaluation specialized methods such as randomized controlled trials to determine whether a program meets its objectives, i.e., impact attributable to the program, to estimate its net results or impact, and/or to identify whether the program’s benefits outweigh its costs. Impact A continuous process of collecting and analyzing information to monitoring better understand how well a program operates against expected outputs. Impact An analysis of the effects and outcomes of a project, program, or reporting initiative. It typically includes quantitative and qualitative data to demonstrate the impact on the target population, environment, or other areas of interest. Monitoring A process by impact-seeking organizations to enhance program and Evaluation effectiveness, make projects accountable to the public, and help (M&E) the government better allocate budget resources. Output The tangible goods and services that the project activities produce; these are directly under the control of the implementing agency. Outcomes Results likely to be achieved once the beneficiary population uses the project outputs; these are usually achieved in the short to medium term and are usually not directly under the control of the implementing agency. Social Finance All financial structures or business models that mobilize philanthropic capital including but not limited to donations, endowments (including cash waqf), or alms (zakat) to deliver tangible social outcomes. Vocabulary of Islamic Finance Asnaf Zakat beneficiaries include the hardcore poor and destitute, the poor, and oppressed Muslims. Maqasid Intent, objective, and purpose of public good to create harmony for the welfare of the society. Awqaf or Assets that are donated, bequeathed, or purchased to be held in Waqf perpetual trust for general or specific charitable causes that are socially beneficial. Zakat An obligatory financial contribution disbursed to specified recipients that the Shariah prescribes for those with a minimum wealth maintained for one lunar year. Zakat Zakat funds that are refunded to the zakat payer to be distributed Wakalah/ to eligible recipients either via self-distribution or delegation to Returned authorized institution or organization. Zakat What’s Been Achieved, What’s Been Learned and Where We Go From There iTEKAD: Making Inroads Into Social Finance 5 Acronyms Vocabulary of Impact Monitoring and Evaluation BNM Bank Negara Malaysia CSR Corporate Social Responsibility IP Implementation Partner KPI Key Performance Indicator M&E Monitoring and Evaluation MOF Ministry of Finance PFI Participating Financial Institution SIRC State Islamic Religious Council 6 iTEKAD: Making Inroads Into Social Finance What’s Been Achieved, What’s Been Learned and Where We Go From There Executive Summary What’s Been Achieved, What’s Been Learned and Where We Go From There iTEKAD: Making Inroads Into Social Finance 7 The iTEKAD initiative, launched by Bank selection, program interventions, PFI– Negara Malaysia (BNM) in May 2020, IP collaboration, and monitoring and is a social finance initiative to support evaluation (M&E) practices. low-income microentrepreneurs in Malaysia. The program aims to enhance The review employed a mixed- microentrepreneurs’ financial resilience methods approach, utilizing surveys and business acumen through a blend of to gather information on iTEKAD financial and non-financial interventions. implementation from PFIs and IPs. Since its introduction, iTEKAD has gained The surveys were digitally distributed, significant traction in Malaysia’s social resulting in a 70 percent response rate finance ecosystem. The total number of from PFIs and responses from 19 IPs. iTEKAD enrollments increased nearly In addition to surveys, interviews were fivefold from 1,595 in 2022 to 9,684 in conducted with various stakeholders, 2024, and the total social finance funds including State Islamic Religious mobilized grew from RM9.8 million in Councils (SIRCs), government agencies, 2022 to RM63.6 million in 2024. academic institutions, and training program participants. Two roundtable With support from BNM, this report discussions were also held with PFIs, provides a comprehensive review of financial regulators, and experts to the implementation of the iTEKAD gather feedback on preliminary findings initiative. The review examines the and recommendations. A pilot survey of implementation practices of Participating iTEKAD participants was also conducted Financial Institutions (PFIs) and their to assess the program experience from Implementation Partners (IPs), focusing their perspective. on human resource allocation, participant Key Findings The iTEKAD program’s implementation and challenges helps design relevant has primarily adhered to its original interventions. Developing an integrated design, demonstrating a commitment screening framework that considers to established objectives. The the socio-economic background of collaboration between PFIs and IPs has low-income microentrepreneurs and enabled PFIs to broaden their outreach incorporates non-credit information can to low-income microentrepreneurs from provide valuable insights, leading to diverse locations. A particular value- informed and fair selections. add of the program, acknowledged by all IPs interviewed, was its capacity to Secondly, while the variety of evaluate and strengthen participants’ training interventions promotes creditworthiness, enabling them to effective learning, it can also result in transition from reliance on financial aid inconsistencies in program delivery. to greater financial resilience. However, Hence, PFIs and IPs need to ensure that the review suggests only a few PFIs have all participants receive a level of training also taken the extra mile to improve their that can help achieve the program’s monitoring, by developing a framework core objectives consistently. Evaluating to measure and track participants’ credit training interventions and establishing scoring development. a standardized program that can benefit everyone is essential to achieve this. PFIs Notwithstanding, this suggests room for and IPs should also explore collaborations improvement, particularly in refining with technology providers to enhance the participant selection process to training access and improve delivery ensure greater effectiveness and long- quality. term impact. Reviewing participants’ profiles can help improve targeting Additionally, further enhancements and ensure resources reach those in are needed to establish a more need. Understanding demographics comprehensive M&E framework 8 iTEKAD: Making Inroads Into Social Finance Executive Summary that strengthens the assessment knowledge exchange would be mutually of program effectiveness. A well- advantageous, promoting capacity structured M&E system would enable building and enhancing outcomes for all continuous participant progress tracking, parties involved. identifying gaps, and measuring long- term impact. Moreover, it would facilitate While the review aimed to be the dissemination of lessons learned comprehensive, some limitations and best practices, creating a dynamic suggest further research is needed. feedback loop that drives ongoing Key areas for future studies include improvements. By integrating data-driven a cost-benefit analysis to assess the insights, the program can be refined to financial sustainability and value of enhance its effectiveness, ensuring better the program and an examination alignment with participants’ needs and of microentrepreneurs’ repayment ultimately leading to more sustainable behaviors. Additionally, a longitudinal microentrepreneurship development and study focusing on the economic and financial inclusion outcomes. financial impacts on participants, particularly for women and youth, The review also highlighted the need and a comparative analysis with other for an appropriate platform to facilitate microfinance initiatives could provide knowledge sharing between PFIs valuable insights. Addressing these and IPs. Establishing such a platform aspects would facilitate more effective would be highly beneficial, as many resource allocation, improved risk valuable lessons and best practices have management, and enhanced program emerged during this review that could design—ultimately supporting the long- be shared among stakeholders. This term success and viability of the initiative. Key Recommendations and Conclusion The table below summarizes the key to enhance implementation of iTEKAD. In recommendations by the World Bank pursuing the practical application of these based on findings of the review, which recommendations, stakeholders should policy makers and overall stakeholders consider the trade-offs between the costs of iTEKAD may wish to consider in effort and benefits. Executive Summary iTEKAD: Making Inroads Into Social Finance 9 Findings Recommendations Stakeholders Timeframe4 to Implement Limited utilization of Develop a robust participant PFIs and IPs Short-term integrated scoring selection framework. framework to Establish a comprehensive effectively facilitate internal screening framework participant selection for microentrepreneurs that process. captures credit and non-credit data. Diverse training Develop a standardized PFIs and IPs Short-term interventions training intervention. may lead to Define and establish clear inconsistencies in minimum standards for training training impact. interventions. Lack of standardized Establish a standard BNM, PFIs, Short-term methodology for methodology for M&E. and IPs M&E limits credibility Define and establish clear and comparability of minimum standards for impact monitoring indicators and targets, and reporting. measurement bases, data collection methods, M&E plan, and data governance. Limited knowledge Facilitate knowledge sharing BNM, PFIs, Medium- sharing and and documenting learnings.  and IPs term documenting Conduct annual roundtable learnings to enhance discussions with relevant capacity building stakeholders. among PFIs and IPs. Limitations of study Develop a long-term BNM, PFIs, Long-term evaluation plan. and IPs Identify and plan for future research studies to evaluate the effectiveness of the initiative. In conclusion, the iTEKAD initiative has emphasize the need for comprehensive shown promising impacts on business data collection and collaboration with IPs growth and financial confidence among to ensure sustained impact. By addressing participants. While most agree on these areas, the initiative can better reach the effectiveness of the interventions, underserved microentrepreneurs and opportunities for improvement in foster long-term financial resilience in the participant selection and long-term communities it seeks to support. tracking remain crucial to enhancing program outcomes. The lessons learned 4 Short-term (less than 12 months), medium-term (one to three years) and long-term (three to five years). 10 iTEKAD: Making Inroads Into Social Finance Executive Summary Chapter 1 Introduction 1.1 Context And Rationale: Why This Review Matters The Malaysian social finance ecosystem delivers the intended benefits. A program is still in early development, but implementation review helps identify significant investment opportunities any issues or challenges hindering the are on the horizon. PFIs have expanded program’s progress. This allows for timely their social finance offerings and adopted interventions and corrective actions to be a blended approach, incorporating taken. A structured review of the current donations, social impact investment, zakat, implementation practices becomes cash waqf, and microfinance facilities. more important now, considering the One of the most promising developments increasing amount of resources allocated is the iTEKAD social finance initiative to the initiative. A review is key to ensuring introduced by BNM, which, as of the end of efficient allocation of funds toward 2024, is offered by 14 PFIs. The total social program components that maximize finance funds mobilized grew significantly impact on beneficiaries and are cost- from RM9.8 million in 2022 to RM63.6 effective. million in 2024. By the end of 2024, over 9,000 microentrepreneurs benefited This report is the outcome of an from the program, with over 4,000 having ongoing review by the World Bank, completed the initiative—prompting the supported by BNM, which examines Ministry of Finance (MOF) to increase PFIs’ implementation of iTEKAD. As fund allocation from RM20 million in 2022 a follow-up to the World Bank report to RM25 million in 2024. Additionally, “Tracking Progress: Impact Monitoring of the MOF continues to support iTEKAD Social Finance,” launched in November with a RM15 million grant allocation for 2023, this study is intended to obtain participants’ seed capital and a new further insights into gaps and challenges RM5 million matching grant allocation in the iTEKAD initiative’s implementation, for insurance and takaful contributions particularly looking at impact monitoring in 2025. iTEKAD is well positioned to and reporting practices. The observations substantially support the government’s will also serve as input towards developing MADANI aspiration to eliminate hardcore a guide for PFIs on impact monitoring poverty and reduce the income gap. and reporting of social finance programs. The findings and recommendations of This review comes at a timely this report are intended to benefit not moment, four years after the iTEKAD only PFIs and IPs involved in iTEKAD but initiative was launched, allowing also stakeholders involved in Malaysia’s sufficient time for PFIs and IPs to broader social finance ecosystem. accumulate experiences and reflect The iTEKAD initiative exemplifies the on their journey so far to ensure practical application of blended finance, this review is meaningful. While implemented under the central bank’s the initiative’s growth reflects strong guidance. This approach can serve as a institutional and policy support, an reference to other countries in developing implementation review is necessary to their respective social finance initiatives. ensure it effectively achieves its goals and 12 iTEKAD: Making Inroads Into Social Finance Chapter 1 1.2 Unpacking iTEKAD: Objectives, Structure, And Performance Launched in May 2020, iTEKAD is a social growth of low-income microentrepreneurs finance initiative initially introduced to and improving their financial well-being. address the heightened vulnerabilities of the underserved following the As the convener of the initiative, BNM pandemic. Aligned with BNM’s Financial plays a pivotal role in ensuring the Sector