THE World Bank has given the thumbs-up for Malaysia’s financial inclusion, saying it has achieved one of the highest levels in Southeast Asia and should be an example for other countries to follow. The Global Findex Database of the World Bank, which collects data on financial inclusion worldwide every three years, revealed that 81 per cent of Malaysia’s adults had an account in 2014, way above the global level at 61 per cent.
Second Finance Minister Datuk Seri Johari Abdul Ghani said Malaysia was honoured with the findings of the report, which stated that the percentage of banking customers with active deposit accounts had risen to 92 per cent from 87 per cent six years ago. “This achievement is due to strategic initiatives that we have engineered over the years. Among others, we have in place infrastructure readiness, targeted micro-financing initiatives, facilitative SME (small and medium enterprises) financing ecosystem, highly developed Islamic financial architecture and the establishment of agent banks,” he said in a keynote address at the launch of the World Bank’s report on “Malaysia Experience in Financial Inclusion” yesterday.
In the report, the World Bank said it was due in part to policies by taking advantage of mobile phones and banking agents to expand access. The report was launched at the Global Symposium on Microfinance. Datuk Seri Johari said Malaysia had also done well in terms of financial access points at the district and sub-district levels with new record highs. As it stands, all 144 districts and 97 per cent of the 886 sub-districts with a population of at least 2,000 now have access to essential financial services. “This expansion in the number of access points nationwide provides 99 per cent of Malaysians with convenient access to safe, reliable and affordable financial services.” On average, for every 10,000 adults, there are 4.7 bank branches and agent banks, 4.7 automated teller machines and 2.2 cash deposit machines nationwide.
In terms of targeted micro-financing initiative, various schemes have been offered by financial institutions and microfinance institutions such as National Entrepreneur Group Economic Fund (Tekun). “These schemes were designed to engender inclusion by eliminating barriers for the unbanked and underbanked segments of the society such as the poor and women to have access to microcredit as well as to provide increased access to financing for micro enterprises.”
Datuk Seri Johari added that the financial inclusion agenda was also supported by a facilitative financing ecosystem for SMEs, where various funding and schemes were offered by several entities, including development financial institutions (DFIs), Corporate Guarantee Corporation (CGC), Bank Negara Malaysia and non-financial institution lenders.
As at 2015, SME financing approval rate exceeded 80 per cent and had grown by 14 per cent over the last three years. Currently, 96 per cent of the financing, or RM274.5 billion, were from financial institutions and 44 per cent of approvals were given to new customers.
Islamic finance is no longer a niche segment in the domestic financial system as it accounted for 28 per cent of total banking system assets last year and close to 60 per cent of total size of the capital market.
Agent banks also had an impact in increasing access to financial services, particularly in the rural areas. At its core, agent banking enabled consumers to obtain banking services by licensed financial institutions through third-party agents such as retail outlets and post offices. As of last year, 7,984 agent banks were established nationwide, with over 25,700 new accounts. The volume of financial transactions conducted through agent banks also rose from three million transactions as at end-2012 to 100 million as of last year with US$1.9 billion (RM8.18 billion) in value. Most of these transactions involved bill payments (60.8 per cent; US$1.2 billion) and cash deposits (26.0 per cent; US$0.5 billion).
“The level of financial inclusion in Malaysia in 2015 based on the Financial Inclusion Index is relatively high at 0.90 with 1.00 reflecting full inclusion. “However, there are areas that we have to focus on and intensify our efforts urgently, namely financial literacy and financial health. “Currently, there are still eight per cent of unbanked population in Malaysia and we hope to reduce this to five per cent by 2020.”
The government remained committed to expand the level of financial inclusion to a new height and would utilise Internet and technology as new enablers, in addition to other existing tools. Non-banks service providers such as e-money issuers and money remittance services may also play a prominent role to support the financial inclusion agenda.
For enterprises, the advent of technology and sharing economy has a huge potential in providing alternative source of funding. For instance, via the Investment Account Platform (AIP), funds from investors can be channelled to finance viable ventures, including SMEs.
“We have seen major improvement on the expansion of Internet banking and mobile banking. As at end of last year, the number of Internet banking subscribers increased to 22.8 million representing 71.9 per cent of the total population (2011: 11.9 million), while the number of mobile banking subscribers rose to 8.9 million (2011: 1.6 million).”
Meanwhile, Bank Negara governor Datuk Seri Muhammad Ibrahim (pic)said more than 75 per cent of businesses in Malaysia are micro enterprises, and 40 per cent of households earn incomes below US$850 (RM3,650) a month. In Malaysia’s experience, simple changes in application procedures and faster processing times have encouraged a higher take-up of micro finance.
Flexible repayment schedules also enabled borrowers to better manage irregular cashflows, while continuing to meet their repayment commitments.
Datuk Seri Muhammad added that Bank Negara was working to expand the offering and take-up of micro insurance solutions under a multi-pronged strategy that combines tailored products offered by insurance companies and development financial
institutions, and a universal product option available through low-cost mobile and other channels.