Jessica Chew Cheng Lian: Generating new solutions for
remittances in Malaysia
Remarks by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia,
at the Launch of Project Greenback 2.0 Kota Kinabalu, Kota Kinabalu, 4 March 2018.
* * *
It is my great pleasure to be here today for the launch of the Greenback 2.0 Project in Kota
Kinabalu.
First of all, on behalf of Bank Negara Malaysia, I would like to thank Dewan Bandaraya Kota
Kinabalu for agreeing to host this Project. We are sincerely honoured by the presence of YB
Datuk Hajah Jainab at today's launch event. And of course, the World Bank has been a truly
committed and equal partner in this project with Bank Negara Malaysia, and as we concluded our
collaboration in Johor Bahru last year, we are excited to begin another chapter in this journey
together with the World Bank.
Kota Kinabalu is Malaysia's second remittance champion city and only the third champion city for
the Greenback Project in Asia. Through the project, our aim is to help more people living and
working in Sabah remit moneys whether for business or personal purposes, safely and at lower
costs. To achieve this, we want to provide people in Sabah with information, with access and
with the confidence to use remittance services. And we want to encourage more competitive
remittance services in Sabah that will better serve the community.
You may ask what is the significance of being a champion city?
The selection of a champion city recognises the enormous potential of cities across Malaysia,
where three quarters of our population live, to be the engines of innovation. In our work at Bank
Negara on a range of issues - whether it is to improve access to financing, promote financial
inclusion or lift economic efficiency through migration to electronic payments - our collaboration
with cities and their leaders has been the source of many solutions and breakthroughs in
addressing the challenges that we face. This reflects the close and vibrant communities and
networks within cities that can be drawn upon much more quickly and effectively to deliver
solutions that will benefit the community.
As a champion city for remittances, Kota Kinabalu will similarly be able to show the way in
generating new solutions for remittances. There are many valuable lessons that we can take
from our recent experience with the Greenback project in Johor Bahru. But it will be important for
us to receive your ideas and your input to ensure that we are addressing the specific needs and
circumstances of people and businesses in Kota Kinabalu.
Kota Kinabalu has a sizeable population of foreign workers who contribute to the state of Sabah,
while supporting and improving the livelihoods of their families back home. This, coupled with the
higher remittance cost of 4.5% in Kota Kinabalu compared to other parts of Malaysia presents a
unique opportunity to leverage on the Greenback project, to support the financial needs and goals
of foreign workers here in Sabah; to increase the development impact of remittances to our
neighbouring countries; and importantly, to make remittances generally more efficient for
businesses and the population of Sabah itself.
Even though this is the second champion city in Malaysia, we are not only looking to replicate our
experience in Johor Bahru. Indeed, we acknowledge the different challenges and opportunities
presented in Sabah, which is why an important and distinct focus for Greenback Kota Kinabalu
will be the wider use of technology to deliver remittance solutions in Sabah.
Here in Sabah, people still often need to travel a great distance to send money home. This is
costly, cumbersome and at times, risky - made even more challenging by Sabah's geography
and remoteness of some parts of the state. Technology offers new possibilities to overcome
these difficulties, while significantly improving user convenience.
Although remittances through electronic channels is not new, the take-up rate of electronic
remittances has been relatively slow. In 2017, the share of electronic remittances accounted for
only 12% of total remittances. This in turn has limited the potential to make remittance services
much more efficient and accessible to our communities, including here in Sabah.
We are therefore determined to double up our efforts to increase the use of electronic channels
to send money.
In November last year, Bank Negara Malaysia amended existing regulations to allow money
services companies to complete customer verifications electronically, without the need for
customers to visit a money services business premise. This is an important change that
removed an existing hurdle for companies to support an end-to-end electronic process for
performing remittance transactions.
We expect this change to create significant momentum for further growth in electronic
remittances, in particular among foreign workers. Today, foreign workers in several parts of
Malaysia may still face difficulties getting to a MSB office to complete the customer due diligence
process. Yet, nine in ten foreign workers have smartphones and use them to access the internet.
With technology, we can tap into these alternative access channels to enable e-remittances.
Two other important development are also coming together to encourage the use of electronic
remittances. The first is the initiative by the Government to require employers of foreign workers
to pay their salaries into bank accounts. This removes the need to deliver cash to remittance
service providers. The second is the development of an interactive mobile application by the MSB
industry that allows users to identify licensed MSB providers, compare services and
communicate directly with MSB companies. The mobile app serves as a powerful tool to further
promote transparency and competition in the money services business industry, by providing
consumers with the information and facilities that will help them make smarter remittance
choices.
Kota Kinabalu will be an important testbed for these initiatives, serving as a model for envisioning
an end-to-end digital remittance landscape in Malaysia. Given Sabah's aspirations to develop a
digital ecosystem, we could not have picked a better city or time to launch our next Greenback
journey.
As we look forward to the journey ahead, I cannot help but recall how far the MSB industry has
come. In 2017, the MSB industry facilitated RM20 billion in worker remittances and a further
RM400 million in business remittances. This represents a 43% and 300% increase respectively
over values transacted in 2013 when significant reforms were introduced to strengthen
standards and shore up trust and confidence in the industry.
Today, an industry represented by progressive and credible principal MSB companies and a wide
network of agents has not only improved access to services, but also raised the quality of
service. With better knowledge, tools and resources, the industry has also worked hard to
strengthen safeguards against its use for criminal and other illicit activities. The industry is
already leading the way in the financial sector by certifying all compliance officers to equip them
to be more effective in implementing AML/CFT measures.
This is important because our collective efforts here today to improve overall welfare by providing
more people and businesses with efficient access to remittance services will be severely set
back if trust and confidence in the industry are eroded. When this happens, rules often have to
be rewritten, the costs of compliance will increase, and the public is saddled with reduced
access and other burdens that result from the actions that have to be taken to protect the
integrity of the system and manage risks to consumers.
We must avoid this path, which will come at a heavy cost to communities and countries that
depend on remittances. We have seen this in recent times with de-risking measures taken by
financial institutions, and we still continue to see their effects in parts of the world. We must not
expose our system to the same effects.
In Kota Kinabalu, we also hope to build on Greenback activities to achieve greater financial
inclusion of migrant workers and small businesses. For example, beyond remittances, suitable
savings, payment and insurance products can help migrant workers make their earnings go
further, facilitate access to goods and services, and provide protection for their families against
financial hardship as a result of unforeseen events. For small businesses, electronic remittances
can be harnessed to build transactional histories which can help improve their overall
creditworthiness. This needs to be supported by a strong focus on financial education.
As you can see, we have great expectations for Project Greenback Kota Kinabalu. But we are
also equally confident of meeting, if not exceeding, those expectations. This is in no small part
due to the tremendous cooperation that has already been extended to the project by the city of
Kota Kinabalu, including its police force. I also know for a fact that the MSB industry here in Kota
Kinabalu has thrown its full support behind the project, working closely and tirelessly with the
Malaysian Association of Money Services Business, to identify and plan activities for the coming
year. And we will leverage on an expanded network of partners, including non-government
organisations, other financial service providers and our counterparts in the Philippines, to
increase the financial inclusion impact of Project Greenback.
With that, let me once again thank YB Datuk Hajah Jainab and the city of Kota Kinabalu for the
opportunity to collaborate on this very important initiative to build inclusive communities where no
one is left to suffer in abject poverty.