Zeti Akhtar Aziz: The financial well-being journey - building on the
momentum and identifying new paths
Opening address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank
Negara Malaysia), at the Malaysia-OECD High-Level Global Symposium on Financial
Well-Being, Kuala Lumpur, 30 September 2015.
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It is my great pleasure to be here at this Global Symposium on Financial Well-Being, an
important area of priority in the current world economic environment. Bank Negara Malaysia
is most pleased to host this important event in collaboration with the OECD. Let me extend a
very warm welcome to all delegates to Kuala Lumpur and to our facilities here at Sasana
Kijang.
The advancements in the provision of financial services in these recent few decades have
had a transformational impact on financial well-being. Key features of this transformation
have been the greater diversification of financial systems and the increased leverage on the
advancements in technology. Today, a growing share of financial intermediation is supported
by a wider range of financial products and services that are not only being offered by banks
but also by capital markets and non-bank financial intermediaries that are now assuming a
larger role in the financial system and the economy. This has contributed to greater flexibility
in managing financial risks and it has expanded the avenues for businesses and households
to meet their financial needs and goals.
Advancements in technology have also improved access to financial services to be
undertaken more effectively. It has also contributed to lower costs of financial services.
Additionally it has supported the development of a broad range of financial services,
including advisory and product aggregation services that allow for more informed financial
decisions. Ongoing regulatory and supervisory reforms, particularly in this recent decade,
have further reinforced the potential benefits of financial development - by improving the
resilience of financial systems to disruptions and reducing the harm it could have to
consumers that may arise from market failure and financial crisis.
For the benefits of financial development to be fully realised, it needs to be complemented
with the effective use of the financial system by consumers and businesses. With economic
progress, individuals need to assume greater responsibility for financing their lifetime
financial needs that may include education, healthcare and retirement. In addition, easier
access to credit has also increased the risk of households falling under the crippling weight
of excessive debt burdens, while the challenges associated with operating in a more complex
financial system have also increased the vulnerability to inappropriate financial risk taking
and to financial fraud. Indeed, the identification of vulnerable groups is no longer confined to
the poorest segments of society as defined by poverty threshold levels, but it also includes
young adults, households living in urban centres, those in temporary unemployment, and the
older segments of the population.
The focus on strengthening the ability of consumers and businesses to effectively use the
financial services must therefore be an important part of any effort to improve financial
wellbeing. This would involve enhancing the ability of users of financial services to make
discerning financial choices that best suit their needs, while increasing their confidence to
take advantage of the new spectrum of channels and tools for financial management. This
would result in better financial planning and more stable consumption patterns as well as the
ability of individuals to better withstand the macroeconomic shocks that are now occurring
more frequently in the global economic environment.
Increased financial capability would also contribute towards evolving more inclusive financial
systems and the broader financial stability. There is greater expectations on the potential for
financial education to deliver improvements in responsible financial behaviour; encourage
stronger market discipline and lift the poorest segments of society out of poverty in addition
to helping communities adjust to the changing economic and financial conditions. The
achievement of these outcomes will increasingly hinge on consumers of financial services
being financially competent.
Over the years, important progress has been made to provide the foundations on which
enhanced financial capability can be built. These foundations include: (i) greater provision of
truthful disclosures on financial products and services; (ii) expanded financial knowledge;
(iii) an environment which is supportive of consumer choice, including the ability for
consumers to exercise their preferences without impediments; and (iv) effective redress
mechanisms. Policy makers, the private sector and market participants have a key role in
building these foundations.
In the area of disclosures alone, there has been extensive improvements in the quality and
consistency of disclosures, making it easier to understand through the use of plain language,
and adopting the various approaches to bring important disclosures to the attention of
consumers. For many regulators, the use of disclosures has been particularly useful to
promote positive consumer outcomes, without creating distortions that could result from more
intrusive policy interventions.
