Resource information
This note focuses on the regulatory and
market environment relevant to the emergence and adoption of
innovative delivery channels to promote greater financial
inclusion in Malaysia. Financial inclusion is defined here
not only as providing access to financial services, but also
as enabling and promoting increased usage of those services.
Achieving higher levels of access and usage requires an
extensive and efficient retail payments infrastructure,
affordable financial products that meet the needs of
customers, and actions to address cultural and social
factors that influence customers' choices. This note
therefore considers the implications for financial inclusion
of Malaysia's evolving retail payments landscape and
the country's potential to go beyond providing physical
access to services. Malaysia has achieved remarkable
progress in providing access to basic bank accounts to the
majority of the population and credit to small and medium
enterprises. Increasing access and usage will depend, to a
large extent, on greater availability of technology-enabled
channels that go beyond brick-and-mortar branches and
leverage on existing third-party infrastructure such as
retailers and neighborhood shops, which are usually referred
to as 'retail agents.' There are only a few
regulatory obstacles for the use of agents by banks (there
is already an enabling framework for nonbanks) and for
development of other alternative delivery modes. Relevant
regulation is generally permissive while maintaining minimum
standards for the safety and security of transactions and
the protection of users. Financial inclusion is defined in
this Note as a situation where financial services are not
only readily accessible, but also widely used by the
majority of the population in meeting all or most of their
financial needs. After a brief overview of the state of
access to basic financial services and the institutional
potential for expansion in Malaysia, the note analyzes the
market environment and the policy and regulatory frameworks
that may have an impact on the emergence and sustainability
of delivery modes that could cater to underserved and
un-served communities.