Blueprint 2022–2026, the program smooth execution and continuous seeks to develop the capacity of low- improvement of iTEKAD. This involves income microentrepreneurs to generate regular monitoring of iTEKAD’s sustainable income by improving performance, facilitating collaboration their financial management skills and among PFIs and IPs, and leveraging business acumen. To achieve this, iTEKAD data insights to refine strategies. BNM’s integrates a blend of financial and non- involvement extends to setting clear financial interventions, providing critical objectives, providing guidance on best funds consisting of microfinancing practices, and fostering an ecosystem that and seed capital to sustain business supports innovation in social finance. By operations and structured training to acting as a central authority, BNM ensures equip participants with the necessary skills that all stakeholders are aligned with the to generate sustainable income (Figure program’s overarching goals, which have 1.1). This blend of interventions offers been instrumental in scaling up iTEKAD a comprehensive pathway to achieve and achieving significant milestones in iTEKAD’s goals of sustaining the business terms of enrollment and fund mobilization. Figure 1.1 An Overview of iTEKAD iTEKAD programme iTEKAD Participants Funds availble to PFIs : (microentrepreneurs) Seed capital BNM’s Micro Enterprises Facility (MEF) Coordinated by Government’s iTEKAD Participating Financial matching grant Institutions (PFIs) Microfinancing Salient Features of the Programme: In partnership with • Seed capital (funded by social finance instruments) to acquire business assets Implementation • Microfinancing supports working Partners capital need for business expension and instill prudent Training Providers financial behaviours Structured Training • Capacity building (including State Islamic Religious Councils business mentoring) improves entrepreneurial skills for business NGOs viability and performance • Impact-based monitoring enhances Government Agencies programme effectiveness and track achievement of outcomes Source: Retrieved from BNM’s webpage, Social Finance Since its introduction, iTEKAD has gained million in 2022 to RM63.6 million in traction in Malaysia’s social finance 2024. As of 2024, more than 40 percent ecosystem. From 2022 to 2024, the of these participants have completed total number of iTEKAD enrollments the necessary interventions provided increased fivefold, from 1,595 to 9,684 under iTEKAD, with the remaining still (Table 1.1). Consequently, the total undergoing training and observation. social finance funds mobilized under the Ultimately, these statistics reflect iTEKAD’s iTEKAD initiative increased from RM9.8 significant expansion. Chapter 1 iTEKAD: Making Inroads Into Social Finance 13 Table 1.1 Key Statistics of iTEKAD Key Performance Indicators 2021 2022 2023 2024 Number of microentrepreneurs enrolled 172 1595 6019 9,684 (cumulative) Number of participating financial institutions 3 9 13 14 Number of participants completing the program 165 1,054 2,340 4,057 Number of business sectors 15 17 17 17 Percentage (%) of participants who are female 60 59 n.a. n.a. Percentage (%) of participants who are male 40 41 n.a. n.a. Total financing disbursed (RM million) 2.2 8.5 35.5 53.7 Total social finance funds mobilized (RM million) 0.8 9.8 40.0 63.6 Source: Retrieved from BNM’s webpage, Social Finance 1.3 Review Approach: Implementation And Impact Monitoring Mechanisms This review examined the implementation This review adopted a mixed-methods approach of iTEKAD by PFIs and their IPs. approach, incorporating surveys, It considered various elements such as interviews, and focus group discussions human resource allocation, participant with PFIs, IPs, and iTEKAD participants. selection, program interventions, M&E, This approach allowed for the capture of and stakeholder collaboration. Given the diverse perspectives and experiences of flexibility and variation in implementing iTEKAD stakeholders. iTEKAD, this review aimed to document these aspects comprehensively. This This report is divided into five chapters. information can inform future research on Chapter 2 presents analyses of various participant outcomes and implementation implementation aspects. Chapter 3 costs. Due to data confidentiality focuses explicitly on M&E practices. constraints, further review of these areas Chapter 4 shares insights from survey was not possible within the current responses received from iTEKAD timeframe. participants. Finally, Chapter 5 concludes this report by summarizing key findings and providing recommendations for policy makers, PFIs, and IPs. 14 iTEKAD: Making Inroads Into Social Finance Chapter 1 Box 1 Review Methodology This review was conducted on PFIs and IPs involved in the initiative as of June 2024. It adopted a mixed-methods approach. Firstly, two distinct surveys were utilized to capture detailed information about various aspects of iTEKAD implementation by PFIs and their IPs. A separate pilot survey was also employed to capture the program experience from the perspective of iTEKAD participants, which was formatted in Bahasa Melayu. These questionnaires comprised closed-ended and open-ended questions, which were cross-checked and validated by the financial regulator and two experts for their relevance and adequacy in examining iTEKAD’s implementation. The online surveys were distributed to PFIs, where PFIs served as the contact point in distributing the surveys to their IPs and iTEKAD participants. At the close of the three-month survey period, responses were received from nine PFIs (a 70 percent response rate out of 13 participating PFIs), 19 IPs, and over 190 iTEKAD participants. The pilot survey does not form a representative sample. Secondly, in addition to the surveys, interviews were conducted to investigate the obtained responses. Interviews were conducted with three SIRCs or their agencies, two government agencies, two academic institutions, and one technology provider. Seven participants of one of the training providers were also interviewed to better understand the effectiveness of training programs. Finally, two roundtable discussions were organized with PFIs, financial regulators, and relevant experts to obtain feedback on the review’s preliminary findings and proposed recommendations. Chapter 1 iTEKAD: Making Inroads Into Social Finance 15 Chapter 2 Implementation Practices: How Are the iTEKAD Programs Deployed Across the Industry? Key Observations 1. PFIs have dedicated teams for the program. Microfinance programs can be resource-intensive due to the higher cost of monitoring target participants. 2. PFIs rely on IPs to select program participants. Several PFIs adopt a two-pronged approach, complementing the selection process with internal criteria emphasizing credit-related factors. 3. PFIs and IPs employ diverse program interventions that can provide opportunities for robust learning. 4. PFIs and IPs exhibit positive collaboration, allowing them to leverage expertise and create a better impact. Chapter 2 examines the implementation While there may be variations in how practices of PFIs and IPs in deploying iTEKAD is implemented by PFIs, the the program. The implementation- program cycle begins with participant related issues include human resource selection by PFIs and IPs and ends after allocation, participant selection, participants complete their repayment program interventions, and PFI–IP commitments (Figure 2.1). Each activity in collaboration. Understanding how the the program lifecycle is either conducted industry implements iTEKAD is essential separately by PFIs or IPs or may be to measuring program effectiveness, undertaken jointly by both institutions. PFIs identifying gaps and challenges that agree upon the roles and responsibilities impede desired outcomes, and learning related to the activities within the program best practices that could be shared lifecycle with their respective IPs and may with the industry to improve program vary according to the institutions. outcomes. Figure 2.1: Generic Lifecycle of iTEKAD Program IP Intervention 1. Selection of iTEKAD Participants 2. Onboard & Induction Lifecycle of iTEKAD 7. Repayment & Financial 3. Training Commitment 6. Monitoring & Impact 4. Seed Capital Measurement Disbursement 5. Mentorship & Coaching Note: Components are color-coded based on the primary responsibilities of PFIs and IPs throughout iTEKAD’s lifecycle. Stages in grey are iTEKAD components actively undertaken by IPs, light blue denotes those primarily managed by PFIs, and dark blue indicates components co-implemented by PFIs and IPs. Gradient stages reflect unequal weightage of responsibilities between PFIs and IPs in their co- implementation of iTEKAD components. Chapter 2 iTEKAD: Making Inroads Into Social Finance 17 During the selection process, PFIs and IPs either during or after completion of the may collaboratively select participants. required training modules, depending IPs provide PFIs with a list of potential on the program structure. After receiving candidates, while PFIs assess eligibility funds, IPs generally mentor and monitor and finalize the selection of iTEKAD participants for three to 15 months. participants. Post-selection, participants Tracking and documenting participants’ are onboarded into the program and progress is then relayed to PFIs. The begin their assigned training modules program concludes when participants (required and additional modules), complete repayment of their financial which are conducted over a six to commitments. 15-month period. Funds are disbursed 2.1 Human Resource Allocation Given the complexity of microfinance team size. The teams generally consisted programs and the growing number of managerial and executive-level staff to of participants, having sufficiently oversee their iTEKAD programs. One PFI experienced staff to oversee the responded that the program is managed program’s implementation is critical. under its institution’s microenterprise Staffing inefficiencies may adversely business unit, suggesting a shared impact the quality of interventions resource with other microfinancing delivered, management, and monitoring programs offered by PFI. The teams are of participants, ultimately impeding also supported by different departments the program’s benefits to beneficiaries. within the institutions, such as media and This section examined a range of communications. human resource-related considerations, including the size of the team employed, Most of PFIs’ and IP’s iTEKAD teams their average experience in microfinance, have two to five years of experience and how the teams are managed within in microfinance (Figure 2.2). Compared the institutions (PFIs and IPs). to PFIs, more IPs reported having staff with less than two years of experience or Most PFIs (88.9 percent) and IPs (94.7 no experience in microfinance (IPs: 47.3 percent) have dedicated iTEKAD teams, percent, PFIs: 33.3 percent). However, reflecting their commitment, with an more IPs responded that they had more average of four and five employees, experienced teams, with more than five respectively. However, variations in years of experience, compared to PFIs staffing size were observed across (IPs: 26.4 percent, PFIs: 11.1 percent). institutions. Half of the surveyed PFIs Hence, by leveraging the expertise of IPs, and IPs reported team sizes ranging from PFIs can better design and implement four to five, and five to 10 employees, program interventions. respectively, representing the typical Figure 2.2: Average Experience in Microfinance of PFIs’ and IPs’ Staff  18 iTEKAD: Making Inroads Into Social Finance Chapter 2 2.2 Participant Selection Adopting an appropriate participant were chosen from an existing list of selection process is essential to Asnaf involved in the SIRC’s economic ensuring the program benefits the empowerment programs. The SIRCs intended participants and informs risk interviewed stated that the Asnaf selected management practices related to the demonstrated business potential and may potential exposures arising from the benefit from further support through the program implementation. iTEKAD program, indicating a positive selection process. Aside from SIRCs, there PFIs primarily rely on their IPs, particularly were also examples of PFIs partnering with SIRCs or related agencies, to select universities to identify university students participants who meet the target group from low-income households interested of low-income microentrepreneurs. in entrepreneurship, social enterprises to The participants selected by SIRCs or identify women or youth entrepreneurs, associated agencies are categorized as and government agencies to identify army Asnaf and are eligible to receive Zakat veterans eligible to participate. under Shariah (Islamic law). The Asnaf Box 2.1: Determination of Asnaf in the State of Selangor Under Majlis Agama Islam Selangor (MAIS) and its zakat management arm, Lembaga Zakat Selangor (LZS), the determination of Asnaf eligibility follows specific guidelines based on Islamic principles, local economic conditions, and government policies. LZS ensures that Zakat is distributed only to those who meet the criteria for the eight Asnaf categories. LZS evaluates applicants’ financial status to determine whether they fall under the Fakir (extremely poor) or Miskin (needy) categories. The Had al- Kifayah (minimum cost of living) calculation is used, which considers household size, monthly income (from employment or own business), and essential expenses (for example, food, rent, utilities, education, transportation). If the total income is below the Had al-Kifayah, the applicant qualifies as Asnaf Fakir or Asnaf Miskin. Applicants must submit necessary documents such as identification, proof of income, household expenses, and debt records. LZS officers may conduct home visits and interviews to verify applicants’ living conditions, as well as conduct visits to the business premises of applicants under its economic empowerment programs. Some PFIs adopt a two-pronged PFI reported that Asnaf participants were approach, complementing the Asnaf selected jointly with the SIRC to ensure selection criteria with their pool of their suitability to receive sector-specific customers or internal screening criteria interventions. Collaborating with SIRCs (Table 2.1). While all PFIs reported using from different states in Malaysia has the list of Asnaf participants, one PFI allowed PFIs to broaden their outreach surveyed stated that participants from its to low-income households from diverse existing microfinance programs were also locations. invited to apply to the program. Another Chapter 2 iTEKAD: Making Inroads Into Social Finance 19 Collaborating with SIRCs from different states in Malaysia has allowed PFIs to broaden their outreach to low-income households from diverse locations. Table 2.1: Selection Practices Among PFIs PFI   1 2 2 3 4 5 6 7 8 9 Participants are selected by X X X X X X X X X X another implementation partner (for example, SIRC) Selected customers from existing X microfinance programs are offered the opportunity to apply to iTEKAD. Applicants are assessed based on X X an internal credit scoring process. Applicants are assessed based X on internal customer profile criteria unrelated to credit risk consideration. Other participant pool and X X X selection Note: PFIs are randomly ordered. However, two IPs expressed concern wide engagements with participants but about the risk of participants benefiting they could not determine the prevalence from multiple programs offered by of such occurrences. One IP suggested different PFIs. Since PFIs are not restricted establishing a centralized database to engage with different IPs for different to mitigate the issue. This observation cohorts—including sourcing participants should be examined further to ensure from internal and external sources—there funding resources reach those most in is a risk that some participants may apply need. Improving coordination regarding for multiple programs, exploiting gaps in participants’ targeting and selection eligibility verification. The IPs interviewed amongst PFIs and IPs could help to observed this occurrence during industry- prevent such duplication. 