Assessing The Services Of Money Changers In Kuala Lumpur

Assessing The Services Of Money Changers In Kuala Lumpur


This assignment comprises of a research project which related to the business and economic. It contains the steps of carry out a research which include the collection of primary and secondary data. Economic view in term of economic cycle is taken into consideration in order to relate with the subject which is the services of money changer in Kuala Lumpur. The usage of money changer or also known as foreign exchange business in Kuala Lumpur is very wide because Kuala Lumpur is the capital of Malaysia. The present of the foreigner that comes for different purpose increase the need of money changer services. As the overall research, the time period will be taken into consideration where the changes of economic will be viewed from 1997 to 2007. We want to identify whether the variables are connected to each other or not. The variables that involved are the economic cycle (independent) and the services of money changer (independent)


A study of the impact of economic cycles (from 1997-2007) on the demand for services of a foreign exchange in Kuala Lumpur.


There have a three hypothesis, with these three hypotheses; the research will determine whether one of it will be the same on one of these three hypotheses.

H 0: Economic cycle have no impact on the demand for services of a money changer.

H 1: Economic cycle have a positive impact on the demand for service of a money changer.

H 2: Economic cycle have a negative impact on the demand for services of a money changer.

With this hypothesis, we able to know whether economy are influence of demand for services of a money changer or not.

Foreign Exchange is a business that involves exchanging currencies. Hence, our group member has decided to choose this topic because, one of our group member have a family business which is foreign exchange business. We can see that, to start foreign exchange business is a big opportunity and good business to open because this kind of business is such a buy a shares in the company to earned more profit. There is always up and down the rate of currency world. Every day the currencies are going to change according to Bank Negara Malaysia (BNM). Moreover, one of our group members also wanted to have this research because she wants more knowledge about this business to helping her family in future.

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The objectives for choosing this topic are what exactly how the foreign exchange business operates in Kuala Lumpur. Moreover, with foreign exchange business, able to find out whether the economy is influence or effect the foreign business or not.

Scope of research

Foreign Exchange in Kuala Lumpur

Kuala Lumpur or commonly known as “KL” is the central point of the new Malaysia. The city’s is still present in the suggestive British Colonial Buildings of the Dataran Merdeka and the midnight lamps of the Petaling Street night market, that past is everywhere met with insistent reminders of KL’s present and future. The cities are full with bustling streets, and its shinning, and modern office towers etc Kuala Lumpur Convention Centre (KLCC) and it is cosmopolitan city. Hence, it attract tourist to come visit to Kuala Lumpur. KL’s commercial centre is a grand meeting place for merchants and travelers from all over the world. When there is an attraction of tourism come to KL, there must be a foreign exchange that being provided in KL. There is a lot of foreign exchange in Kuala Lumpur, such as in Bukit Bintang there have 3 shop of foreign exchange in the same place. Moreover, there is almost 100 shop lot that for foreign exchange money in Kuala Lumpur. And most of them their shop are in main town such as in KLCC, Bukit Bintang and Times Square that most place are attention to tourism. In addition, most of the owner is Indian Muslim, is about 80% and another 17% are for Malays and 3% is for Chinese. Other than that, KL also is the place for the business activities such as foreign businessman come to KL and having a business meeting at KL, they wanted to exchange their currency with Malaysia currency. For an example, a businessman is come from Australia, and their currency is different, they wanted to exchange their currency to Malaysian currency. Thus, they have to find any nearest foreign exchange money to exchange the money based on the currency that are provided by the foreign exchange shop.

Economic cycle from 1997-2007

Year of 1997

According to (2008), on the foreign exchange market, the ringgit appreciated against a composite of major currencies by 4.1% from end of 1996 to end of March 1997. Against the United States (US) dollar, the ringgit appreciated by 2.0% from US$1=RM2.5279 at the end of 1996 to US$1=RM2.4790 at the end of March 1997, despite the US dollar strengthening against most currencies. Nevertheless, the ringgit weakened to US$1=RM2.5110 at end of April due to the consolidation of the stock market and related outflows of short-term capital. Since mid-May, the ringgit as well as other currencies in the region came under bouts of speculative attacks, triggered by development in Thailand. As a result, the ringgit declined to close at US$1=RM3.1975 on 30 September 1997.