On enhancing further financial knowledge, more than 50 countries have accorded priority to
this agenda and have implemented or designed national financial education strategies. This
will gain further traction with the publication of the OECD high level principles on national
strategies for financial education in 2012. It will be further reinforced with the reporting of
progress made by countries in implementing their national strategies. Of significance has
been improvements to better coordinate and achieve greater alignment between the financial
education strategies, the financial inclusion agenda and the consumer protection regime in
order to maximise the impact of the respective individual initiatives and avoid duplication so
as to optimise the impact of financial education efforts over the longer term.
In the area of facilitating consumer choice, initiatives have been pursued to reduce exit and
switching costs so that informed consumers can easily exercise their preferences and adapt
to the changing circumstances. While measures to reduce financial exit costs have met with
some success in reducing switching barriers within the financial industry, responding to other
factors that discourage consumers from switching to a superior product or financial service
has been more challenging. Such factors include the additional effort required to switch
financial service providers or products arising from the higher marginal cost of switching.
Finally, the measures to strengthen redress mechanisms are also contributing to the
enhanced capability of financial consumers, by providing an expedient and cost-effective
means for consumers to assert their rights and protect their interests. Effective redress
mechanisms also increase consumer confidence in using financial services, while serving to
strengthen market discipline.
Looking ahead, strategies to further strengthen these foundations are likely to be significantly
influenced by two important developments. The first is the broader application of behavioural
finance so as to better understand and identify the levers that contribute to better financial
decisions in the different circumstances. Recent insights from the study of behavioural
finance suggest that emotional and psychological associations with finance are as powerful
as the intellectual grasp of how to make wise financial choices. This will have important
implications for the design and implementation of both consumer protection policies as well
as financial capability strategies.
We have found that providing consumers with relevant information in Malaysia did not always
lead to better decisions. This was frequently because it was not easy to understand the
information and there was also too much of it. The Bank now requires for the simplification of
disclosures by financial service providers and for the strengthening of the role of independent
advisory services in the financial institutions. Financial institutions are also required to
exercise a higher degree of diligence in ensuring that the respective products sold to
consumers had to be commensurate with their financial capability and to steer financial
consumers towards decisions that are in their interests, whereby choices are in the best
interest of consumers.
Approaches to financial education have also become more targeted in an effort to more
effectively influence financial behaviour. This reflects the growing customisation of financial
education programmes to target audience groups that are delivered at the right time and
using the right channels. Programmes are increasingly being tailored to behavioural traits,
demographics and stages in the financial lifecycle of individuals so as to appeal to the
intrinsic motivations and incentives that would drive financial behaviour.
The second development relates to the advances in technology that has had a profound
impact on financial capability. While it presents new challenges for financial capability
strategies, it also brings with it the potential to revolutionise how financial capability strategies
can be designed and delivered, enabling policymakers and financial institutions to achieve
what was previously not possible. Online classrooms and games, have for example, opened
up new and engaging avenues for imparting important messages on financial management.
The use of mobile applications has also made it much more convenient for individuals to
monitor and control financial habits, in addition to helping consumers make financial choices.
This has also enabled resources to go further by significantly expanding the reach of
financial capability initiatives, and increased its potential to create a more lasting impact on
financial behaviour.
In Malaysia, initiatives to strengthen financial capability began almost 20 years ago and is an
important component of the Bank's business conduct and financial inclusion responsibilities.
The Bank has in collaboration with the Ministry of Education and the financial industry,
implemented financial education in schools to promote financial capability skills from an early
age. This has now culminated in a process of formally integrating financial education
elements into key subjects in the school curriculum.
Financial capability programmes among adults are closely aligned to the nature of financial
decisions and exposure that individuals are likely to be confronted with at the different stages
of their lives. This has therefore shaped the content, approach and timing of our financial
education programmes. Of significance, has been the involvement of the private sector,
through initiatives such as financial education in the workplace which are organised by large
corporates in collaboration with the Credit Counselling and Debt Management Agency in
Malaysia. The enabling infrastructure is also being enhanced to provide financial consumers
with an integrated platform for easy access to financial education contents that are relevant
for financial decision making.
