KUALA LUMPUR (Sept 11): The nature and quality of financial services offered play an important role in pushing financial inclusion forward, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said.

“There is now greater appreciation that the level and quality of financial inclusion will have a significant impact on the prospect for balanced and sustainable growth,” she said in her keynote address at the opening of the two-day Alliance for Financial Inclusion (AFI) Global Policy Forum on “Advancing Financial Inclusion to its Next Level” in Trinidad and Tobago yesterday (Sept 10).

“However, more should be done to move the cause of financial inclusion forward,” she added.

She cited the AFI, which within three years has been instrumental in galvanising commitments from member countries to enhance financial inclusion policies, resulting in 20 million of the unbanked to gain access to financial services.

"Yet we wish to achieve more than just access. The nature and quality of the financial services and the nature of the participation in the financial system is equally important," said Zeti.

She noted that the poor were impacted by many factors such as low and irregular income, which makes monthly debt-servicing difficult, living in remote areas away from access to financial services. These factors has to be taken into consideration in designing or coming up with new products to target this group.

"There is a greater need for features that are responsive to the constraints faced by those that have been marginalised. Flexible microfinance for the agricultural sector [for] example, addresses the cash flow mismatches between fixed repayments to banks and the irregular income flow of the farmers, due to the seasonality of crops.

"A further innovation has also involved the creation of platforms for matching savers with those that need financing," she said.

Other areas needed to be looked at, include collecting and compiling relevant data in a timely manner to among others, assist in detecting risks and vulnerability early.

There also needs to be strengthen regulation and supervision, specifically to address the low income households and small borrowers in the interest of inclusiveness.

"Lending and provisioning standards, reporting requirements, minimum capital adequacy and customer due diligence requirements, are among the key areas in which there is still little formal distinction made, to address the impact of such regulations on the access to financial services to low income households and small borrowers," said Zeti.

AFI is a network of finance policymakers from 95 developing and emerging countries, which has now made Malaysia its headquarters. It was previously based in Thailand.

AFI was founded in 2008. Some of its members include institutions from Syria, Nigeria, Samoa, China, India, Russia and Uruguay.