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Encouraging Financial Inclusion with FinTech Solutions

Written By: Dr Yamunah Vaicondam and Dr Fatin Nabila Abd Latiff, Lecturers at the School of Accounting and Finance, Faculty of Business and Law at Taylor’s University


Dr Fatin

The rapid growth of digital technologies has led to Malaysia embracing FinTech as a way to improve financial inclusion, promote economic growth and stimulate financial innovation. Financial inclusion refers to the accessibility and usage of financial services and products by all individuals and businesses, thus enabling their participation in the economy, saving money, and accessing credit and other financial services.

The Malaysian government had set a goal to increase the financial inclusion rate to 90% by 2020. To achieve the targeted rate, the government took several initiatives to promote financial inclusion and FinTech. The government established the National Financial Inclusion Framework (NFIF) in 2017 and the Financial Inclusion Fund (FIF) to provide financial assistance to small and medium enterprises (SMEs) and low-income households. Additionally, the government created the FinTech Regulatory Sandbox (FRS) in 2018, providing a secure environment for Fintech companies to test, develop and collaborate on their products and services.

That said, the World Bank states that only 54% of adults in Malaysia have a bank account, and a much lower percentage have access to other financial services. Recently, the Financial Capability and Inclusion Demand Side Survey 2021–2022 by Bank Negara Malaysia (BNM) estimated that 74% of Malaysians use digital financial services. In addition, World Bank’s Global Findex 2021 Report disclosed that 79% of Malaysian adults use digital payments, of which 42% were first-time users during the COVID-19 pandemic.

Serving the Underserved

Malaysia now faces the challenge of reaching out to the remaining underserved communities and ensuring active use of financial accounts. There is a need to address the infrastructure deficits in suburban areas that hinder the provision of financial services such as payments or loans, and data security and privacy concerns that arise from the storage of data in cloud. Additionally, regulatory risks from different countries’ financial services rules can create complexities for Fintech companies operating in multiple markets.

Dr Yamunah

Recently, the nation has unveiled its 2nd Financial Inclusion Framework 2023–2026. This groundbreaking initiative developed by BNM aims to provide affordable and accessible financial services to all Malaysians, regardless of their income levels or social status. Key strategies within this new framework include expanding digital financial services, promoting financial education and awareness, enhancing the regulatory environment, and strengthening the financial sector’s capacity to serve all segments of society. The enforcement of the strategies is expected to contribute significantly in achieving the sustainable development goals.

FinTech services have been a major factor in the financial inclusion of Malaysians by providing access to previously excluded individuals, but they have also reduced the cost of transactions and increased options for those seeking financial services. The introduction and utilisation of FinTech services in Malaysia have enabled more people to participate in the financial system and become financially included, generating economic growth, and leading to better economic outcomes overall.

Going forward, there is an opportunity to combine the efforts of both fintech companies and financial inclusion initiatives to create more comprehensive solutions and expand the reach of financial services to all walks of life.