Jessica Chew Cheng Lian: Opening remarks - World Bank's
Sustainable ExchangE Development Series (SEEDS)
Opening remarks by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of
Malaysia (Bank Negara Malaysia), at the World Bank's Sustainable ExchangE Development
Series (SEEDS), 25 October 2021.
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Good morning. It is a privilege and pleasure to be a part of this year's edition of the World Bank's
webinar series on sustainable finance. We are grateful to the World Bank for organising this
programme. Learning from our peers continues to be one of the most important and practical
ways in which we can help each other effect meaningful change to ensure that finance truly
serves our communities.
The effects of the COVID-19 pandemic have now been with us for almost two years. While
ambitions to pursue sustainable finance goals started well before the pandemic, the pandemic
will surely be remembered as a defining period in shaping the path taken to a more sustainable
future.
The pandemic has extracted an enormous toll not only on global health, but also on poverty
levels and inequality. More vulnerable groups, including those who earn lower incomes, have
lower levels of education, or are holding less secure jobs, have borne a disproportionate brunt of
the fallout from the pandemic.
While policy measures are helping to mitigate these effects in the short term, the longer lasting
impact on society and future economic prospects are likely to be far more significant. This could
amplify pre-existing inequalities, particularly in emerging economies.
Yet, it is also true that the other side of the "pandemic coin" has also had a profound impact in
realising possibilities that not so long ago, seemed much further into the future.
Over the last two years, we have seen the diffusion of technology achieve levels very quickly in
many previously untapped segments of society, largely driven by coping mechanisms in
response to the pandemic. This has created new opportunities for income generation and
enhanced financial access for many people in ways not fully appreciated before. The growth and
pervasiveness of the gig economy is perhaps the most visible evidence we have of this.
For many countries, the pandemic has also served to accelerate critical structural reforms
needed to strengthen our resilience to future shocks. This includes labour policy, social
protection and environmental reforms that will reinforce foundations for sustainable development.
Collectively, these forces can have an enormous positive impact on sustainable and inclusive
development.
To fully harness the potential before us, financial policy has a key role to play. At Bank Negara
Malaysia, we believe this role centres around three themes; innovation, transition and
collaboration.
Firstly, we strive to be more encouraging of innovation within a safe enabling environment.
We recognise the need to strike the fine balance between maximising the benefits of financial
innovation and limiting abuse that can cause harm to consumers and increase risks to the
financial system. With the rapid and constant emergence of new technologies, this balance is
increasingly taking regulators outside their traditional approaches and comfort zones.
To help us achieve this balance, we emulated the Financial Technology Regulatory Sandbox
introduced in some other countries to provide an avenue for industry players to pilot or test new
solutions within a safe space. Here, industry players have the opportunity to trial new financial
technologies that support sustainable goals. At the same time, we are able to better understand
and observe market impacts and tailor our regulatory and supervisory response accordingly.
To date, 19 solutions have been tested in the sandbox. Of this, over 60% have been successfully
rolled out into full-scale production.
The Bank has also introduced new digital bank licences and implemented a series of changes to
existing regulations applicable to agent banks, microinsurance, and payment and remittance
services to enhance financial inclusion and consumer protection.
Secondly, we continue to support a meaningful role of the financial sector in helping households
and businesses meet transition challenges.
While we are encouraged by a number of financial institutions in Malaysia that have announced
net-zero or carbon neutral goals, it is imperative for financial institutions to do more to support
transition. We expect this to gain momentum with the implementation of the Climate Change and
Principle-based Taxonomy for financial institutions that was issued by Bank Negara Malaysia in
April this year.
By shining a light on climate risk mitigation and adaptation activities, the taxonomy will strengthen
incentives for both financial institutions and businesses to adopt practices that are aligned to
climate goals.
The taxonomy will also pave the way for plans that will be announced soon to mandate the
adoption of climate related financial disclosures by financial institutions.
In addition, we are supporting efforts by the Government to strengthen the capacity of
development finance institutions to enable them to play a more significant role in crowding in
sustainable finance from the private sector, supporting the capacity building needs of businesses
in transition, and scaling up innovative financing mechanisms.
In light of the current challenges faced by businesses and individuals, we see a greater need and
significant prospects for new forms of blended finance to support the recovery process and meet
transition challenges. To this end, the Bank is engaging with the financial industry, including DFIs,
and other key stakeholders on strategies to combine commercial lending with alternative funding
sources such as philanthropic funds and social finance instruments. This includes upscaling
existing pilot programmes. Such blended finance solutions will be important to reduce debt levels
and future risks to growth and financial stability.
During this period, the Bank has also established concessionary financing facilities dedicated to
help SMEs automate and digitalise their operations. This will enable them to take advantage of
new technologies to enhance income streams and build greater resilience.
Thirdly, we believe collaborative partnerships will play a larger and more critical role in shaping
financial policy going forward.
The world around us is changing so rapidly, and the challenges we face so multi-faceted, that
our best hope for creating sensible financial policy and effective conditions for sustainable
development must lie in working together. This has certainly been our experience in Malaysia,
particularly in recent periods. Let me just mention three of these partnerships.
In Islamic and sustainable finance, the Value-based Intermediation Community of Practitioners or
VBI COP has played a key role in driving the industry-wide implementation of VBI principles. The
COP has been instrumental in developing practical frameworks, tools and guidance that have
been widely adopted by the industry in supporting the offering value-based financial solutions that
are aligned with the SDGs. As an example, for green finance, the Islamic banking industry is
supporting approximately 4,500 renewable energy and green projects worth more than USD2.2
billion.
On climate, the Bank and Securities Commission Malaysia have established the Joint
Committee on Climate Change or JC3 to pursue collective climate actions. The Committee
brings regulators and the financial industry together to promote alignment and drive climate
actions in five areas - risk management, governance and disclosures, green finance and
innovation, data and capacity building.
Finally, sustainable finance would ring hollow without ensuring that our communities - especially
our most vulnerable communities - have the means and ability to make good financial decisions.
To this end, the Bank, together with Securities Commission Malaysia and various Government
ministries and agencies, collaborate through the Financial Education Network to increase the
level of financial literacy and access to information and resources on financial matters. The
Financial Education Network also serves as a focal point to drive the implementation of
Malaysia's National Strategy for Financial Literacy.
I know that over the course of these webinars, we will learn much more about the priorities,
approaches and strategies to advance sustainable finance development across the region.
As we absorb the many valuable lessons and experiences shared towards this common goal, I
am reminded of Winston Churchill who said, 'It is no use saying we are doing our best. We have
got to succeed in doing what is necessary".
In the end this is what counts.
Policymakers and the financial industry have a responsibility to do what it takes to succeed in
making sure that finance works for sustainable development.
Let me end here and thank you very much for this opportunity to offer some remarks today.