Among ASEAN, OIC and other middle-income country, Malaysia stands as a leader in developing its Islamic finance industry as well as attaining financial inclusion
- Deliberate policy measures since the 1960s have cultivated Islamic finance as a source of financial inclusion
Religious objections to financial participation have essentially been eliminated. Discussions around financial participation now look at making finance (both conventional and Islamic) more accessible to the general public.
Strong leadership from financial regulators drive overall financial inclusion
- Regulatory initiatives with clear targets and tracking of milestones have pushed Malaysia to rank well in this regard
Standardized and comprehensive frameworks for consumer and investor protection
- Malaysia¡¯s framework for consumer and investor protection, covers both Islamic and conventional products
- Dedicated institutions have grown out of this, raising confidence and promoting financing inclusion
Institutions of financial inclusion
- Tabung Haji (TH) turned religious beliefs into an avenue for financial inclusion by incentivizing saving for the pilgrimage to Makkah
- Permodalan Nasional Berhad (PNB), mandated with redistributing wealth through affirmative action, provided preferential share allocations to participating Malays
- Federal Land Development Authority (FELDA) allowed land ownership through designated holdings for agricultural cultivation
- Corporatized State Islamic Religious Councils (SIRCs) improved zakat collections and melded waqf interests between these councils and Islamic banks
Islamic social finance as a central element in utilizing waqf funds for social development
- The Security Commission and 5 Malaysian states have passed regulations and ?waqf-specific legislation enabling entrepreneurs to access financing
Improved financial inclusion through FinTech
- Cell phone and internet access is a global driver of financial services
- FinTech has fueled a resurgence in Islamic social finance enhancing information access and transparency in making donations through zakat, waqf and sadaqah.
Three challenges and opportunities remain for FinTech applications driving inclusion in Malaysia:
- Bridging the technology gap between generations and income segments
- Automating processes beyond payments and financing systems
- Greater innovation from Islamic FinTechs