The Bank assesses all major financial education programmes to evaluate their effectiveness
in meeting the intended objectives through a Financial Education Assessment Framework.
The Framework, developed in 2013, assesses the impact of financial education programmes
on the overall level of financial literacy and on changes in behaviour.
Mobile applications have also been introduced to promote more informed financial decisions.
These includes applications for personal money management, updates on important
consumer news including financial fraud alerts issued by the Bank, and for consumers to
make enquiries, obtain advice and raise their complaints with financial institutions. These
mobile applications are customised for use in Malaysia and can be downloaded by
individuals at no cost. It is envisaged that wider use of these applications will contribute
towards enhancing financial competence.
The financial education initiatives in Malaysia has been advanced through collaborative
efforts by the public and private sectors. Key agencies involved have included the Credit
Counselling and Debt Management Agency, the financial industry, consumer associations
and the Employees Provident Fund (which has more than 14 million contributors) to ensure
that messages on financial management address all the key issues in savings, debt,
investment and protection. These strategies are pursued together with the efforts to promote
financial inclusion and to ensure fair treatment of financial consumers.
It is important to recognise that the financial industry itself plays a pivotal role in helping
consumers improve their financial well-being. The global financial crisis significantly
undermined confidence in the financial system, and the discovery of ethical lapses that
continue to be reported today has further eroded public trust in financial institutions. There is
an urgent need to restore faith in the utility of financial services, firstly through the
demonstration of fair and responsible practices and reinforced with the provision of
valueadding products and services that are meeting the real needs of consumers and businesses.
Financial institutions with their extensive reach and customer relationships are in a unique
position to have a more significant role in advancing the financial education agenda. In
Malaysia, this has included providing technical support and materials for teachers to improve
their knowledge and increase confidence in teaching financial matters in schools. Financial
institutions have also adopted more than 10,000 schools across the country under the
School Adoption Programme with wide ranging activities in money management for the
children. The financial institutions also work closely with the Credit and Debt Management
Agency in the implementation of financial education programmes for adults.
Today, the focus on financial capability has become a global agenda. This has provided
opportunities for policymakers to learn from their peers across countries and leverage on the
international network of expertise in addressing common issues and challenges. This
Symposium is a great example of realising such opportunities. The possibilities for
meaningful cooperation at the regional and global levels are tremendous. This has already
included research, technical assistance and guidance for policymakers. Leveraging on
technology, financial education applications can be developed, tested and translated for
adoption in different countries. International collaboration can not only be for training
programmes, but also on the access to the network of international experts through online
platforms and communication channels.
I would also like to take this opportunity to invite all the delegates of this Symposium to our
Financial LATeracy exhibition that is being held in this building. This is an exhibition of more
than 150 distinctive caricatures by a renowned Malaysian cartoonist that depict the
promotion of good habits for money management. The drawings are compiled from the
annual pocket money books for students which were published by Bank Negara Malaysia.
More than 15 million copies of these pocket money books have been distributed annually to
students since 1999 to more than 10,000 schools throughout the country to encourage good
money management habits. The drawings also illustrate the many aspects of the culture and
environment in Malaysia. I hope you will enjoy the exhibition and also draw inspiration from it.
Let me now conclude my remarks. The commitment to financial education is an important
imperative. As the theme of this Symposium reminds us, it is to improve the financial
wellbeing of our communities. It is the very reason why we are on this journey. It is so that
members of our society will benefit from the effective utilisation of the financial system and
avoid despair and desperation that is brought by poor financial decisions. Additionally, we will
also help build more resilient and inclusive financial systems and thus contribute towards
achieving more balanced growth and development.
Thank you and I wish you productive discussions at the Symposium.