PETALING JAYA: Malaysia is ranked 20th in the latest Global Financial Inclusion Index, a study examining financial inclusion across 41 countries, a slight drop from last year when it was at 18th spot.
This suggests that the country needed less government intervention than others as its economy and population were more resilient.
In terms of government-backed financial inclusion, Malaysia slipped one spot to 24th place. The country fell 11 places to 16th for availability of government-provided financial education.
Despite these declines, Malaysia showed progress in other areas, rising one spot to 28th for education levels and climbing four places to 26th for financial literacy. The mixed results reflect the complex financial landscape in Malaysia as it continues to navigate global economic challenges.
The 2024 Global Financial Inclusion Index, conducted by Principal Financial Group and the Centre for Economics and Business Research, highlights the progress countries have made in improving access to financial services.
The report shows that financial inclusion worldwide has been improving for the second year in a row, with every region making strides.
The index measures how well employers, governments, and financial systems support greater access to financial services.
Principal Asset Management Malaysia CEO Munirah Khairuddin said “Malaysia, alongside India, has been a relative economic beneficiary of China’s contraction. In recent years, the country has benefitted from taking on some of China’s labour capacity and, in addition, higher commodity prices have buoyed its export market.
“Similarly to the US, its overall drop in the financial inclusion ranking is not indicative of the market moving backwards. Rather, it’s a function of an economy and population that require less intervention than others,“ she said.
Despite the slight decline in ranking, Malaysia continues to perform well compared to many other markets, reflecting the country’s ongoing efforts to improve financial access for its people.
The report noted that global economic pressures made it more difficult for businesses and households to access loans this year, so the public and private sectors stepped up to help communities manage the harsh financial conditions.
Of 41 countries studied, 32 (or 78%) saw their financial inclusion scores improve compared to the previous year.
Malaysia remained flat in the rankings at 16th for its financial system’s support.
However, it saw improvements in digitised finance, notably improving its scores for the volume of real-time financial transactions and the presence and quality of its fintech companies. It also has improved its score for online connectivity.
Malaysia’s rank fell overall by eight places to 13th in the employer-supported financial inclusion pillar, however it registered score increases for employer pay initiatives and employer pension contributions.
Developing Southeast Asian markets may be reaching a tipping point for financial inclusion.
Following accelerated growth in fintech and online services over the past few years, progress in markets such as Thailand, Malaysia, Indonesia and Vietnam is tapering off.
This may be a result of some developing markets’ inability to react quickly to tough economic conditions, but it could also suggest that these markets have reached a level of financial maturity where progress may now be incremental but nonetheless is moving in the right direction.
“What has remained consistent, and we see as a secular trend, is the continued advancement in the financial system based on ongoing investment into digitization. In this area, Southeast Asian markets are standout world leaders,“ Munirah said.