Hence, currency ringgit is reflecting to the US dollar. When US dollar are going down, ringgit are will more strengthening it is because US dollar are against most of the currency in the world. And as a result, the ringgit declined to close at US$1=RM3.1975 on September 1997. However, according to Ali.A (1997), Malaysia is the best change your money in here. There are a few reasons for this; first, the exchange rates against the ringgit are always better in Malaysia than in a foreign country. Next, most foreign changers are commonly known overseas charge a commission for all transactions

Year 1998

According to (2008), the foreign exchange market, the movement of the ringgit during the first eight months of 1998 was generally volatile. However, following the imposition of selective exchange controls on 1 September 1998 to insulate the economy from the contagion effects of the global financial crisis, the ringgit since 2 September 1998 been fixed at RM1-US$0.2632. Thus, as results, foreign exchange market during the year, the Kuala Lumpur Composite Index (KLCI) fluctuated erratically.

Year 1999

According to (2008), since 2 September 1998, the ringgit has been fixed at RM1=US$0.2632 (US$1=RM3.80). The ringgit strengthened against most major currencies, such as the deutschemark, sterling pound and Singapore dollar. Moreover, during the same period, the ringgit has depreciated against the yen. This was in cycle with the strengthening of the yen against the US$ attributable to the inflow of funds into Japanese assets, increasing bond yield and improving business sentiments in Japan. However, ringgit also regional currencies such as Thai Baht, Indonesian Rupiah and other regional currencies during the first nine month on 1999. As the result, the ringgits continued remain competitive.

Year 2000

In year 2000, the ringgit is recorded to an across-the-board appreciation against the major currencies. Moreover, in year 2000, ringgit has to against the currencies of US in the international foreign exchange markets, and in cycle, with the strengthening growth of US economy.

Year 2001-2007

In year 2001, the rate remained pegged at RM3.80 to the US dollar. And the Malaysia are continually improvement their stability economy with Malaysian financial markets. Thus, US dollar are influenced the Malaysia Foreign exchange with their stability. However, the ringgit still needs to against with other regional currencies such Thai Bath, Indonesian Rupiah and other currencies. Moreover, in year 2002, tourism has helping the company by foreign exchange money in Malaysia. Thus, it is influence more other retailer of foreign exchange to compete each other. The tourism market has become more diversified with more tourists arriving. And most of them are from Republic of China and Middle East. Hence, with tourism they are helping out to that foreign exchange retailer. In year 2003, Malaysian gives more effort to promote Malaysia to the world to influence tourism from over the world to come to Malaysia. And it is increased compare to year 2002, the tourism are increasingly come to Malaysia and spending at here. Other than that, by year 2002 also there are more students from overseas continue their study at here. Thus, indirectly, it also influence to retailer of foreign exchange market to motivate their services to customer. Other than that, in year 2004, within the services sector, ICT and tourism continue to generate significant growth and both in terms output and foreign exchange earnings. In addition, year of 2005 besides the tourism earnings are increased, there is several relations have also been made to Malaysian foreign exchange administration rules. Their objectives are to reducing cost of business, facilitating transactions involving foreign exchange as well as encouraging better risk management. For an example, the retailer of foreign exchange are encouraging to better risk management which is more security with their shop and also aware about false notes. Besides that, in year 2006, Malaysian has do the largest promotional the Malaysia country to the world. It is because, in year 2007, there is a 50th anniversary independence of Malaysia. It is to encourage tourism to come more to Malaysia to know more about Malaysia culture besides spend money in Malaysia. It is influence tourist to come to Malaysia. Moreover, in year 2007, there are several rules that being updated to the foreign exchange rates. It is to improving the foreign market and as well to reduce the cost of doing business. For an example, renovate the shop to become smaller than before. Thus, it can save a cost from to pay a full rent.

The table below shows the currency rate over the world currency. It is important to foreign exchange Company to put this table on their shop it is because they have to follow the guidelines from Bank Negara Malaysia (BNM)

Mid rates at noon

29 Apr

28 Apr

% chg





























There are always exchanging rates from time to time. Sometimes the rates are changing within 3hours and sometimes are going to be same rate for a day. It depends on the economic crisis in every company. For an example, this table shows a foreign exchange on 29th April 2010 at 2.30pm. US dollar has going up from US$1=RM3.2055, US dollar going up for 0.1406.

In addition, these are a scope of foreign exchanging business. Our scopes are focusing on the economic and Kuala Lumpur. With the economic situation, we able to find out more whether foreign exchange business are effect or not. The place of our research is Kuala Lumpur because; Kuala Lumpur is the most of attraction of tourism to come visit Malaysia beside the business person having a business meeting at Kuala Lumpur.


