Publication:
Institutionalising sustainability-driven impact measurement framework for development financial institutions (DFIs) in Malaysia
Abstract
The 2030 SDGs deadline requires urgent collective action for a sustainable, inclusive, and resilient world. The significance of the development financial institutions (DFIs) has surged, yet their contribution to economic and social progress is undervalued due to a biased focus on financial performance, leading to a shift away from their developmental mission. This could alter DFIs' priorities, favouring conservative and profitable portfolios. To promote sustainable and inclusive growth, their performance framework must prioritise developmental objectives and sustainability. This paper explores integrating sustainability into DFIs' strategies and utilising impact measurement tools to facilitate a well-structured transition towards sustainability. While the impact of DFIs' contribution varies among economies, literature commonly highlights a focus on financial sustainability as the primary performance benchmark, with social and environmental aspects not adequately evaluated. Although there are studies on development impact measurement tools, their comprehensive adoption is not widespread. Therefore, to enhance DFIs' potential in advancing socioeconomic development, it is crucial to adopt a holistic performance measurement anchored on sustainability. This will align their business strategies with the nation's strategic priorities. The study employs a qualitative review of secondary sources to examine the contributions of global DFIs in advocating the SDG Agenda. Furthermore, it aims to identify the challenges and expectations specific to the six sizeable developmental-centric banks in Malaysia that are both well-regulated and supervised through surveys and semi-structured interviews with DFIs and their key stakeholders. The objective is to understand how DFIs can be shaped to prioritise sustainability. The qualitative analysis and interviews reveal that DFIs should align themselves with national priorities, emphasising the necessity of advancing sustainability-driven initiatives due to the vulnerabilities of the segments they serve. Consequently, DFIs must proactively invest in and continuously enhance their institutional knowledge, skills, and expertise to guide and support their clients effectively. While DFIs have demonstrated support for this agenda, there is a pressing need to accelerate their efforts, explore innovative solutions, and leverage their core strengths to achieve meaningful outcomes. This endeavour should be accompanied by relevant key performance indicators (KPIs) to ensure ongoing focus and commitment to the sustainability-driven agenda. Based on the findings, it is of utmost importance to view sustainability as the standard rather than the exception. Therefore, as DFIs move forward, integrating the principles of sustainability into their developmental mandate becomes essential for enhancing the resilience of economies and communities. Considering the pressing need to expedite sustainability efforts, this paper explores recommendations on two key aspects: i) the establishment of performance measurement tools that prioritize sustainability, and ii) transformative actions to future-proof DFIs.
Keywords
Development financial institutions (DFIs) , Sustainability-driven , Mandate , Performance measurement , Project paper (MBA)
Citation
Abdul Wahab, A. (2023). Institutionalising sustainability-driven impact measurement framework for development financial institutions (DFIs) in Malaysia (Master dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/3930
Publisher
INCEIF
Available in PDF format. Kindly email to kmc@inceif.edu.my to access the item