20 iTEKAD: Making Inroads Into Social Finance Chapter 2 Developing a more sophisticated scoring framework that considers credit and non-credit factors would be critical to improving PFI’s risk management of microfinance program and access to finance for underserved and unserved customer. The survey responses also indicated that The survey observed that 88.9 percent the use of internal scoring frameworks of PFIs strongly agreed or agreed that by PFIs is limited, indicating room for using philanthropic capital helped improvement. Three PFIs responded increase their risk appetite (Figure using an internal scoring framework that 2.3). However, as we observe later in utilized credit scoring (two) or other non- this chapter, no PFIs have utilized any risk credit-related criteria (one) (Table 2.1). PFIs capital. While cognizant of SIRCs’ role in using an internal credit scoring framework selecting Asnaf, it is essential that PFIs also highlighted the use of credit reports from develop their internal scoring frameworks, recognized credit reporting systems taking advantage of data points that can such as the Central Credit Reference be collected through the iTEKAD program Information System (CCRIS) and CTOS4, to refine further and validate their risk and financial health indicators. In contrast, scoring methodologies. Developing a only one PFI responded using customer more sophisticated scoring framework profiles such as family background, health that considers credit and non-credit factors condition, internet accessibility, business would be critical to improving PFI’s risk commitment, and business experience, management of microfinance programs since Asnaf would not be expected to and access to finance for underserved and have a good credit score. unserved customers, such as Asnaf and low-income households in general. Figure 2.3: PFIs’ Perceptions on the Role of Philanthropic Capital in Expanding Risk Appetite  4 CTOS is a Credit Reporting Agency (CRA) under the purview of the Registrar Office of Credit Reporting Agencies, Ministry of Finance and is regulated under the Credit Reporting Agencies Act 2010. Chapter 2 iTEKAD: Making Inroads Into Social Finance 21 2.3 Program Interventions This subsection reviews the interventions training. Table 2.2 lists the interventions provided under iTEKAD. Understanding reported by PFIs. All PFIs met the what program interventions are provided expectations of intervention by providing and how they are delivered is critical a blended source of funds and general in assessing the program’s impact on business skills training. However, additional participants. This subsection highlights topics covered in their structured training the types of interventions offered, while vary across PFIs. Two-thirds of PFIs offer Chapter 3 is a more detailed discussion of five to seven additional topics, primarily M&E practices. focused on financial management, digital marketing, digital payments, and business The iTEKAD initiative, overseen by mentoring. In comparison, market access BNM, is designed to give PFIs greater facilitation, digital bookkeeping, sector- autonomy to structure their individual specific training, and linkages with other programs. This flexibility enables PFIs to government-supported entrepreneurship collaborate with IPs to define the target programs were relatively underutilized. segments, program interventions, and The structured training is mainly delivered implementation details. These decisions in person. However, if participants cannot are informed by PFIs’ risk appetites, attend the physical training, for example, capabilities, and scalability considerations. due to the distance of the training location Notwithstanding, BNM has issued several or inability to leave their businesses, specification letters to guide the general training providers may offer virtual implementation of iTEKAD. sessions as an alternative. Depending on the topics and mode of delivery, the Conceptually, two central interventions training may be conducted in a big group are identified in the iTEKAD program (more than 30 participants) or a small design: (i) funding through seed capital group (fewer than 30 participants). and microfinancing, and (ii) structured Table 2.2: iTEKAD Interventions Across PFIs PFI   1 2 3 4 5 6 7 8 9 Blended source of funding X X X X X X X X X General business skills training X X X X X X X X X Financial management training X X X X X X X X (including bookkeeping) Digital marketing training X X X X X X Digital payment training X X X X X X Market access facilitation X X X X Business mentoring X X X X X X X Digital bookkeeping X X X Sector-specific training X X X Link with related government- X X X X X supported program for entrepreneurs Other X X Note: PFIs are randomly ordered. 22 iTEKAD: Making Inroads Into Social Finance Chapter 2 Looking at the funding source, most Most microentrepreneurs lack PFIs utilize Zakat funds and matching fundamental financial management grants (Figure 2.4). In addition, two PFIs reported using internal funds earmarked and bookkeeping skills, such as for Corporate Social Responsibility (CSR) computing basic product costing and initiatives, and four PFIs reported using profit and loss, which are essential other sources of philanthropic capital. Depending on the participant’s profile, information to determine business most iTEKAD participants are provided viability. with blended financing consisting of matching grants and microfinancing. BNM Information about training content performs an oversight function over the and delivery is essential to assess matching grants allocated by MOF, which the effectiveness of the training are channeled to PFIs. It is worth noting interventions and the impact on that despite PFIs surveyed indicating that desired outcomes. Based on interviews they have increased their risk appetite, no conducted with select government PFI reported utilizing risk-based capital. agencies involved in entrepreneurship Based on participants’ survey responses, training, most microentrepreneurs lack the majority stated that the funds are used fundamental financial management and to purchase business assets and materials. bookkeeping skills, such as computing Funds are disbursed through formal bank basic product costing and profit and accounts to ensure proper disbursement, loss, which are essential information to and PFIs will facilitate the opening of bank determine business viability. However, accounts for participants who do not have we note there are some variances in one. The review did not examine the size approach between PFIs and IPs on training of funds mobilized from these different content. Furthermore, according to the sources. However, this information would interviewees, microentrepreneurs would be necessary for policy makers and PFIs benefit more from a hands-on approach, to assess the sustainability of the funding such as business mentoring, as this sources for the program’s long-term provides them with direct access to expert viability. advice, which helps them with problem- solving when faced with challenges. Figure 2.4: iTEKAD Funding Source of Funds by PFI Count  Terms of Funding by PFI Count  Chapter 2 iTEKAD: Making Inroads Into Social Finance 23 Box 2.2: Training Interventions During this review, we interviewed seven training participants pre-selected by one of the program’s training providers (a government agency). Due to limited access to participants, we could not randomly select them for the interview. The objective of the interviews was to obtain qualitative insights that would complement the survey responses. This allowed us to uncover nuanced feedback and contextual factors that the survey may not adequately capture. The interview questions sought to assess participants’ training needs, the relevance of the training provided, their satisfaction level, and the impact of the training on them. The interview also explored potential training content to ensure participants have the skills to navigate future business environments. Below are the key takeaways: • Training effectiveness: Participants greatly valued and benefited from the training programs. The training modules cover essential business skills, including product labeling and packaging, budgeting, accounting, costing, price setting, cash flow management, branding, online marketing, promotion strategies, sales monitoring, proposal preparation, leadership skills, and business sustainability. The training is managed by highly competent coaches with rich industry knowledge, providing systematic and impactful coaching, mentoring, and field visits. The training caters to a wide demographic, including experienced business owners and first-time entrepreneurs from various backgrounds across Malaysia.  • Need for advanced training: There is a demand for in-depth training on finance management, business resilience skills, and practical business challenges to better equip microentrepreneurs for the evolving market. Many participants faced difficulties accessing financial support, compounded by complex application processes, and high repayment interest rates, which can hinder business growth. Participants also cited the need for human capital training, as hiring and training staff, especially unskilled youth, can be time-consuming and challenging. Notably, participants interviewed were not familiar with sustainability practices. With Malaysia’s net-zero ambition, there is a need for training on environmental impact and sustainability practices, which are currently limited by costs and resources. • Infrastructure gaps in rural areas: Participants in rural regions faced significant challenges due to a lack of essential facilities to enable online training and in- person support, indicating a need for improved infrastructure. • Encouragement for women entrepreneurship: Support and mentoring among women entrepreneurs are essential, as women-owned microenterprises contribute to gender equality but often face challenges in effectively balancing family and business responsibilities. 2.4 PFI–IP Collaboration A key success factor of iTEKAD is Nasional, and economic empowerment leveraging collaborations between programs organized by SIRCs and PFIs and IPs to significantly impact government agencies. Hence, the value support for microentrepreneurs, of collaborations under the iTEKAD particularly those underserved and program should be critically examined to unserved. Several programs are currently understand how they contribute to better targeting microentrepreneurs, such outcomes and whether they create any as Amanah Ikhtiar Malaysia, TEKUN unintended consequences. 24 iTEKAD: Making Inroads Into Social Finance Chapter 2 A diverse ecosystem of stakeholders support the varying needs of microentrepreneur development. PFIs engage with different IPs the varying needs of microentrepreneur depending on the strategic objectives development. This diversity encompassed of their iTEKAD programs. These IPs multiple areas of expertise, ensuring that include SIRCs, academic institutions, the unique requirements of different technology and training providers, and microentrepreneurs are met effectively. government and non-governmental PFIs can leverage specialized knowledge agencies. PFIs may explore collaboration and resources by engaging with various with different IPs for different program IPs, creating a robust support system. cohorts. Table 2.3 provides an overview Aside from IPs that provide funding, PFIs of the types of IPs engaged by PFIs. The compensate IPs for services rendered, survey responses indicated a diverse including training and technological ecosystem of stakeholders supporting support. Table 2.3: PFI–IP Collaboration Matrix (Number of Institutions) PFI 1 2 3 4 5 6 7 8 9 SIRC or associated agency 1 8 1 6 1 Government/ State agency 1 1 2 2 1 1 Academic institution 7 1 Training provider – government agency 1 1 1 1 1 Training provider – private sector 3 2 4 1 1 Technology provider 1 Non-governmental agency 1 1 5 Others 1 3 1 Note: PFIs are randomly ordered. Some IPs take on multiple roles and digital business platforms, digital financial responsibilities. Most of IPs surveyed management applications and tools, who are involved in providing training and access to technology infrastructure (84.2 percent) and mentoring (63.2 such as computers. Notably, only one PFI percent) also supported participant reported collaboration with a technology monitoring (73.7 percent) (Figure 2.5). provider, indicating significant room for Half of IPs that provided training also innovation. offered technology support by utilizing Chapter 2 iTEKAD: Making Inroads Into Social Finance 25 Figure 2.5: Roles of IPs under iTEKAD  The survey posed several questions to Based on survey responses, PFIs and IPs examine the value of collaborations. agree that the collaboration positively The objective was to assess PFIs’ and IPs’ impacted the three aspects (Figure 2.6). perceptions regarding three potential PFIs (77.8 percent) and IPs (73.7 percent) constructs of impact on improving strongly agree that the partnership has outreach, operational efficiency, and improved outreach to the underserved. product solutions5. These elements While both PFIs and IPs agree on the represent key value propositions offered positive impact on operational efficiency, by the select IPs, for example, (i) SIRC or the lower proportion of PFIs (33.3 percent) associated agency—providing access to and IPs (36.8 percent) who strongly agree underserved and unserved customers to suggests a degree of uncertainty. A similar ensure reach to target beneficiaries, (ii) pattern emerged regarding the impact on training providers—managing all aspects of product solutions, with PFIs (33.3 percent) training content, delivery and monitoring appearing less firmly convinced than IPs to ensure training effectiveness, and (iii) (63.2 percent). These findings indicate technology provider—providing access to that PFIs and IPs should more proactively technology solutions to improve program identify gaps and explore solutions efficiency and facilitate innovative to improve operational efficiency and solutions. product innovation. 