New World Bank report analyzes Malaysia’s journey on financial inclusion during the past two decades
Malaysia has achieved one of the highest levels of financial inclusion among Southeast Asia countries, due in part to policies taking advantage of mobile phones and banking agents to expand access, according to a recent World Bank report.
The Knowledge and Research Report Financial Inclusion in Malaysia: Distilling Lessons for Other Countries outlines Malaysia’s experience in reaching high levels of financial inclusion. The Global Findex Database of the World Bank, which collects data on financial inclusion in countries around the world every three years, revealed that 81 percent of Malaysia’s adults had an account at a licensed financial institution in 2014. Globally, 61 percent of all adults have accounts.
“Malaysia has achieved one of the highest levels of financial inclusion among Southeast Asia countries, underpinned by long-term development plans and policies, strong financial infrastructure and an enabling regulatory environment to support innovation in the financial sector,” said Datuk Seri Johari Abdul Ghani, Second Finance Minister. “We are honored to receive this report from the World Bank to document our journey as a useful case study for countries seeking to ensure that every economic activity, geographical region and segment of society have access to financial services.”
The report was launched by the minister today at the Global Symposium on Microfinance, jointly organized by Bank Negara Malaysia and the World Bank Group Global Knowledge & Research Hub in Malaysia.
“Access to finance is critical for lifting people out of poverty. Having bank accounts and being able to save and get credit helps people and firms make plans, consume. and invest for the long term, and also manage unforeseen short term shocks,” said Ulrich Zachau, the World Bank’s Country Director for South East Asia. “Malaysia is at the cutting edge of financial inclusion. The World Bank Group looks forward to our continued partnership with Bank Negara Malaysia in sharing the country’s best practices in strengthening its financial sector, so policymakers and practitioners around the world may benefit from the experiences in Malaysia."
The report looks at specific actions, programs, and strategies that have contributed to enhance financial inclusion in the country and highlights key learnings to benefit low- and middle-income countries with similar ambitions.
The report also notes that there is no single factor that can explain Malaysia’s success in financial inclusion. The progress that Malaysia has achieved is the result of efforts undertaken by authorities and the financial sector industry over the past 20 years. The country has been able to achieve sustainable growth of its financial system over a long period of time, reconciling two policy objectives, namely “financial stability” and “financial inclusion”, in a successful manner so far.
Malaysia faces two main challenges in terms of financial inclusion. First Malaysia will need to reach out to the remaining under-served population. Secondly, a major challenge is how to ensure that the people with access to financial services actually make active use of their accounts.
Knowledge and Research reports are flagship publications of the Malaysia Hub. This report is part of the Malaysia Development Experience Series, which strives to capture key learnings from Malaysia that are relevant for developing countries around the globe as they transition out of poverty and into shared prosperity.