Bank Kerjasama Rakyat Malaysia Bhd, better known as Bank Rakyat, may not command the same spotlight as its public-listed peers, but as Malaysia’s largest Islamic cooperative financial institution, its growth is no less remarkable — boasting more than RM122 billion in assets and a two-decade track record of double-digit dividend payouts.

The bank posted a net profit of RM1.17 billion for the financial year ended Dec 31, 2024 (FY2024), slightly up from RM1.12 billion in the previous year, with a total comprehensive income of RM1.15 billion, and its capital adequacy ratio (CAR) of 24% is well above the industry average of 12% to 14%.

The country’s second-largest Islamic lender also maintained its dividend payout of 17% for FY2024, amounting to a total distribution of about RM510 million.

“Right now, we are already operating at pre-Covid levels. That shows how quickly Bank Rakyat rebounded from the impact of the pandemic,” says Bank Rakyat CEO Ahmad Shahril Mohd Shariff.

Much of this success was due to the disciplined execution of its five-year strategic plan — Bank Rakyat 2025 (BR25) — which will conclude by December. The blueprint, built around six strategic pillars — digitalisation, customer experience, human capital, small and medium enterprises (SMEs) value creation centre, sustainability and shariah leadership — has helped the bank lay a strong foundation for its long-term transformation.

“We are very much on track, as expected in BR25,” Ahmad Shahril says. “The most challenging pillar has been digitalisation. Technology evolves so fast that what we adopt today could be obsolete in the next 12 months.”

Still, the progress under BR25 has been notable; its mobile banking platform, iRakyat, has already garnered 1.4 million users since its launch in September 2021.

“The market is moving towards [customers] banking at their own convenience — [whether] time [or] place,” Ahmad Shahril explains. “It’s not about traditional banking anymore and the only way to achieve that is through digitalisation.”

Even as Bank Rakyat intensifies its digitalisation efforts, Ahmad Shahril stresses that the plan is not to replace its people but to redeploy them. “Digitalisation is not about cutting down on manpower — they will be redeployed for other functions or more on the business side.”

At the same time, the bank is also investing heavily in talent development to support this transition. “We also invested in our talent — by developing them with the right skill set or bringing in a mix of outside talent on board. So, in combination, we should have the best mix of talent to support the bank’s transformation journey.”

Historically, the 71-year-old bank has been synonymous with personal financing for civil servants, but it is now actively penetrating the mass-affluent and non-bumiputera market segments.

“Bank Rakyat is for all Malaysians, not just the bumiputera,” Ahmad Shahril says. “We’re already seeing higher uptake in our mortgages and hire-purchase financing among Chinese and Indian customers.”

According to him, the bank’s mortgage, hire-purchase and SME financing segments have grown by an average of 12.3% in FY2024, outpacing market averages.

As an agency under the Ministry of Entrepreneur and Cooperatives Development (Kuskop), Bank Rakyat plays a key role in supporting SMEs, micro-enterprises and cooperatives — through programmes such as RAKYATpreneur and Bank Rakyat UNIpreneur — by providing financing, capacity building and financial literacy training.

“Under the purview of Kuskop, our responsibility is to support all these entrepreneur development initiatives. So, we play a very important role in development, not just commercial,” Ahmad Shahril says.

Bank Rakyat now serves as the primary financier for more than 3,500 cooperatives, representing some 15 million members.

“There’s still plenty of untapped potential in the cooperative segment. We are leading, but the space is big enough for others to join,” he says.

While ESG (environmental, social and governance) has become a buzzword in the corporate world, Bank Rakyat views it as a long-standing principle embedded in its cooperative roots.

“There’s no excuse for not understanding sustainability. We have ESG, we have the SDGs (sustainable development goals), we have value-based intermediation (VBI) — all of these components can be mapped to one another. Being an Islamic cooperative bank, we have also a responsibility under VBI,” Ahmad Shahril says.

Bank Rakyat has built a sustainable financing portfolio worth RM3 billion to support green sectors such as solar, electric vehicles (EVs) and other renewable energy ventures, with RM1.3 billion in green financing disbursed so far.

On the operational front, Bank Rakyat is converting its buildings into certified green premises to align with Malaysia’s net-zero ambitions by 2050.

Meanwhile, Bank Rakyat is also expanding into waqf (Islamic endowment) management, as it was recently appointed as a mutawalli (trustee) by the Federal Territories Islamic Religious Council (MAIWP) — the first bank in Malaysia to be given such a role.

“In Malaysia, we don’t have a waqf bank, and this is the thing that Bank Rakyat is seriously looking into,” Ahmad Shahril says, noting that a plan is underway to expand this across other states. “Before we can go to that phase, we have to build a strong footing through collaboration with all the state Islamic religious councils.”

As at end-2024, Bank Rakyat’s waqf collections stood at RM3.12 million and sadaqah (voluntary charity) through its Jariah Al-Barakah platform exceeded RM374,000. Meanwhile, in 2023, RM41 million in business zakat — the obligatory tax for Muslims to achieve social justice through the distribution of wealth — was disbursed, including RM24.7 million directly to asnaf (beneficiaries) through its internal distribution.

With 2025 marking the final year of BR25, plans are well underway for the bank’s next five-year road map, dubbed “BR30”. While details remain under wraps, Ahmad Shahril hints that BR30 will push even harder into data-driven decision-making, cross-border Islamic finance partnerships, and talent development.

“We are now crafting BR30, and it won’t be just a continuation [of BR25],” says Ahmad Shahril. “It will address what we’ve missed under BR25, and take us to a higher level.”

Ahmad Shahril admits the stakes are high, however.

“What keeps me awake at night is the risk of getting the next five years wrong,” he says. “If we misread the market and make the wrong investments, we’ll waste years. That’s why BR30 is being developed through a collective effort, a group-wide approach — to tap into everyone’s ideas and position the bank correctly.”

As such, he remains optimistic about the group’s outlook.

“After 70 years, this is the time that we go all out in expanding Bank Rakyat in the market,” he says. “We’ve laid out the strategies and, hopefully, within the next one year, the public will see how Bank Rakyat is leapfrogging market presence and product diversity into various segments.”

As a cooperative-based development financial institution (DFI), Bank Rakyat is resolute in fulfilling its mandate to serve members, customers and the broader community. The bank reaffirms its commitment in the light of speculation pertaining to corporate exercises and existing structures.