5 The IPs surveyed and interviewed do not reflect a representative sample, as such we did not employ standard inferential analysis. 26 iTEKAD: Making Inroads Into Social Finance Chapter 2 IPs interviewed agreed that the collaborations allowed them to learn about and from different institutions, expanding their network of collaborators. Notably, IPs interviewed and surveyed commented on the capacity of collaborators to provide a more holistic approach to tackling the economic and financial challenges faced by the underserved or unserved segment of the population. Figure 2.6 Perceptions on PFI-IP Collaboration    Chapter 2 iTEKAD: Making Inroads Into Social Finance 27 The survey also asked PFIs and IPs to percent of IPs reported they were only rate their overall working relationship. somewhat satisfied, highlighting a lower The survey responses suggest that, in level of satisfaction with the collaboration. general, PFIs and IPs are satisfied with Despite this, all IPs surveyed expressed the collaboration (Figure 2.7). However, intention to continue collaborating on a closer examination of the results clearly iTEKAD in 2025. While the overall working showed a difference in the level of relationship was positive, the findings satisfaction, whereby only one PFI (11.1 suggest that PFIs should regularly initiate percent) was very satisfied compared to discussions with their IPs to identify issues eight IPs (42.1 percent). Additionally, 15.8 and concerns and resolve them effectively. Figure 2.7: PFIs’ and IPs’ Perceptions on the PFI-IP Working Relationship  Insights obtained from interviews with so that best practices could be replicated. IPs corroborate the general perception By capitalizing on each other’s strengths, of positive working relationships and IFIs and IPs can create synergies that lead the impact of iTEKAD. IPs interviewed to more effective and innovative program agreed that the collaborations allowed implementations. them to learn about and from different institutions, expanding their network of In summary, the review highlighted collaborators. Notably, IPs interviewed PFIs’ strong commitment to ensuring and surveyed commented on the the effective implementation of iTEKAD capacity of collaborators to provide a and achieving the desired outcomes. more holistic approach to tackling the This is evidenced by the dedicated economic and financial challenges faced resources assigned to the program and by the underserved or unserved segment extensive engagements to establish of the population. IFIs and IPs share productive collaborations with their IPs. common goals and objectives, which However, there are areas for improvement, motivates them to foster better working particularly in refining participant relationships. To further strengthen the selection processes, streamlining training collaborative environment, IPs interviewed interventions, and disseminating lessons commented on the need to share lessons learned and best practices. learned more widely across the industry 28 iTEKAD: Making Inroads Into Social Finance Chapter 2 Chapter 3 Monitoring and Reporting: What Does Program Success Look Like? Chapter 3 iTEKAD: Making Inroads Into Social Finance 29 Key Observations 1. PFIs and IPs find monitoring participants and the long-term impact of programs beyond twelve months challenging, particularly when they may not have the necessary processes and resources in place. 2. M&E practices vary between PFIs and IPs, which may limit comparability. In many instances, M&E practices are appropriate to capture outputs but less suited to capture outcomes. Chapter 3 examines the M&E practices in 1. Impact thesis (theory of change) and greater detail. By tracking progress and strategic priorities; assessing impact, M&E provides valuable Setting goals, targets, and key 2. insights for continuous improvement and performance indicators (KPIs) to track resource allocation. It fosters transparency progress; and compliance with stakeholder and regulatory requirements, thereby building 3. Monitoring and measuring progress; trust and demonstrating the effective use and of resources. Ultimately, M&E enables 4. Reporting and verification. social finance programs to achieve their goals, enhance their impact, and Through survey responses and interviews, sustain their efforts in addressing social the review focuses on understanding the challenges. methodology and processes adopted by PFIs and IPs, their reporting practices, As outlined in a prior World Bank report and the challenges faced in implementing (Azhar et al. 2023), impact monitoring and M&E. reporting frameworks in general have the following elements: 3.2 Methodology There is an inherent industry-wide stage, PFIs collected baseline information alignment between the program’s relating to financial information, business objectives and desired outcomes. PFIs profiles, and financial behavior (Table and IPs generally understand the linkages 3.1). Throughout training and mentorship, between the interventions and the desired relevant IPs maintained records about impact. Most PFIs were aware of concepts training attendance, training completion, such as the theory of change and results mentor check-ins and feedback, and chain, but there is limited integration of business progress. IPs employed various such concepts into their internal standards data collection methods, including paper and processes. PFIs employ other design and online surveys, in-person assessments, thinking frameworks to identify problem and interviews. Data collection is statements, stakeholders, and solutions. conducted at a minimum within six These concepts were only familiar to some months, with most IPs reported preparing government agencies, training providers, a quarterly report and a small number of and academic institutions. These concepts IPs reported preparing monthly reports. appear “technical” or “academic” to many stakeholders, raising the urgency for M&E Based on interviews, IPs informed us to be mainstreamed at all levels of public that controls are in place to incentivize and private institutions. participants’ progress, such as requiring participants to complete specific training Impact monitoring and reporting is a modules before disbursement. Still, collaborative effort between PFIs and IPs. these controls do not necessarily extend Throughout the iTEKAD cycle, PFIs and to reporting obligations. As such, data IPs are responsible for different aspects of collection is conducted on a best-effort impact monitoring and reporting. In the first basis and relied heavily on participants’ 30 iTEKAD: Making Inroads Into Social Finance Chapter 3 self-reporting. When IPs offered Most PFIs were aware of concepts technology support, business progress such as the theory of change and can also be tracked through their digital solutions, although this largely depends results chain, but there is limited on the participants’ active utilization of integration of such concepts into their such applications. Most importantly, the internal standards and processes. monitoring and reporting were designed to cover twelve months after training completion or fund disbursement. Table 3.1: Overview of Industry’s iTEKAD Impact Monitoring Practices Source Category Description Baseline information Financial information Sales revenue, profit, income, savings Business profile Number of employees, type of business, sector, business registration details, financing purpose, PFIs digital payment access Financial behavior Financing history Additional data Financial aid received, business network, utilization of financial services and products Monitoring practices Periodic assessments Monthly participant monitoring, 6-month post- program evaluations, business observations, quarterly/ biannual progress reports Digital and self- Digital applications, online forms for impact IPs reporting tracking, WhatsApp groups for informal progress tracking In-person monitoring Field visits, compliance verification, regular check- ins (every 3–6 months), tracer studies, one-on-one monitoring through coaching In this regard, PFIs rely heavily on M&E practices, and even when they were, IPs to monitor participants’ progress, they did not seem to apply recognized particularly training providers and methodology consistently. For example, academic institutions that have determining an appropriate sampling close contact with them due to their basis and ensuring an adequate response involvement in the program. Eight of the rate. Furthermore, there was limited nine PFIs surveyed reported relying on IPs documentation on M&E approaches, to track and monitor iTEKAD participants’ including analysis performed, which progress. Hence, the assessment of resulted in less meaningful disclosure. IPs’ capability to implement adequate For example, a small sample may be M&E practices is critical to ensure the prone to bias and would not reflect the credibility of any impact reporting. While experience of the iTEKAD cohort. Hence, the IPs surveyed and interviewed do any impact disclosures without adequate not reflect a representative sample, the qualifications may lead to unintended insights help develop a preliminary view biases about the program. This would of the underlying practices and gaps. be counterintuitive, mainly when it As mentioned, most IPs tasked with distorts gaps and weaknesses that could monitoring impact were less familiar with perpetuate less-than-optimal outcomes. Chapter 3 iTEKAD: Making Inroads Into Social Finance 31 When tracking progress, PFIs are guided by impact indicators and IPs’ capability to implement adequate reporting requirements specified M&E practices is critical to ensure the by BNM. According to BNM, PFIs are required to report impacts of the program credibility of any impact reporting. on four dimensions: (i) business growth— increased monthly sales by the end of their However, BNM allows PFIs flexibility participation, (ii) employment—retained in tracking and measuring indicators. at least one employee since joining the This flexibility considers the diversity of program (2023) or number of new jobs businesses, costs, resource intensity, and created (2024), (iii) financial resilience— participants’ cooperation and financial saved on average up to RM4,000 literacy. The goal is to balance practical of income monthly, and (iv) digital aspects with the quality of data reported upskilling—conducted online sales and by PFIs and their IPs. However, without a marketing (Figure 3.1). PFIs were required standard methodology, the comparability to submit reports periodically (between of this data remains limited. six and twelve months) after participants had graduated from the program. Figure 3.1 Progress and Impact of iTEKAD in 2023 (top) and 2024 (bottom) PROGRESS 6,019 2,340 13 RM40 mil RM35.5 mil (2022 : 1,595) (2022 : 1,054) (2022: 9) (2022: RM9.8 mil) (2022: RM8.5 mil) Total participants Number of Participating Social finance funds Financing and (ongoing and graduated financial disbursed investment graduated) participants institutions* disbursed IMPACT 89% 59% 92% 40% Business growth Employment Financial resilience Digital upskilling Increased their monthly sales by Retained at least 1 employee Saved on average up to Conducted online sales the end of their participation since joining iTEKAD RM4,000 of income monthly and marketing PROGRESS ¹ 9,684 4,057 14 RM63.6 mil RM53.7 mil (2023: 6,019) (2023: 2,340) (2023: 13) (2023: RM40 mil) (2023: RM35.5 mil) Total Microentrepreneurs Participating Social finance funds Financing and microentrepreneurs ² graduated from the finacial institutions disbursed investments iTEKAD programme disbursed Based on sample of microentrepreneurs that graduated from the iTEKAD programme, n: IMPACT ¹ 86% > 1,300 86% 65% (n = 2,577) (n = 2,499) (n = 2,812) (n = 4,057) Business growth Employment Financial resilience Digital upskilling Increased monthly sales New jobs created Saved up to RM4,000 Conduct online sales and of business income per month marketing on average Source: BNM’s Annual Report, 2023 and 2024 In addition to BNM’s indicators, a small program participation (Table 3.2). Some number of PFIs and IPs also set different of these additional targets are related to targets or KPIs. These can be generally activities (such as program participation), categorized to track business growth and some are related to outcomes (such as and sustainability, financial resilience, an increase in digital payments compared digitalization, behavioral metrics, and to traditional payment methods). 