KUALA LUMPUR (April 29): Policymakers should take a more active role in the introduction of Islamic products for financial inclusion to ensure better levels of adoption, said Securities Commission Malaysia (SC) chairman Datuk Syed Zaid Albar.

Over 1.7 billion adults or one-third of the world's adult population are estimated to not have access to formal financial services, with many of them in developing countries.

At a conference themed 'Islamic Finance: A catalyst for Financial Inclusion' here, Syed Zaid said the potential of Islamic finance in enabling greater financial inclusion is vast, though a clearer direction is needed.

"Providing access to financial services is a universally shared vision for all nations, including Islamic countries. Though in reality, access to financial services is not uniform or consistent.

"The inability to access the most basic of financial products and services prevents some segments of a country's population from fully participating in its growth and prosperity.

"It translates into costs for the nation as inequalities in terms of opportunities and wealth can hinder economic growth, instead of reaching its optimal potential," he said in his keynote address here.

Syed Zaid added that increased digitisation in Islamic finance will also facilitate greater inclusion as it would help enhance cost savings, speed, convenience and appeal.

He concluded that while a private sector-driven approach to the development of market-based products and its supportive ecosystem has its merits, it also has limitations, particularly when there is a need to prioritise socioeconomic outcomes over investment returns.

World Bank group representative to Malaysia and country manager Dr Firas Raad said, “Islamic finance can play a role in addressing the high levels of poverty in the Organisation of Islamic Cooperation countries, which account for over 40% of those living on less than US$1.25 a day and is home to one third of the global population living in extreme poverty, defined as those living on less than US$1.90 per day.”

The annual conference is jointly organised by the SC, World Bank Group Global Knowledge and Research Hub in Malaysia, and the International Organisation of Securities Commissions (IOSCO) Asia Pacific Hub.