However, every research is always having a limitation. Same goes to this kind of research. We are facing a few problems to finish up the research.

First, we are facing the problem on scope of research, we have reread all over the article, the reports to find out what the economic crisis in the year of 1997 to 2007 that relate the foreign exchange business. Moreover, we also difficult to find out the trend of living in the Kuala Lumpur on the year of 1997-2007, we are not able to find the exactly year that relate in the trends of living. Other than that, we are also difficult to make a hypothesis that relate to this research. In addition, the most difficult part that we are facing is how to generate the literature reviews. We are not able to find out the journals that relates with foreign exchanging money. Even though we find it, the journals are in the stages foreign exchange of the world. Which are the journals are more focusing on US dollar.

Methodology chosen for this research

In carry out a research, it is very important for the researcher to choose appropriate methodology in collecting the primary data as well as the secondary data. Type of research always influences the methodology to be used because it can generate useful data for the research.

In order to carry out this research successfully, we have chosen to use descriptive research which concentrates on using survey and observation methods to collect data. This type of research is also known as ex post facto. Descriptive research studies deal with collecting data and testing hypothesis or answering questions concerning the current status of the subject of studies. In this research we would like to test the hypothesis of the economic cycle whether it gives impact to the services of money changer in positive or negative way. The topic of this research which has been explained in the previous page is observing the natural behaviors of the subject without affecting them. This is the main characteristic of the research where the researcher has no control over the variables

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Advantages of using this type of research is that the subject being observed in a completely natural environment. This means that we will never change the situation and comparing them. In this topic, the economic cycle in Malaysia is observed in natural ways and we evaluate on how it gives impact on the services of money changer in Kuala Lumpur. Economic cycle is natural environment where it will happen in approximately once in 10 years.

Other than that, descriptive research also requires the researcher to collect the information of primary and secondary data. The process of collection data can be done by carry out survey or observation method. Both methods are quite simple compared to carry out experimentation on subject. Direct opinion or answer are given in the interview can give impact on the result of the research. The same goes to the questionnaires where the respondents can give their opinion regarding the subject.

2.1 Steps Involved in Descriptive Research.

Recognizing and identifying a topic to be studied

Selecting an appropriate sample of participants

Collecting valid and reliable data

Reporting conclusions

The basic steps of carry out descriptive research

The above diagram is the steps of carrying a descriptive research. This research emphasizes more on collecting valid and reliable data. Reliable data is very important to obtain since it will affect the result of this research as a whole. Reliable sources such as books written by the experts in economic field, business person who deal with money changer business, government website concerning the economic in Malaysia, and so on are the example of valid data. These sources can give information that accurate to the subject to be studied.

This research also stick to analytical and academic thinking of the topic that already chosen. This means that it requires critical thinking on the information being process and to consider how complex is the subject. For this research, the economic cycle that we want to evaluate is from 1997 to 2007. This subject requires a lot of valid information and quite complex. Because of that, academic thinking is required in order to critically evaluate the truthful of the information gathered.

The steps that involved in carry out descriptive research is quite simple but need a lot of effort especially in collecting valid and reliable data. A lot of reading needs to be done in order to find valid information. Other than that, the sources of primary data also need to be taken into consideration. We choose this method because our topic needs a lot of reading the articles about economics which involve income level of people in Kuala Lumpur, their spending trend and lifestyle, and the present of foreigner which concentrates in Kuala Lumpur.

In selecting an appropriate sample of participants in order to response to this research topic, we will select the business person who involve in the money changer business and have some experience about the fluctuation of economic in Malaysia.

Furthermore, in our topic, we don’t have to do any experiment to the subject. For example is to test the hypothesis by changing the nature of the subject. We only have to observe the changes of economic in nature ways without affecting them. This variable is independent in nature and already exists in that way. On the other hand, the services of money changer are dependent variable where it depends on the economic cycle. With the presence of these variables, we think that the best type of research that we should carry out is descriptive research.

In addition, we choose this type of research because we can express the emotions that we felt by argument on related sources of information. This means that we are able to share our opinion on proving the hypothesis. This can be done through the writing of this report.

Method to evaluate the planning activities in conducting research

A Gantt chart is a graphical representation of the duration of tasks against the progression of time. A Gantt chart is a useful tool for planning and scheduling projects. A Gantt chart is helpful when monitoring a project’s progress.

Type of bar-chart that shows the scheduled and completed work over a period, a time-scale is given on the chart’s horizontal axis and each activity is shown as a separate horizontal rectangle  whose length is proportional to the time required  for the activity’s completion.

