WHAT IS FINANCIAL INCLUSION AND WHY IS IT CRUCIAL POST-COVID 19?

13th October 2021

Given the many unknowns surrounding COVID19, assessing the full impact of the pandemic is a difficult task – how long will it take to overcome the pandemic; what will be the impact on the Asian, regional, and global economies in the short, medium, and long term; the impact on people, their livelihoods, and their behaviours; and, of course, the financial sector and financial services.

Malaysia, like almost every other country on the planet, has seen its GDP contract in recent quarters and is forecasting some hard times ahead. Poverty, inequality, and unemployment have all risen in recent years. Transportation and hospitality industries, including hotels and restaurants, have been particularly hard hit. These sectors are made up of thousands of micro and small companies run by women and men who are fighting to feed their families and livelihoods while simultaneously delivering critical services to the economy.

We've seen how financial technology has the power to change individual and company behaviour. Consumers benefit from low costs, ease of use, and speedier services provided by digital financial services. Financial technology may be utilized to provide not only access for marginalized people but also to deliver digital financial education programs and improve financial consumer protection.

Responsible financial and digital financial inclusion requires access to finance, as well as financial awareness and consumer protection. As a result, the underserved can access a variety of financial services, which opens up chances for economic rehabilitation.

What Is Financial Inclusion?

Financial inclusion, or the provision of suitable, affordable, and high-quality financial services to all segments of society, helps to promote balanced and long-term economic growth and development. The Central Bank of Malaysia Act 2009, which articulates Bank Negara Malaysia's principal function of promoting a strong, progressive, and inclusive financial sector, further reinforced Bank Negara Malaysia's strategic focus on advancing financial inclusion policies. To further the financial inclusion mandate, BNM's Financial Sector Blueprint (FSBP) 2011-2020 created a holistic framework to improve communities' overall well-being in terms of accessible accessibility, high take-up, responsible usage, and high satisfaction with financial services.

The financial inclusion framework's objective is to build an integrated financial system that best benefits all members of society, particularly the underserved, by providing access to and use of high-quality, low-cost financial services to meet their needs and contribute to greater shared prosperity. The vision's success is judged by the expected results for clients, which include easy access, high take-up, responsible usage, and high customer satisfaction with financial services.

On a global scale, Bank Negara Malaysia remains a major proponent of inclusive financial development:

1. Alliance For Financial Inclusion

AFI is a global network of policymakers with headquarters in Malaysia and 100 member institutions whose goal is to make financial services more accessible to the world's 1.7 billion unbanked people. Bank Negara Malaysia, in collaboration with AFI, plays a key role in promoting and advocating for financial inclusion policies in key policy areas such as global standards and proportionate regulation, consumer empowerment and market conduct, financial inclusion data, and national strategy, digital financial services, and SME financing.

The Maya Declaration, which is the AFI Network's commitment to financial inclusion, has also committed Bank Negara Malaysia to a series of measurable financial inclusion commitments to further the goal of reaching these unbanked people. Recognizing the importance of measurements in translating policies into real impact, Bank Negara Malaysia adopted the Sasana Accord at the AFI Global Policy Forum in Kuala Lumpur in 2013 and developed a set of key performance indicators and a financial inclusion index to track progress and estimate the impact of policies to expand the reach of financial products and services.

In May 2015, Bank Negara Malaysia, AFI, and the Toronto Centre joined to host the Global Symposium "Towards Proportionality in Practice," which culminated in the KL Resolution on Proportionality in Practice. To see the KL Resolution's commitments, go here. The Maputo Accord, which introduces SME financing as a new focal area of the Maya Declaration, was accepted by AFI members during the 2015 Global Policy Forum in Maputo, Mozambique. In many developing nations, SMEs encounter significant obstacles in obtaining financing. They are the key drivers of economic growth, employment, innovation, and women's empowerment. The Maputo Accord establishes a framework for AFI members to make explicit pledges to SME finance, decrease regulatory impediments, and accelerate financial inclusion progress.

AFI presented Bank Negara Malaysia with many distinguished awards in recognition of its support and dedication to the financial inclusion agenda:

- In 2014, the Best Host Institution award was given to Sasana Kijang for hosting the AFI Global Policy Forum 2013.

- In 2015, Bank Negara Malaysia received the Maya Declaration Award for achieving financial inclusion aims and providing the most detailed reporting of measurable benchmarks.

- The AFI Leadership Award in 2015, for being the institution in the AFI Network that provided the most leadership.

2. WC-FINC (The ASEAN Working Committee on Financial Inclusion)

The ASEAN Working Committee on Financial Inclusion (WC-FINC) was established on 4 April 2016 by the ASEAN Finance Ministers and Central Bank Governors (AFMGM) to coordinate and implement actions to improve financial inclusion in the region. WC-FINC is also a platform for sharing country experiences, expertise, and information, allowing member countries to build or improve national and regional financial inclusion plans and activities.

WC-FINC also collaborates with international partners such as AFI, the World Bank, the United Nations Capital Development Fund (UNCDF), and the Organization for Economic Cooperation and Development (OECD) to improve ASEAN's financial infrastructure and ecosystem. The WC-FINC aims to promote financial inclusion in the region by concentrating on four key outcomes:

- Aiding in the development of a national financial inclusion strategy and action plan.

- Building ASEAN member states' capacity to improve the financial inclusion ecosystem.

- Advocating for creative financial inclusion through digital platforms.

- Raising consumer awareness of financial education and protection.

Malaysia is a member of WC-FINC, and it presently co-chairs the organization alongside Indonesia for two years (2016-2018).

3. Other collaboration

Bank Negara Malaysia has collaborated with the Irving Fisher Committee on Central Bank Statistics, AFI, the OECD, and the World Bank to organize several financial inclusion capacity-building programs for policymakers throughout the world. Bank Negara Malaysia has partnered with Asian Banking School to provide leadership and technical training to regional microfinance practitioners.

Advanced solutions for financial inclusion

Organizations and individuals alike are now on the lookout for the best apps to send money and payment solutions for mobile reload and bill management, seeing that the accessibility to such Fintech solutions is greater than ever before. Some diverse digital payment apps allow users to send money for better online shopping experiences, while others allow international payment transactions that are simple and secure.

Other services have integration capabilities that cater to almost every major financial necessity, from remittances and digital wallets to salary management and monthly expenses payments. EVOLET is one such solution, dedicated to the improvement of organizational salary management as well as the financial wellbeing of migrant workers across Malaysia.

EVOLET's mission revolves around the very concept of financial inclusion, empowering employers to manage their payroll better and workers to capitalize on the thriving technology of our current era. The unbanked make out a huge portion of our population, and enabling them with access to better financial services means that our economy and our enterprises will benefit greatly from the potential inclusion.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/