32 iTEKAD: Making Inroads Into Social Finance Chapter 3 was the capacity to evaluate and develop All IPs interviewed concurred that the participants’ bankability. This would enable most critical value of the collaboration them to obtain private financing and move away from relying on financial aid and with PFIs was the capacity to evaluate support, thereby freeing the limited capital and develop participants’ bankability. to be utilized for future participants. As discussed in Chapter 2, using an internal scoring framework for iTEKAD would Notably, a PFI and an IP surveyed be necessary to support the assessment reported having a target on a measure of creditworthiness appropriate to of “bankability.” Bankability refers microentrepreneurs utilizing both credit to the likelihood that PFIs will accept and non-credit data points. In this regard, a participant for financing. All IPs PFIs may consider behavioral metrics to interviewed concurred that the most complement credit factors. critical value of the collaboration with PFIs Table 3.2: Additional KPIs Monitored by PFIs and IPs Theme Examples of KPIs PFIs IPs Business Status of business operation at Status of business operation after growth and the end of the monitoring period, one year, increase in income. sustainability participants migrated from informal to formal business. Financial Upward mobility with improved Increase in zakat contributions, resilience creditworthiness and potential managing bank accounts growth (bankability). effectively, securing financing from PFIs (bankability). Digitalization Utilization of digital payment Enhancement of digitalization channels, increase in skills, technology adoption, digitalization. adoption rate of mobile banking, increase in digital payment transactions compared to traditional methods. Behavioral None reported. Entrepreneurial development, metrics behavioral competencies. Program Number of participants enrolled Number of participants enrolled, participation and trained. hours of training, number of modules delivered. 3.3 Reporting Practices PFIs prepared internal reports on this information with case studies or iTEKAD and disseminated specific data featured success stories. In the case of points to the public. While PFIs submitted IPs, while surveyed IPs reported publicly impact reports to BNM, most PFIs only publishing information, we could not published program-related statistics, such validate the existence of the information as participants’ enrollment and funds on the internet. IPs interviewed informed disbursement, in their annual reports or that reports are generally for internal websites. Several PFIs complemented consumption or shared with PFIs, citing Chapter 3 iTEKAD: Making Inroads Into Social Finance 33 confidentiality as the primary reason for PFIs who have engaged expertise from not disclosing publicly, since program academia to perform impact studies of participants’ data are subject to PFIs’ their social finance programs. As limited personal data protection policies. impact studies have been conducted in Malaysia, such collaboration should be At present, impact reporting is not promoted. Their experience would help validated by an external party and is the industry gain insights into the benefits not a mandatory requirement by the of impact evaluation. Further discussions financial regulators. External validation should be pursued at the industry level will result in additional costs to PFIs, which with financial regulators to collaboratively may not be cost-effective to be prepared identify means of conducting an impact by individual IFI. That said, during this evaluation. review, we are aware of at least two Box 3.1: Maqasid Al-Shariah Disclosure Islamic social finance programs, such as Zakat and Awqaf, aim to fulfill the Maqasid Al-Shariah (objectives of Islamic law), which include preserving faith (deen), life (nafs), intellect (‘aql), lineage (nasl), and wealth (maal). To gain insights on the application of Maqasid Al-Shariah in the program, the survey of IPs queried if Maqasid Al-Shariah considerations were applied in any part of their decision-making process. Of the 19 IPs who responded, only two reported in the negative. We analyzed the open-ended responses from the 17 IPs by categorizing them based on the following Maqasid Al- Shariah themes: (a) Preservation of faith • promotes honesty, integrity, and ethical business practices per Islamic principles • encourages economic empowerment and social justice (b) Preservation of life • supports the livelihoods of low-income entrepreneurs to reduce financial burdens • improves participants’ physical and mental well-being by ensuring income generation (c) Preservation of intellect • provides skills training and enhancement of digitalization to increase intellectual capacity • ensures informed decision-making and continuous learning (d) Preservation of lineage • creates job opportunities to support families and future generations • helps maintain economic stability for households (e) Preservation of wealth • ensures financial support is used responsibly and sustainably • provides capital, financial literacy training, and business monitoring to prevent mismanagement and wastage • helps participants preserve and grow their wealth through structured program design and implementation Based on interviews with SIRCs, aside from adhering to Maqasid Al-Shariah in determining and identifying Asnaf to ensure compliance with the rules regarding Zakat contribution, participation in the iTEKAD program was strongly driven by the higher objectives of Maqasid Al-Shariah to effect meaningful and permanent change in the status of Asnaf so that they may no longer require Zakat assistance and can become future Zakat contributors. In terms of disclosure, no specific attribution was made to Maqasid Al-Shariah in the public reporting of the iTEKAD program by PFIs or IPs. 34 iTEKAD: Making Inroads Into Social Finance Chapter 3 3.4 Challenges PFIs and IPs identified data collection the first section of this chapter. Secondly, challenges as barriers to effective impact methodology and cost were also reported monitoring and reporting. Figure 3.2 as key challenges for at least a third of the shows that the top three challenges PFIs and IPs. Therefore, further efforts are reported by PFIs and IPs surveyed are needed to provide further guidance on related to data. Firstly, data validation, methodology and develop cost-effective completeness, and data collection solutions to facilitate proper M&E timeliness were ranked as top three implementation. It is worth noting that in both groups surveyed. This raises aside from data, the next set of challenges further concerns about the credibility of pertain to cost and resource constraints. impact measurement, as discussed in Figure 3.2: Top Three Challenges of Impact Monitoring and Reporting  In conclusion, collaboration between PFIs and digital upskilling. Continuous and IPs plays a significant role in tracking improvement in M&E practices and the the program’s progress and impact. adoption of standardized methodologies While PFIs and IPs may face challenges will enhance the credibility and in the form of data collection, validation, comparability of impact reporting, and methodology, reporting from earlier ultimately contributing to the program’s cohorts have shown promising results long-term success and achieving its in business growth, financial resilience, desired impacts. Chapter 3 iTEKAD: Making Inroads Into Social Finance 35 Box 3.2: Results Chain Commentary In this box, we broadly discuss observations about the iTEKAD initiative’s theory of change, interventions, and impact indicators. Firstly, we attempt to design a potential results chain based on the information gathered from this review (Figure B5.1). Problem Statement: Low-income microentrepreneurs face barriers to financial services and business development support, limiting their ability to grow their businesses, increase income, and contribute to local economies. These barriers include limited access to affordable credit and inadequate financial and business management skills. Impact: A thriving microentrepreneur sector from the underserved and unserved population segment that contributes to poverty reduction, improved livelihoods, and stronger local economies. Figure B3.1: iTEKAD Result Chain Inputs Activities Outputs Outcomes Impacts ● Financial 1. Provide structured 1. Number of ● Increased ● Business and capital business training microentrepreneurs monthly sales financial programs. trained in financial by end of resilience ● Capacity and business program. building 2. Offer financial management. products such as ● New jobs ● Partnerships microfinancing 2. Volume of created. and grants. microfinancing and ● Policy grants disbursed. ● Saved on advocacy 3. Engage policy average up to makers to create 3. Number of RM4,000 of supportive businesses income financial accessing digital monthly. regulations. financial services. ● Conducted 4. Policy adoption by online sales regulators. and marketing The theory of change and interventions adopted in iTEKAD are based on a logical framework consistent with evidence from empirical studies on microentrepreneurs’ support programs. However, the outcomes and impacts are often observed over a longer time period since they take time to materialize. In this regard, distinguishing short-term and long-term outcomes is essential to ensure appropriate target settings and planning for M&E. Secondly, in Chapter 2, we surveyed the types of interventions provided to participants. At least two PFIs did not report digital payment or marketing training despite this being one of the outputs and outcomes measured. While there may be reasons for this, it is essential to distinguish the participants to ensure that output and outcome indicators reflect the intervention provided. Thirdly, the outcome indicators could be further refined. As stated earlier, short- term and long-term indicators can be defined. For example, specific targets could be assigned for sales growth across different periods, measuring sustained sales levels over a specified period. Similarly, considering that the participants’ profiles are categorized as low-income, the increase in savings level could also be staggered over a set period. PFIs may also track transaction data, such as growth in digital payment transactions. 36 iTEKAD: Making Inroads Into Social Finance Chapter 3 Chapter 4 Participants’ Reaction: What Do iTEKAD Participants Think About the Program? Key Observations 1. iTEKAD participants reflect a segment of Malaysia’s financially vulnerable population: women, low-income households, and the youth. 2. Some participants’ responses suggest a lack of information about the program’s nature, awareness of the PFIs involved, and funding received. 3. Monitoring participants and the long-term impact beyond 12 months is challenging, as participants from earlier cohorts are less likely to respond. In Chapter 4, we share insights from the collection challenges through the online pilot survey, which obtained 190 survey survey method. This exercise would help responses from iTEKAD participants. The develop a better survey instrument and main objective was to test the survey provide preliminary insights into existing instrument, ensuring appropriate data participants. Hence, the responses were was collected to evaluate the program’s not representative samples, so standard effectiveness and understand the data inferential analysis was not applied. Table 4.1: Cohort Stratification Cohort Actual Actual cohort size/ Surveyed cohort size/ enrollment Total enrollment (%) Total respondents (%) 2021 172 2.6 0.6 2022 1,423 21.8 2.2 2023 4,424 67.6 18.2 End–June 2024 521 8.0 79.0 This section shares preliminary program and lessons learned from the observations on participants’ survey dissemination. demographics and perceptions of the 4.1 Participants’ Demographics iTEKAD participants reflect the beyond iTEKAD’s target group or an financially vulnerable segment of error in the urvey distribution or survey Malaysia’s population. The participants response.  who responded to the survey were 52.6 percent female, below the age of thirty Sixty percent of participants (75.3 percent), and reported earning who responded operated sole monthly incomes below RM2,000 (61.6 proprietorships or sole ownership. percent) (Figure 4.1). About 81.1 percent Most of them were involved in the food of those who responded completed and beverage (F&B) (45.2 percent) and some post-secondary school qualification, services (29.7 percent) industries (Figure and 57.9 percent reported residing in 4.1). Notably, 25.6 percent of participants urban areas. While many participants reported having unregistered businesses. were the program’s target group, it is On average, participants reported having worth highlighting that 2.6 percent of two employees working for them, and 6.8 participants reported household incomes percent reported having between 10 and of more than RM10,000. This observation 20 employees. may suggest a leakage of enrollments 38 iTEKAD: Making Inroads Into Social Finance Chapter 4 When the survey was circulated, 2.1 cap of RM50,000, potentially because percent of participants reported having the participants were funded by PFIs’ closed their businesses, and 4.7 percent microfinancing products with a maximum reported changing their businesses since limit of RM100,000. completing the program. For those who reported having an ongoing business, When asked about their current income 53.2 percent reported having an average situation, 70.2 percent expressed that monthly business revenue of less than they were getting by on their present RM2,000 in the past six months, while 18.4 income. 36.3 percent of participants percent reported an average monthly reported having experienced a significant business revenue of more than RM5,000. change in their personal lives (for example, death in the family or personal accident) In terms of funding, 73 percent of between the period they were enrolled participants reported receiving iTEKAD in the program and when the survey was funds of RM5,000, the minimum undertaken. These questions may be amount offered by the program. As helpful to contextualize the perception observed in the income demographic, of impacts and understand if extenuating about two percent of participants reported circumstances may have influenced the receiving more than iTEKAD’s funding program’s impacts. Figure 4.1: iTEKAD Participants’ Demographics   Chapter 4 iTEKAD: Making Inroads Into Social Finance 39    40 iTEKAD: Making Inroads Into Social Finance Chapter 4   4.2 Participants’ Perception The survey posed several questions to their banks, 66 percent felt more examine different constructs of impacts knowledgeable about financial products related to interventions received, and services, and 73 percent reported not service delivery, financial resilience, facing issues during their candidature in and behaviors. In general, most iTEKAD. participants agreed with the significance of impacts due to the program’s iTEKAD’s impact on financial resilience interventions, such as funding (82 is uncertain, though the program may percent), training (82 percent), and digital positively influence charitable attitudes business training (79 percent) on business among participants, a desired behavior growth, with funding garnering the most reflective of Maqasid Al-Shariah. 