3.1 Plan to show the process of conducting research by using Gantt chart






Time Period

Week 1 Week 2 Week 3 Week 4

In first week, our group gathered and brainstorming to get ideas in searching the suitable topic for research. After choose a topic that we want, we need to set our objective, hypothesis, scope of research and limitations. Other than that, our group decided on suitable date in conduct interview for respondents. The topic our group choose is money changer.

Then, in second week, our group analyze each question on assignment that we want to ask and know from the respondents. Besides that, we discuss appropriate methods to get the information. Furthermore we decided to do all the tasks together and we also discuss about the methodology use in research on task 2.

In the third week, after finish discuss about the methodology use in research on task 2 our group find the related information about money changer in Kuala Lumpur. In addition our group find about economic cycle in 1997-2007. Besides that, we also find the exchange rate of currency and methodology survey and interviews.

Finally, in the last week, we discuss about the literature review about the topic we choose. Literature reviews our group find it from newspaper, article and journals. Furthermore we also find about the income level of people in Kuala Lumpur, spending trends and lifestyle and Malaysia economic cycle.

Literature review

The purpose

A purpose for doing a literature review for this topic are because we want to know whether the descriptive methodology is use for study can give the impact of economic cycles and the demand for money changes services.

It means?

In year 1997 to 1998, crisis economy has occurred in Malaysia and it is the starting year when Usha Anang Sdn Bhd operating the business and still survive until now. That’s why we want to whether the economic crisis can give the impact on the demand for money changer services or not and how the company handles the economic crisis situation.

The scope

The scope of area that we are focusing for the demand of money changer services is only at Kuala Lumpur area. Usha Anang Sdn Bhd headquarter is located at Bukit Bintang Plaza and the others two branches are located at Plaza Mont’ Kiara and in Jaya Jusco Wangsa Maju.

To obtain the result whether the economic is influencing the demand for services of money changer or not, we will find articles such as income life in Kuala Lumpur, spending trend in Kuala Lumpur, and Malaysia economic cycle to prove our one of the hypothesis.

Income life and population in Kuala Lumpur

In 1995, the average monthly household income for Kuala Lumpur is RM3, 371 and has been increased to RM4, 105 in 1999.


Average Monthly Household Income, 1995 – 1999

This table is taken from DBKL website for Kuala Lumpur Structure Plan 2020. It’s shown that although Malaysia has economic crisis in year 1997 to 1998, its does not affect the growth rate of income level of Kuala Lumpur citizens.

Population in Kuala Lumpur is 1.5 million in the city and 2.5 million in the metropolitan area. Kuala Lumpur is not the largest population compare to other states such as Penang, Johor Bharu etc.

The Definition of Economic Cycle

Economic cycle is also known as business cycle. According to Parkin (1999), the business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP (gross domestic product) and other macroeconomic variables. This means that the rate of real GDP from year to year enables us to track the business cycle. It shows the economic growth fluctuates around the long-term trend. There are many factors that determine long run economic growth. Below is the real growth rate of Malaysia GDP from year 2003 to 2010 which taken out form

GDP – real growth rate: -2.8% (2009 est.)

4.6% (2008 est.)

6.2% (2007 est.)

The graph below is taken from public data from google.

GDP growth rate in Malaysia from year 1965 to 2005

In economic cycle, there are four phases which consists of contraction, trough, expansion and peak. According to Parkin (1999), a contraction is a slowdown in the pace of economic activity, a expansion is a speed-up in the pace of economic, a though is the lower turning point of a business cycle where a contraction turns into a expansion, meanwhile a peak is the upper turning point of a business cycle where an expansion turns into a contraction. The graph below can indicate the business cycle.

The Variable and the Business Cycle

Business cycle is influenced by several factors such as unemployment, inflation, and all the government and current account deficits where these factors are all related to business cycle activity. These variables are the factors that will also influence the business of money changer in Kuala Lumpur. This means that, in carry out this research and to prove the hypothesis, we need to consider these variables and evaluate whether it give positive of negative impact to the services of money changer in Kuala Lumpur. Below are the information collected regarding the inflation and unemployment rate in Malaysia from Furuoka (1997).

