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Why is financial inclusion important to you?

Financial inclusion has been a buzzword in recent years due to its role as a key enabler in cutting poverty and boosting a country’s wealth. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs. These include transactions, payments, savings, credit and insurance, all delivered in a responsible and sustainable way.


What has reinforced the need for increased digital financial inclusion was the onset of the COVID-19 crisis. Financial inclusion means that individuals and

businesses have access to useful and affordable financial products and services that meet their needs. These include transactions, payments, savings, credit and insurance, all delivered in a responsible and sustainable way within a well-regulated environment.


One way to accelerate the financial agenda on a national scale is to catalyse more sustainable financing ecosystems, which would then foster stronger financial inclusion against a backdrop where environmental, social and governance (ESG) dictates the growth and development of the nation.


The benefits of financial inclusion catalyse economic growth, as access to financing opens doors for people via smoother daily consumption and the possibility to think long-term through funding for education and health, while businesses are also provided with the necessary flexibility to expand, create jobs and reduce inequality. While we are cognisant of the benefits of financial inclusion, there remain huge barriers to achieving this. Key among them is financial EXCLUSION.


This is where there is a lack of access, lack of physical and social infrastructure, lack of understanding and knowledge, lack of technology and the list goes on.

How do we overcome these barriers?


If we look at the lack of physical infrastructure, it is quite unfeasible to set up a brick-and-mortar branch in the villages mainly due to cost constraints.


This is where the deployment of the cost-saving digital means will help reach currently financially excluded and underserved populations with a range of formal financial services. These financial services are catered to their needs and are responsibly delivered at a cost affordable to customers and sustainable for providers.


If you look at most rural areas, people face the daily challenges of clean water, sanitation, electricity and transportation. Thus, several men and women can have better lives by becoming entrepreneurs, all because they could receive financing from a bank or other financial institutions.


Let me share with you this anecdote. Halimah, a farmer, started selling excess produce at a local market. She then learnt how to price her vegetables according to demand and supply. Her business began to flourish and she received financing from a bank to set up a proper stall.


The financing received helped her build a thriving business, enabling her to vastly improve her living conditions, from hand-to-mouth to having the ability to have a savings and current account, and credit facilities to help her continue to send her kids to school.


Halimah is just one of the millions of women in the country who has shown what is possible if rural women have access to basic financial services. This is important for a country to push for a strategic approach to developing national financial inclusion strategies.


More so, we should focus on delivering Islamic finance to the Muslim community as it can play a vital role in enhancing sustainability as its main principles revolve around the prohibition of Riba (interest) in a financial transaction by utilising a mechanism where risk is tied proportionally between lenders and borrowers, with financial justice a key pillar of Shari’a law and a requirement for Islamic financing to function.


By emphasising partnership-style financing, Islamic finance has great potential when it comes to adequately improving access to financing for the poor and small businesses on a global scale. There would also be stronger potential for economic growth as a decrease in poverty would be complemented by more opportunities for budding small businesses to gain access to funding while simultaneously growing, increasing output and generating jobs.


Moreover, financial stability can be strengthened with increasing adoptions of Islamic finance as it avoids leverage and speculative financial products, two factors which brought about the financial collapse of various banking systems across the world during the global financial crisis in 2008.


Over the years, strategic partnerships and collaborations have been formed between multiple established, progressive technology players to develop reliable digital banking ecosystems which can seamlessly incorporate the operational needs of Islamic finance.


With the global economy becoming more digitalised, having innovative FinTech solutions will definitely be vital in ensuring Islamic finance and its principles can continue to remain relevant and fostered on a larger scale.According to the World Bank’s Findex survey findings, approximately 1.4 billion adults today across the globe have NO access to banking. That means it’s harder for them to save, borrow, send money or start a business, all of which can play a role in creating a healthier economic ecosystem in the long- run.


With the worsening climate change situation taking centre stage, we should also all be aware of the fact that people living in poverty are most exposed to the negative effects of climate change.

They would not possess the necessary financing to live in safer surroundings or get treatment for any disease caused by the polluted environment around us.


Financial inclusion is a win-win opportunity for the poor, the banks and the nation chiefly because of growing incomes, improving awareness and aspirations of the poor are on the rise. We are cognisant of the increasing prominence of financial inclusion as many countries, including Malaysia, strive to build a digital economy.


More concrete efforts need to be undertaken to push the financial inclusion agenda forward as such a vast proportion of society remains unbanked. As it is, the B40 in Malaysia or low-income earners struggle to gain access to financing as conventional banks have such stringent credit requirements to be fulfilled for the disbursement of financing.


The constantly accelerating growth adoption of FinTech and platforms is a positive sign, but it needs to be incorporated correctly to effectively address financial inclusion. The principles of Islamic finance which focus on socially responsible and ethical investing can be a good example of FinTech being utilised for the betterment of society.


More importantly, government agencies have a crucial role to play in ensuring digital engagement and connection are embedded in the processes involving everyone, from individuals to SMEs as well as large corporations.


Apart from FinTech and technology enablers driving the financial inclusion agenda; government agencies need to ramp up digitalisation efforts to implement effective operating frameworks for digital technologies such as FinTech platforms to foster financial inclusion digitally and on a larger scale.


We are in line with the current trends to help simplify the process and drive digitalisation based on Shari’a principles, and are open to working with government agencies to provide input for the continuous improvement of financial inclusion among the people.


This article is written by Nisa Ismail, CEO of Sedania As Salam Capital, a wholly-owned subsidiary of Bursa-listed SEDANIA Innovator Berhad. Sedania As Salam Capital is an enabler of Islamic financing, offering a suite of innovative Shari’a-compliant FinTech solutions that can accelerate the financial sustainability push through its strong digital expertise.



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