78 “strongly agree” response (34 percent) percent of participants reported feeling (Figure 4.2). Notably, a higher percentage better able to manage their debt, but of participants felt neutral about the only 45 percent felt they had garnered significance of the PFI–IP collaboration (32 the capacity to raise RM1,000 in an percent). emergency. Beyond financial resilience, the program has the potential to impact In comparison, the level of agreement behaviors, with participants reporting on service delivery was lower than the having a greater appreciation of charitable perception of the intervention’s impact. actions (81 percent) and feeling inspired 68 percent of participants reported to perform charity (77 percent). feeling more confident in approaching Chapter 4 iTEKAD: Making Inroads Into Social Finance 41 Figure 4.2: iTEKAD Participants’ Perceptions About the iTEKAD Program    42 iTEKAD: Making Inroads Into Social Finance Chapter 4 4.3 Lessons Learned The survey distribution and data collection interviews, can also be considered. exercise revealed five key lessons: These methods should be evaluated for practicality and cost efficiency. First, this review highlights the importance of collecting and reviewing Fourth, leveraging collaboration sufficient demographic information with IPs is critical for improving to ensure the program benefits the M&E practices based on a sound target group of underserved and methodology by ensuring clear unserved microentrepreneurs. During expectations on timelines, methods, the participant selection process, closer and participants’ commitments. Strong attention should be given to household coordination helps maintain data accuracy, income and business size information, accountability, and consistency in impact and exceptions to the selection conditions measurement. However, PFIs should also should be well documented to understand monitor unintended consequences, such the challenges related to participants’ as participants being unaware of the PFIs selection. linked to their program. This gap could affect their engagement with participants. Second, baseline metrics including Regular and transparent communication participants’ financial and business with IPs and participants can help mitigate information must be gathered to enable these risks, ensuring all stakeholders meaningful future impact assessments. understand their roles and the broader Baseline data captures the initial financial ecosystem supporting the conditions before an intervention or program. initiative begins. This allows for before- and-after comparisons to assess changes Finally, perception studies provide over time. valuable insights into participants’ experiences, but can be subjective Third, tracking progress beyond twelve and biased. Responses indicate that months is key to gauging the program’s participants might sometimes offer long-term impacts, as short-term results information that is not entirely accurate. may not reflect business sustainability. To ensure the reliability of the data Some effects, like financial resilience collected, it is essential to corroborate or social benefits, take time to emerge. these responses with more objective Monitoring beyond a year helps identify and verifiable sources of information. For patterns, risks, and gaps that could impact example, tracking transaction data can long-term success. If some participants measure improvements in digital payment close their businesses, long-term tracking adoption, while periodical quizzes can can reveal whether this is an isolated issue assess knowledge retention over time. or a broader trend. This data supports This approach strengthens credibility by better policy decisions and program validating self-reported outcomes with improvements over time. PFIs and IPs measurable evidence. A balanced mix of must establish mechanisms to update qualitative and quantitative data provides participants’ contact information annually a more reliable picture of program to facilitate long-term monitoring. effectiveness and helps identify areas for Alternative methods, such as in-person improvement. Chapter 4 iTEKAD: Making Inroads Into Social Finance 43 Chapter 5 Summary and the Road Ahead 44 iTEKAD: Making Inroads Into Social Finance Chapter 5 5.1 Key Findings The program’s implementation has the most suitable beneficiaries. Regular primarily adhered to its original reviews and updates of the selection design, demonstrating a commitment criteria will help keep them relevant and to the established objectives. This aligned with the program’s objectives. adherence is a positive indicator of the Furthermore, iTEKAD stakeholders should program’s foundational robustness and come together to evaluate the prevalence the stakeholders’ dedication. of participants enrolled in multiple programs. Improving coordination We summarize the key findings from the among the various stakeholders could review as follows: help address this issue. A. Enhancing participant selection B. Streamlining training interventions process Several factors could account for One key area that can enhance the the diversity in interventions and program’s effectiveness is reviewing practices among PFIs and IPs, including participants’ profiles. By thoroughly participants’ needs and varying levels analyzing the characteristics and needs of resources and expertise. While these of the beneficiaries, the program can differences can lead to tailored solutions improve its targeting mechanisms. This that address specific local needs, they can targeted approach ensures that the also result in inconsistencies in program resources and interventions are directed delivery and outcomes. Furthermore, the toward those who need them the most, review noted that at least two PFIs did thereby maximizing the program’s not report digital payment or marketing impact. Understanding the participants’ training despite this being one of the demographic, socio-economic, and outputs and outcomes measured. behavioral profiles can help design Therefore, it is crucial to establish a more effective and relevant interventions framework that allows flexibility while that resonate with the beneficiaries and ensuring that core program objectives are address their specific challenges. consistently met across different contexts. Developing integrated selection The various training interventions criteria can facilitate a more implemented so far present a valuable effective screening framework for opportunity for meaningful learning. microentrepreneurs. Since many low- Further assessment should be conducted income microentrepreneurs exhibit low to evaluate the effectiveness of these credit scores, incorporating non-credit training interventions and develop a information is critical to providing a standardized program that ensures all more complete assessment. Different participants can benefit from the best weights could be assigned to non-credit training available. This approach could information to reflect the disadvantages facilitate a more consistent evaluation that low-income microentrepreneurs of the program’s impact in the coming face. However, ensuring uniformity in years. Special attention must be given to the assessment process is imperative to providing training access for participants prevent inconsistencies and biases in in rural areas, as this is crucial for credit score evaluations. maintaining the program’s inclusivity. Collaboration with technology providers A well-designed screening framework could also drive innovation to improve can enable data-driven analysis, training access and quality issues. helping PFIs understand the practical applications and predictive value C. Establishing standardized of such data, ultimately leading to methodology for M&E  more informed interventions. This comprehensive approach could improve The program currently lacks a the selection process, ensuring that it is fair, standardized M&E framework. Robust transparent, and effective in identifying M&E frameworks are essential for tracking Chapter 5 iTEKAD: Making Inroads Into Social Finance 45 progress, assessing the effectiveness of to enhance effective implementation. interventions, and making data-driven Effective knowledge sharing and thorough decisions. The absence of comprehensive documentation of learnings are vital for M&E frameworks makes it difficult to fostering capacity building within PFIs and accurately determine the program’s IPs. Engaging in these activities facilitates impact and identify areas that require the exchange of valuable experiences improvement. Measuring success, and encourages open discussions about learning from experiences, and adapting challenges faced in the field, thereby strategies to changing circumstances can paving the way for identifying and become challenging without reliable data disseminating best practices that can and insights. enhance future operations. Robust M&E frameworks that include E. Managing risks transparent methodology, regular data collection, and systematic The review also identified several analysis are imperative to address this potential risks associated with the challenge. These frameworks should iTEKAD initiative that could impact capture quantitative and qualitative its implementation and sustainability. data, providing a holistic view of the One possible challenge is related to the program’s performance. Additionally, initiative’s success; maintaining positive incorporating feedback mechanisms that outcomes may become increasingly allow participants and stakeholders to complex as PFIs and IPs strive to select share their experiences and suggestions suitable participants. Improving the can give valuable insights for continuous participant selection process is essential improvement. The M&E framework must to address this risk. Integrating multiple not hinder or introduce bias into the interventions can also create operational program execution, which could impair challenges, particularly regarding outcomes. Additionally, the framework coordination among PFIs and their IPs. must balance quality adherence with cost- The review noted a positive working effective considerations. relationship so far, and PFIs and IPs need to continue strengthening their D. Facilitating knowledge sharing and engagement and maintaining transparent documenting learnings  communication to ensure effective collaboration. Finally, reliance on social There is a noticeable lack of knowledge funds raises concerns about long-term sharing among PFIs and IPs, even sustainability arising from the risk of considering the wealth of lessons funds being reduced or withdrawn. An and best practices that have emerged important factor to attract social funds is during this review. The review indicates to showcase tangible impacts. Therefore, that there could be room for improvement as outlined in the following section, in the expertise of PFIs and IPs regarding reviewing implementation costs and M&E quality. This underscores the return on capital is crucial to assess the importance of capacity building in M&E initiative’s sustainability. 5.2 Limitations and Future Research The scope of this review focused on identify areas where resources may be various implementation aspects but more optimally utilized. Additionally, did not explore elements related to the evaluating the cost of funds is essential cost of implementation and the cost of for determining the financial feasibility funds due to time and data constraints. of the program. Without this analysis, it Understanding the costs of implementing is challenging to justify the program’s a program is crucial for assessing its continuation or expansion and decision- overall value and sustainability. It helps making regarding resource allocation. 46 iTEKAD: Making Inroads Into Social Finance Chapter 5 Another limitation of the review is that it A • study of microentrepreneurs’ does not consider microentrepreneurs’ repayment behaviors and identifying pricing and repayment history. Pricing factors that influence their strategies and repayment behaviors creditworthiness could help improve are critical factors in the success of risk management and enhance the microfinance programs. Understanding effectiveness of microfinance initiatives. pricing strategies can help identify • A longitudinal study on the economic whether the products or services offered and financial impacts on participants, are affordable and competitive. Analyzing and a deep dive into target segments repayment history provides valuable such as women and youth. The information on microentrepreneurs’ study could also assess participants’ creditworthiness and financial discipline, bankability and access to other financial which are essential for managing risks products and services. and ensuring the program’s long-term viability. A comparative study between other • microfinance initiatives under Amanah Future reviews could focus on several Ikhtiar Malaysia and TEKUN Nasional areas to address these limitations: would also inform the better design of microfinance programs. • A comprehensive cost-benefit analysis analyzing implementation costs, the By addressing these research topics, cost of funds, and the return of funds future reviews can contribute to more provided. This review could provide comprehensive and informed program valuable insights into the program’s evaluations. financial sustainability and overall value. 