Malaysia is set to be the hub of the global financial inclusion agenda.
IF YOUR idea of “financial inclusion” is making sure that your bank always credits the correct amount of interest into your account, you’ll soon be acquainted with a more noble use of that term. That’s because come January, Malaysia will become the permanent home of the Alliance for Financial Inclusion (AFI).
On Tuesday, the steering committee of the AFI, whose main offices are currently in Bangkok, announced that Malaysia, through a bid led by Bank Negara, had beaten the likes of Brazil, Mexico and Turkey to secure the host country rights.
In her keynote address at the AFI’s Global Policy Forum in Trinidad and Tobago the next day, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz (pic) described this as a great honour.
“Malaysia is strongly committed to the financial inclusion cause and will strive to the fullest and best of our ability to provide the necessary support to the AFI towards achieving its objectives,” she added.
“This is an exciting time for advancing the global financial inclusion agenda, as the world economic recovery gains further progress and as there is increasing world attention and priority being accorded to achieving financial inclusion and to an economic progress that is more inclusive.”
The AFI website introduces the alliance as “a global network of financial policymakers from developing and emerging countries working together to increase access to appropriate financial services for the poor”. That tells us what the AFI is, as well as provides a simple definition of financial inclusion.
In this context, the poor are the world’s 2.5 billion unbanked people. The AFI’s member institutions are central banks and other financial regulatory institutions from more than 90 developing countries, where the majority of the unbanked live.
So why is it important that the poor get financial services at affordable costs?
In her keynote address on Wednesday, Zeti pointed out that economic growth, no matter how stellar, would begin to fade when inequality set in, and as income disparities widened.
“Additionally, experience has shown that financial crisis and economic recession entrenches the cycle of poverty. It has been estimated that during a financial crisis, poor households lose 10 times more of their income compared with the average household,” she said.
“The role of financial inclusion has thus become more magnified as a means to improve the livelihoods and as a means to strengthen the financial resilience of the disadvantaged. It provides the opportunity to save for the future, to invest and generate income and to insure against adverse events.”
The AFI was founded in 2008 and is funded by the Bill and Melinda Gates Foundation. The alliance essentially works on what it calls a peer-to-peer learning model that encourages and enables financial policymakers to interact and exchange knowledge.
“There is widespread recognition that financial inclusion is a complex issue that requires global knowledge and insights to make true progress: no single country or institution has the answer. All institutions can learn from each other and from different players,” it explains.
Malaysia’s selection as the AFI’s host country will surely help drive our own financial inclusion agenda. After all, the Central Bank of Malaysia Act 2009 specifies that one of Bank Negara’s functions is to promote a sound, progressive and inclusive financial system.
The Financial Sector Blueprint 2011-2010 contains several recommendations that centre on financial inclusion.
“Pursuing the financial inclusion agenda, where all members of society have the opportunity to participate in the formal financial system, will continue to be a key component of Malaysia’s inclusive growth strategy,” says the report.
“Financial inclusion will enable all citizens, including the low-income and rural residents, to have the opportunity to undertake financial transactions, generate income, accumulate assets and protect themselves financially against unexpected adverse events, thereby enabling them to benefit from economic progress. This will in turn contribute to balanced and sustainable economic growth and development.”
Financial inclusion is certainly not the sexiest of topics in the banking world, but as Zeti said when wrapping up her keynote address at the AFI’s Global Policy Forum, it’s about the potential to transform lives. At a time when bankers, especially those in the developed economies, are increasingly likened to crooks, we need to once again believe that the financial institutions can be a force for good.
Executive editor Errol Oh shudders at the thought of living without access to financial services. At the same time, the fact that many big banks have paid huge penalties to regulators, sends shivers down his spine.