Unemployment and Inflation in Malaysia (1975-2004)

Compared to unemployment rate, there have been greater fluctuations in inflation rate in Malaysia between 1975 and 2004. In the second half of the 1970s, Malaysia’s inflation rate was approximately 4 percent. In 1980, the inflation rate increased and reached 6.6 percent, and increased further to 9.7 percent in 1981. However, since 1982 inflation rate kept decreasing and amounted to less than 1 percent in 1985. In the first half of the 1990s, inflation rate was stable at approximately 4 percent. Due to the Asian economic crisis of 1997, inflation rate in Malaysia increased to 5.2 percent in 1998. From 2000 to 2004, inflation rate stabilized and remained approximately 1.5 percent.

From the above information we will evaluate the variables and identify whether this variable give impact to the service of money changer in Kuala Lumpur or not through conducting the interview.

Critical analysis of literature

December 4 2009, KL money changers aiding capital flight became the titles of the Malaysian Insider newspaper. In this online newspaper, it is state that since early last year, the central bank, Bank Negara, has closed down 49 money-changing firms after raids by its enforcement division revealed that many operators were illegally remitting funds to countries such as Singapore, the United Kingdom and the United States. It is also states at newspaper that for the last November, Transparency International said that Malaysia fell to No. 56, from No. 47 last year, in a league table of 180 countries surveyed around the world, and that graft had hit “alarming” levels.

We agree with this statement because remittance through money changer has been used by the public and also influence people. The breaching of the Money-Changing Act 1998 by moneychangers in this country also state in The Edge Malaysia for December 7 2009, written by M Shanmugam.

Economists said the central bank’s move to shutter the businesses of 49 licensed money changers underscores a deeper malaise afflicting the economy, the flight of capital. It has lifted the veil on the huge amounts of capital fleeing the domestic economy, which bankers estimate could be in excess of several billion US dollars each year.

From our opinion, this flight of capital happens because they are different rates between money changers services and banks when customers want to do the remittance. A money changers rate is cheapest rather than banks rates. Other than that, a money changers service for remittance is popular among migrant workers from Indonesia who want to remittance the moneys to their families at their hometown. Of course the migrant workers will use the cheapest services because they want to survive in our country and at the same time they need to support his or her families. This problem is supporting by the 12th EADI General Conference and written by Treena Wu.

It is reasonable if the low income people category decided for used these services but why influence people like Mohamad, a senior politician from Prime Minister Datuk Seri Najib Razak’s ruling Umno party, is alleged to have transferred RM10 million to London in the middle of last two years? Does he not capable to pay the bank rates? When this news is exposed to the public, automatically public will think negatively because foreign exchange rules stipulate that the transfer of funds overseas can be carried out only by licensed financial institutions, such as banks

5.0 Methodology used in Undertake the Primary Data

Primary data is data that is collected by the researcher directly from observations and experiences in the process of carry out research.

In this research, we only use survey methods because it is more efficient and economical than observation. Survey also a good method because we can collect data on respondent’s attitudes, opinion, intentions, expectation, as well as past events. A lot of primary data can be collected through this method. It requires asking a representative sample of people or respondents for information using either verbal or written questioning. To carry out a survey, we as the researcher have to communicate with selected sample of respondents to get information on this topic. There are a lot of ways to carry out survey, for example, questionnaires, interviews, over the phone and by mails. All these ways are effective and can generate useful information. Survey can be vary in term of the way how someone done it.

In order to get specific information about the money changer in Malaysia, we have decided to choose interview as a techniques of conducting survey. Interview is the qualitative methodology. The respondents are the experts in money changer field and run this business in Malaysia for quite long. The interview session is focus on asking the question about the money changer industry around Kuala Lumpur in the context of economic cycle from year 1997 to 2007.

5.1 Advantages of interview

Advantages of interview techniques are it is in verbal where formality is less concern. In interview session, we are able to ask many things which related to this topic. This means that we can probe deeper into a response given by an interviewee. This will produce a higher response rate. In the interview session that we will carry out in doing this research, we would like to know further about the experiences that the interviewee faced in running money changer business. For example on how they deal with they customers and how they manage the currency exchange between other country and the Bank Negara Malaysia.

5.2 Reason on Selecting the Interviewee.

Our respondents in carry out interview technique in collecting the primary data are the persons who work for Usha Anang Sdn. Bhd. in Kuala Lumpur. This company has three branches of shop lot which located as follow:

This company has a lot of experience in running the business of money changer. They already established the business around 1997 and experienced in economic downturn. They have many experiences in managing the currency from various countries and always up-to-date with the changes of foreign currency. Other than that, this company is also listed under Bank Negara Malaysia Money Changers. It operates the business concerning the law and regulations in Malay


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