5.3 Recommendations Recommendation 1: Develop a robust for future analyses and evaluations. Such participant selection framework a unified approach would enhance the accuracy of assessments and foster better PFIs should establish a comprehensive support for microenterprise development. internal screening framework explicitly tailored for low-income Evidence from the pilot survey of microenterprises. This framework should participants indicates that the current thoughtfully integrate credit and non-credit selection process may require further information to provide a holistic view of improvement. A few participants possess each microenterprise’s potential. Different characteristics that might not accurately weights could be assigned to non-credit represent the underserved or unserved information to reflect the disadvantages customers. For instance, a few participants that low-income microentrepreneurs indicated access to other financial face. For example, factors such as the support schemes and showed previous participant’s social background, business entrepreneurial success, which could experience, and behavioral traits such as skew the program’s outcomes. PFIs and initiative and networking ability could be IPs should carefully review participants’ weighted more heavily than traditional demographics to ensure the initiative credit scores, which might not fully capture benefits the intended target group. This the potential of these participants. These could involve verifying income levels, measures can provide a more nuanced access to other financial services, and understanding of the participants’ assessing the actual need for microfinance. strengths and challenges, ultimately As observed during the review, PFIs and contributing to more effective support IPs could develop a shared database to and resource allocation. Furthermore, prevent participants from enrolling in stakeholders across the industry could multiple iTEKAD programs. This could be collaborate to develop a standardized enforced by implementing a registration framework, ensuring a consistent and system that cross-references applicants rigorous methodology that can be applied with existing records. Chapter 5 iTEKAD: Making Inroads Into Social Finance 47 Recommendation 2: Develop a Indicators and targets for key • standardized training intervention  outputs, intermediate, and final outcomes. For example, an output PFIs and IPs should collaboratively indicator can be defined as reflecting define and establish clear minimum knowledge acquired from training standards for training interventions. or an output indicator related to risk- This should include comprehensive capital mobilization, in addition to guidelines that detail the essential content the impact indicators determined by to be covered, ensuring it is relevant, BNM. Furthermore, specific outcome up-to-date, and tailored to the needs of indicators and targets for key target the target participants. For instance, a segments such as women and youth financial management training module should be considered. might include budgeting, savings, and Suitable methodology for measuring • understanding credit scores. A module impact. For example, increased sales focusing on digital skills could cover the are computed by an improvement digital payment systems, online marketing in average sales over a three to six- strategies, and cybersecurity basics. month period after the completion of Additionally, they should outline quality the program compared to a baseline benchmarks for the delivery methods determined pre-program. employed. This can involve engaging teaching strategies like interactive • Standardized data collection methods workshops and real-life case studies. and tools. For example, a standardized Effective communication techniques online survey can collect baseline might include visual aids, storytelling, demographic information. PFIs may also and regular feedback sessions to ensure track transaction data to measure digital participant understanding and retention. payment or online sales growth. • M&E plan for more than 12 months after Mechanisms for assessing participant the completion of the program. For this understanding and retention could purpose, appropriate processes should involve periodic assessments, quizzes, and be established to enable long-term data practical demonstrations. For example, collection. after a training session on business management, participants could be asked • Data governance is used to obtain to create a business plan or present a appropriate consent from participants marketing strategy for their enterprises. and protect their personal data and By setting these standards, PFIs and IPs confidentiality. can enhance the overall effectiveness and impact of training programs, ensuring As noted in the review, there is limited that participants gain valuable skills and collaboration with technology providers knowledge that can be applied to their who could provide technical support in microenterprises. developing data tools to facilitate data collection and analysis. Therefore, PFIs Recommendation 3: Establish a are encouraged to pursue additional standard methodology for M&E  collaboration with technology providers. PFIs might consider exploring an industry- As part of its oversight role of the wide collaboration, which could prove iTEKAD initiative, BNM should convene more cost-effective by distributing the PFIs and IPs to set minimum standards technology adoption costs among the for the M&E to improve comparability PFIs. and ensure a level of data quality. The M&E approach should be designed Recommendation 4: Facilitate to capture critical data throughout the knowledge sharing and documenting lifecycle of the iTEKAD program from learnings  participation selection until completion of repayment to facilitate more granular Annual roundtable discussions analysis. This approach allows for a more should be conducted with relevant accurate assessment of the program’s stakeholders to facilitate knowledge effectiveness and sustainability. These sharing and documenting learning. minimum standards should encompass: 48 iTEKAD: Making Inroads Into Social Finance Chapter 5 These discussions provide a platform Recommendation 5: Develop a long- for sharing experiences, discussing term evaluation plan challenges, and identifying best practices. For example, a session could To address the limitations of the be dedicated to discussing successful present study, it is imperative to training interventions where participants develop a comprehensive long-term share specific strategies that led to high evaluation plan to ensure the collection engagement and retention rates. of appropriate data for future research initiatives. As previously discussed, Additionally, creating a centralized several critical areas require further repository for documenting learnings exploration. Therefore, it is recommended can ensure that valuable insights are that BNM and PFIs carefully assess the systematically captured and accessible importance of the research objectives and to all relevant parties. This repository can establish a prioritization framework for serve as a valuable resource for training conducting the suggested research. This new staff, developing new interventions, approach will facilitate an informed and and continuously improving existing strategic allocation of resources, ensuring practices. For instance, the repository that the most pressing research needs are could include detailed case studies, addressed effectively and efficiently. training materials, and recorded webinars highlighting effective teaching methods An agreed-upon research plan will and innovative approaches. assist PFIs and IPs in effectively addressing data access and Furthermore, PFIs and IPs can confidentiality issues. For instance, collaborate with relevant industry establishing secure data-sharing protocols associations and experts to develop ensures that sensitive information remains specific M&E training for their staff. protected while allowing researchers This could involve workshops on to access the necessary data. Another advanced data analysis techniques, example could be anonymizing data training on the latest M&E software tools, to protect participant identities, thus and seminars on ethical considerations in maintaining confidentiality without data collection. For example, a training compromising the quality of the research. session could be conducted on statistical software to analyze program data, The table below summarizes the key ensuring that staff can draw meaningful findings and recommendations by the insights and make informed decisions World Bank based on findings of the based on the collected data. review. Chapter 5 iTEKAD: Making Inroads Into Social Finance 49 Findings Recommendations Stakeholders Timeframe4 to Implement Limited utilization of Develop a robust participant PFIs and IPs Short-term integrated scoring selection framework. framework to Establish a comprehensive effectively facilitate internal screening framework participant selection for microentrepreneurs that process. captures credit and non-credit data. Diverse training Develop a standardized PFIs and IPs Short-term interventions training intervention  may lead to in Define and establish clear inconsistencies in minimum standards for training training impact. interventions. Lack of standardized Establish a standard BNM, PFIs, Short-term methodology for methodology for M&E. and IPs M&E limits credibility Define and establish clear and comparability of minimum standards for impact monitoring indicators and targets, and reporting. measurement bases, data collection methods, M&E plan, and data governance. Limited knowledge Facilitate knowledge sharing BNM, PFIs, Medium- sharing and and documenting learnings. and IPs term documenting Conduct annual roundtable learnings to enhance discussions with relevant capacity building stakeholders. among PFIs and IPs. Limitations of study Develop a long-term BNM, PFIs, Long-term evaluation plan. and IPs Identify and plan for future research studies to evaluate the effectiveness of the initiative. In conclusion, the iTEKAD program has program outcomes. The lessons learned shown promising impacts on business emphasize the need for comprehensive growth and financial confidence data collection and collaboration with IPs among participants. While most agree to ensure sustained impact. By addressing on the effectiveness of the interventions, these areas, the program can better attend opportunities for improvement in to underserved microentrepreneurs and participant selection and long-term foster long-term financial resilience in the tracking remain crucial to enhancing communities it aims to support. 4 Short-term (less than 12 months), medium-term (one–three years) and long-term (three–five years). 50 iTEKAD: Making Inroads Into Social Finance Chapter 5 Appendix 1: Literature Review Interventions for Microfinance and Microentrepreneur Development: A Review of Literature and World Bank Reports Impact of Microfinance and Woodruff (2014) reviewed several training programs and found that while they improved Microfinance has been a critical tool for financial business knowledge, income effects were inclusion, offering financial services such as modest, often requiring complementary support microcredit, savings, and insurance to individuals such as mentorship or sector-specific expertise. excluded from traditional banking systems. Calderon et al. (2023) further demonstrated According to the World Bank (2021), well- that vocational training combined with financial designed microfinance interventions can enhance support significantly boosted earnings among entrepreneurial activity, increase income, and microentrepreneurs in Uganda, especially in promote social mobility. Studies suggest that industries with high market demand. access to microcredit enhances entrepreneurial activities by enabling small business growth and Human Resource Allocation and income generation (Banerjee et al., 2015). While Expertise in Microentrepreneur microfinance has improved financial inclusion, its Development impact on poverty reduction remains debated. Roodman and Morduch (2014) argue that The effectiveness of microentrepreneur microcredit alone does not necessarily lead to development programs heavily depends on the significant poverty alleviation and that diversified quality and allocation of human resources. A financial products and social protection measures well-structured program requires experienced are needed. Furthermore, concerns regarding trainers, financial advisors, and industry experts over-indebtedness and high interest rates in to guide entrepreneurs effectively. Blattman et microfinance institutions (MFIs) have been raised al. (2014) highlighted that programs with lower (Cull et al., 2021). trainer-to-entrepreneur ratios achieved better learning outcomes and business performance. Impact of Training Interventions on Overburdened staff may reduce program quality, Income Growth leading to ineffective support and limited success in microentrepreneur development (McKenzie Training interventions are increasingly and Woodruff, 2014). Similarly, high turnover rates integrated into microfinance programs to equip among program staff can disrupt mentorship microentrepreneurs with business, financial and training continuity, reducing the long- literacy, and technical skills. Karlan and Valdivia term effectiveness of microentrepreneurship (2011) found that microentrepreneurs in Peru interventions (Banerjee et al., 2015). who received business training alongside microfinance services demonstrated improved Expertise in microfinance programs also extends business practices and revenue growth. Similarly, to financial advisory services. Bruhn et al. (2020) Drexler et al. (2014) reported that financial literacy demonstrated that microentrepreneurs who training based on simple rules of thumb led to received tailored financial planning support higher income and better financial management experienced higher revenue growth than those than traditional training methods. who only accessed credit. The World Bank (2019) emphasized that integrating skilled financial Despite positive findings, several studies advisors within MFIs enhances loan repayment indicate that training effects on income vary due rates, business sustainability, and long-term to external factors such as market conditions, income generation. social norms, and personal motivation. McKenzie Appendix 1 iTEKAD: Making Inroads Into Social Finance 51 Gender-Specific Considerations in Training In the manufacturing and service sectors, technical and Human Resource Expertise training and digital business skills have proven effective in scaling microenterprises. Karlan et Women entrepreneurs face unique challenges, al. (2016) found that garment manufacturers including limited financial access, social in Ghana who received production efficiency constraints, and lower participation in formal training exhibited higher sales and profitability business networks. Research suggests that than those who only received financial support. gender-sensitive training and mentorship Similarly, digital marketing and customer significantly improve business outcomes for engagement training have been essential for women entrepreneurs. Field et al. (2010) found service-based entrepreneurs in adapting to that business training interventions tailored changing market demands (Bruhn et al., 2020). for women in India enhanced their business confidence and performance, though income Use of Non-Credit Information effects were constrained by social barriers. Buvinic and O’Donnell (2016) emphasized that Traditional methods of credit assessment often female-led business training programs