BNM Lays Out Second Financial Inclusion Framework for the Next 4 Years

BNM Lays Out Second Financial Inclusion Framework for the Next 4 Years

by June 26, 2023

The Bank Negara Malaysia (BNM) has developed its second Financial Inclusion Framework (2023–2026) to address several remaining barriers and challenges.

Barriers and challenges to financial inclusion


The four-year strategic roadmap features a shift in the focus from accessibility and usage to achieving broader development outcomes as well as financial resilience and well-being.

It outlines the seven policy objectives to address remaining gaps and accelerate the advancement of financial inclusion while laying out the four strategic enablers to support the effective implementation of the framework.

The framework also looks into the achievement of the United Nation’s Sustainable Development Goals (SDGs) and ESG propositions for higher value creation.

Charting Malaysia’s advancement on the financial inclusion front

The central bank had implemented its first Financial Inclusion Framework (2011–2020) which had led to significant improvements in the accessibility and take-up of basic financial services in Malaysia.

The seven policy objectives laid out by BNM to address remaining gaps in financial inclusion

Policy Objective 1: Expand financial access for the “last frontier”

Through this, BNM is looking to enhance the role of agent banks and mobile banks with the aim to support the transition to digital financial services and build cash lite communities in remote and underserved areas.

The central bank intends to enable all sub-districts (mukim) to be equipped with financial access points for greater interoperability of financial services.

Policy Objective 2: Promote secure and inclusive digital financial services

BNM will enhance the focus on digital payments by providing wider access and intensifying awareness programmes to support its usage. This is part of a greater plan to foster readiness of e-payment platforms to support digital financial services such as remittance, insurance and more.

In line with enhancing remittance services, BNM will also be encouraging greater e-KYC adoption to onboard individuals and businesses.

Meanwhile, the regulator will also be promoting digital insurance/takaful to improve quality and affordability by licensing new operators that deliver on intended value propositions of inclusion, competition and efficiency.

In addition to that, BNM intends to ensure smooth operationalisation of digital banks as catalyst for financial inclusion by ensuring that the policy environment remains relevant.

Policy Objective 3: Enhance SME financing ecosystem

Moving forward, BNM will be improving access to encourage greater supply of financing and income-generating activities. Among the measures that BNM will take include a holistic review of the Skim Pembiayaan Mikro (SPM) as well as establishing a simplified portfolio guarantee scheme with relevant strategic partners.

The central bank will also tap the use of alternative data to develop targeted, innovative financing solutions by microfinance financial services providers and digital banks.

Another strategy that BNM will deploy to mee t this policy objective would be to step up the support for microenterprises and informal businesses to move up the value chain.

This will be done through structured support on business formalisation, business matching, mentoring and financial management, and more.

Policy Objective 4: Improve access to and usage of risk protection

BNM intends promote more diverse and innovative microinsurance/microtakaful offerings guided by flexibilities within the Perlindungan Tenang framework.

This will be done by facilitating insurance and takaful operators (ITOs) to expand distribution channels and come up with product bundling and provision of value-added services.

The central bank will also further develop and provide ITOs with access to more granular demand-side data and demographic information to enable better identification of protection coverage gaps, risks and behaviours of unserved or underserved segments.

The central bank will also focus on the consumer front by increasing awareness and understanding of risk protection for households and businesses through financial education and literacy initiatives especially for the vulnerable segments that need it most.

Policy Objective 5: Strengthen financial institutions’ role and capabilities in promoting financial inclusion

The regulator will look into the greater use of forward-looking and alternative data alongside traditional metrics through data sharing arrangements with FIs, microfinance institutions and key government agencies.

On top of that, BNM will pursue regulatory reforms to strengthen consumer protection through the Consumer Credit Act as well as standards on data governance and protection among others.

BNM will also step up its support for the development of green sectors and green finance solutions through collaborations with fintech players in that space.

Policy Objective 6: Improve targeted support for the vulnerable segments

BNM will focus on appropriate funding/financing and capacity building for social impact businesses and co-operatives that supports well-being of the vulnerable segments

The bank will also enhance policy and regulations to ensure vulnerable consumers are treated fairly by financial service providers

Policy Objective 7: Equip consumers with improved financial capabilities

BNM will be collaborating with the Financial Education Network (FEN) to drive national collaboration on financial education initiatives by expanding strategic partnerships.

FEN is an inter-agency platform of eight partner institutions committed to raising the level of financial literacy in Malaysia. FEN members comprise the Ministry of Education Malaysia, Ministry of Higher Education, BNM, Securities Commission Malaysia, Employees Provident Fund (EPF), the Malaysian Deposit Insurance Corporation, Permodalan Nasional Berhad and Credit Counselling and Debt Management Agency.

The central bank will also scale up targeted and focused engagement measures particularly on risk protection, digital financial literacy and financial management for SMEs (incl. entrepreneurs, informal sector, gig workers), workplace employees, youth and school students.

How does BNM intend to translate these policies into action

The framework intends to deliver four desired outcomes for financial inclusion. This includes (1) access to affordable and suitable financial products and services; (2) responsible usage of financial products and services; (3) financial innovation that delivers value for all; and (4) financially capable consumers with good financial health.

In order to achieve this, the framework has identified four strategic enablers involving industry-wide efforts that support the successful realisation of policy objectives and strategies for financial inclusion.

The central bank will also develop a structured monitoring and evaluation (M&E) process to track the performance and progress of the strategies outlined in the framework.

A major element of the M&E process would be the establishment of key performance indicators (KPIs) that will account for the quality of financial services as well as components of financial capabilities and health this year upon consultation with stakeholders. The KPIs and targets will be published as part of the Strategy Paper’s addendum in 2023.

BNM had also outlined how the strategies under this second financial inclusion framework is aligned with the Financial Sector Blueprint 2022 – 2026.

The full Financial Inclusion Framework 2023 can be found here