create rely on formal credit histories and financial more inclusive learning environments, leading documentation. However, microentrepreneurs— to higher engagement and long-term business particularly those operating in developing success. economies—frequently lack such formal records. This has led to growing interest in leveraging non- The presence of female mentors and trainers credit information to assess their creditworthiness also plays a vital role in women’s entrepreneurial and potential for business success. success. Brooks et al. (2018) found that women microentrepreneurs in Kenya who received One promising avenue is the use of psychometric mentorship from female business owners assessments. These tools evaluate traits such as reported higher income growth and business honesty, intelligence, and perseverance, which expansion. Programs that integrate mentorship are often correlated with responsible financial with financial and technical training are more behavior. Klinger et al. (2013) developed effective in overcoming gender-specific barriers psychometric credit scoring methods to assess (Valdivia, 2015). loan applicants in low-data environments. Their research demonstrated that such methods can Sector-Specific Expertise in rival traditional credit bureau data in terms of Microentrepreneur Development predictive power, offering a valuable alternative for institutions serving unbanked populations. Entrepreneurs benefit significantly from sector- specific expertise, which provides industry- Another emerging approach involves analyzing relevant knowledge and technical skills. digital footprints, such as mobile phone usage, McKenzie and Woodruff (2014) found that geolocation data, and social media activity. businesses receiving industry-specific training Björkegren and Grissen (2019) found that performed better than those attending general patterns in mobile phone usage—like frequency business workshops. For instance, agricultural and diversity of contacts—can effectively predict microentrepreneurs receiving agronomic training loan repayment behavior. This kind of alternative and market access support achieved greater data is especially useful where formal financial productivity and income growth compared infrastructure is limited or absent. to those relying solely on financial assistance (Calderon et al., 2023). Conclusion The success of microfinance and training interventions alone may not always microentrepreneur development programs translate into immediate income growth, their depends on a holistic approach that integrates impact is maximized when combined with financial access with training interventions, expert mentorship, financial planning, and skilled human resource allocation, and targeted industry knowledge. Addressing sector-specific expertise. Gender-sensitive these factors will improve the effectiveness of mentorship and industry-relevant training microentrepreneur programs and contribute to are crucial in addressing structural barriers sustainable economic development. and enhancing business performance. While 52 iTEKAD: Making Inroads Into Social Finance Appendix 1 Appendix 2: List of Participating Financial Institution (PFI) iTEKAD Program details PFI Program name Objective Target segment Funding features AEON Bank AEON Bank’s Provide support to B40 women AEON Bank’s (M) Berhad Growth Start microentrepreneurs at early entrepreneurs Sadaqah (donation) Programme stage of their business through and Ujrah entrepreneurship training (compensation / tailored to respective business fees for services), sector with future access to microfinancing facilities (currently being developed) Affin Islamic iTEKAD Support retired Malaysian Retired Malaysian Zakat funds and Bank Berhad PERWIRA-i Armed Forces personnel Armed Forces microfinancing in harnessing skills and personnel facilities productivity to generate sustainable income streams via entrepreneurship Bank Structured • Provide resources and Asnaf who are Diverse social Pertanian Community upskilling to the target committed finance funds (zakat, Malaysia Development segment towards nurturing to become zakat wakalah, Berhad Programme agripreneurship or entrepreneurs etc.) and access (Agrobank) for Cash Crop microentrepreneurs selling and work on to microfinancing and Sumber agriculture-based products agricultural projects facility Kekayaan Baru • Comprises various sub- i.e. becoming an programmes, each focusing agripreneur on different agriculture activity and crop Agroiltizam • Provide resources, upskilling, B40 or asnaf Diverse funds - Agrobank microfinancing and microentrepreneurs sourced from iTEKAD assistance in market access to involved in Agrobank’s internal Microfinancing microentrepreneurs involved agro-based and zakat, corporate Program in agro-based and agriculture agriculture value funds, and value chain business i.e. for chain business allocation of funds crops and livestock received from the State Government and corporate entities. Association myZakat Provides comprehensive Zakat wakalah Zakat wakalah of Islamic – Program support for asnaf and access to and access to Banking and Transformasi entrepreneurs, focusing on microfinancing microfinancing Financial Usahawan Asnaf long-term business success and facilities facilities Institutions Note: this personal growth through seed Malaysia is a multi- capital, business equipment, (AIBIM) bank iTEKAD structured training, mentoring, programme, and access to microfinancing, involving more going beyond short-term aid to than one PFI enable lasting impact Appendix 2 iTEKAD: Making Inroads Into Social Finance 53 iTEKAD Program details PFI Program name Objective Target segment Funding features Alliance Alliance Islamic Provide support to B40 women Shariah Non- Islamic Bank TEJA iTEKAD microentrepreneurs at early in Sarawak Compliant Event Berhad Programme stage of their business through comprising from (SNCE) income entrepreneurship training former recipients and access to tailored to respective business of the Geran microfinancing sector Permodalan facility Pemerkasaan Wanita Sarawak Ambank AmBank Provide grant, technical and Asnaf Returned zakat Islamic Islamic’s iTEKAD entrepreneurship training at entrepreneurs and access to Berhad Programme early stage of their business, microfinancing with support on digital facility infrastructure Bank Islam iTEKAD BangKIT Provide benevolent loans / Microentrepreneurs Donations-funded Malaysia Microfinance Qard financing for business who are ineligible microfinancing Berhad start-up and expansion for ordinary facility banking financing facilities iTEKAD Maju Microfinancing for working B40 and asnaf Returned zakat and Microfinance capital and seed capital on microentrepreneurs microfinancing needs-basis facility Bank iTEKAD Provide benevolent loans / Microentrepreneurs Returned zakat and Muamalat Mahabbah Qard financing to support in the F&B sector microfinancing Malaysia microbusiness owners or gig and gig economy facility Berhad economy workers from selected business sectors (as agreed with funders) Bank Bank Rakyat Provide support to student University students Returned zakat Kerjasama UNIpreneur entrepreneur through coaching, entrepreneurs and access to Rakyat mentoring and monitoring from asnaf/B40 microfinancing Malaysia background facility Berhad (Bank Rakyat) RAKYATpreneur Provide support to Asnaf microentrepreneurs at early microentrepreneurs stage of their business through with at least 3 coaching, mentoring and months business monitoring operation Rakyatpreneur Provide support to Non-asnaf B40 MOF grant B40 microentrepreneurs through entrepreneurs and access to coaching, mentoring and microfinancing monitoring facility Bank BSN MulaNiaga Facilitate gradual growth of Asnaf and Returned zakat Simpanan participants towards being graduated asnaf, with graduation Nasional bankable by providing training, who may not be to microfinancing coaching and funding in eligible for zakat facility tranches assistance nor ordinary banking financing faciilities 54 iTEKAD: Making Inroads Into Social Finance Appendix 2 iTEKAD Program details PFI Program name Objective Target segment Funding features CIMB Islamic iTEKAD CIMB Provide participants with Individuals from CSR grant, cash Bank Berhad Islamic Rider employment opportunities as B40 and asnaf waqf, zakat fund Entrepreneur food delivery riders to establish categories and microfinancing Asnaf Programme stable income, paired with facility entrepreneurial training Melon Manis Develop viable and resilient Low-income Charity/zakat fund Terengganu agropreneurs in Terengganu, agropreneurs from and microfinancing (MMT) Graduate specifically for those from poor low-income families facility Agropreneur families in Terengganu Programme Program Provide financial assistance and Individuals from Keusahawanan entrepreneurship training to B40 and asnaf (PK) CIMB Islamic selected microentrepreneurs categories – Taylor’s from the asnaf and B40 segments, who are looking at growing their small/micro businesses Hong Leong Women Provide funding and training Women HLISB Special Fund Islamic Bank Excellence to marginalised low-income entrepreneurs for Projects with Berhad groups towards venturing into subsequent access entrepreneurship in different to financing facility economic activities SURI Youth Underprivileged Zakat wakalah and Empowerment / B40 youths purification fund Program from Langkawi, with subsequent specifically access to financing targeting single facility mothers Central Kitchen Facilitate microentrepreneurs’ F&B entrepreneurs Capital funding by access to a central kitchen, the NCIA appointed business equipment and Implementation necessary industry training & Partner with accreditation subsequent access to financing facility Appendix 2 iTEKAD: Making Inroads Into Social Finance 55 iTEKAD Program details PFI Program name Objective Target segment Funding features Maybank Aspirasi Wanita Empowering the economy for Aspiring Zakat and access Islamic women in micro-enterprises microentrepreneurs to microfinancing Berhad and the gig economy, while or gig workers from facilities embracing digital technology asnaf categories POD – Qard Youth and single MIB’s Ikhwan Hassan Social mothers from Charity Fund Financing B40 segment and access to Programme who needs funds microfinancing for their micro- facilities businesses, as well as gig workers Community Developing Asnaf participants’ Asnaf beneficiaries Zakat and access Economic entrepreneurial skills to from Melaka and to microfinancing Development generate additional income Johor Bahru facilities – Megapreneur and improve their economic Programme well-being Program Empowering youth Asnaf Asnaf Usahawan Belia entrepreneurs in Terengganu entrepreneurs Sejahtera by providing training and (faqir miskin) from support to encourage them Terengganu to start and manage their own businesses successfully Public Islamic Public Islamic Provide support to Asnaf participants Zakat wakalah Bank Berhad iTEKAD 3.0 microentrepreneurs at early in the service sector and access to Programme stage of their business through i.e. sewing microfinancing (Aspirasi Niaga) technical and entrepreneurship facility training Public Islamic Empower asnaf participants Asnaf participants Returned zakat Kelestarian by providing technical training in poultry sector i.e. and access to Ekonomi Asnaf on poultry farming and duck egg farming microfinancing Zakat Melalui entrepreneurship facility Penternakan Itik Penelur (KELIP) iTEKAD Programme RHB Islamic BEST-BYOB (B40 Provide support to start pre- Asnaf venturing Returned zakat Bank Berhad Empowerment franchise business through in pre-franchise and access to SME Strategy – Be Your structured training, business business financing facility Own Boss) matching and financial assistance Small SME Bank Provide training, medium-term Asnaf Returned zakat, Medium iTEKAD Ishraf coaching and seed capital as entrepreneurs CSR contributions Enterprise funding support and access to Development microfinancing Bank Malaysia facility Berhad (SME Bank) 56 iTEKAD: Making Inroads Into Social Finance Appendix 2 References Azhar, S., Alawode, A. 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Enterprising psychometrics and poverty reduction (Policy Research Working Paper No. 6506). The World Bank. https://doi.org/10.1596/1813-9450- 6506 Malay Mail.(22August,2023).Govt to boost iTekad grant allocation by RM6m to assist micro entrepreneurs, says PM Anwar. Retrieved from https://www.malaymail.com/news/malaysia/2023/08/22/govt-to- boost-itekad-grant-allocation-by-rm6m-to-assist-micro-entrepreneurs-says-pm-anwar/86531  McKenzie, D., & Woodruff, C. (2014). What Are We Learning from Business Training and Entrepreneurship Evaluations Around the Developing World? World Bank Research Observer, 29(1), 48-82. References iTEKAD: Making Inroads Into Social Finance 57 Roodman, D., & Morduch, J. (2014). The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence. Journal of Development Studies, 50(4), 583-604. Valdivia, M. (2015). Business Training Plus for Female Entrepreneurship? Short and Medium-Term Experimental Evidence from Peru. Journal of Development Economics, 113, 33-51. World Bank. (2019). Women, Business and the Law 2019: A Decade of Reform. Washington, DC. World Bank. (2021). The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19. Washington, DC. 58 iTEKAD: Making Inroads Into Social Finance References Cover photo: The cover illustration is inspired by the core mission of the iTEKAD program: to empower microentrepreneurs through inclusive financial and non-financial support systems rooted in Islamic social finance. The artwork features diverse entrepreneurial activities and a narrative of growth and resilience. It portrays the evolution of entrepreneurs, from humble food stalls to bigger, thriving businesses. The scene integrates a variety of small business types to reflect the diversity of entrepreneurship supported under iTEKAD in the rural area and urban cities, including women-led stalls, farmers, and youth-run coffee shops and tech companies (for digital inclusion), representing Malaysia's multicultural society. Islamic geometric motifs, crescent moon, and a subtle zakat/waqf symbol of “giving hands” to ground the work in the Islamic social finance framework. A vibrant layered collage progression in the layout symbolizes growth, support, and hope. The illustration aims to express not just the function of the program, but its spirit: a collective journey toward sustainable livelihood, dignity, and economic resilience. The QR code embedded in the illustration links to wbg.org/Malaysia.