Led by innovation across the globe from Bangladesh to Brazil, microfinance has allowed previously excluded segments of society to grow incomes, build assets and ultimately improve their standards of living. With poverty eradication taking centre stage in the global public policy agenda, such in the United Nation’s Millennium Development Goals, these developments are welcome. Here in Malaysia, microfinance has been an important part of the development agenda. In 2006, the Bank introduced a comprehensive microfinance institutional framework to promote the development of a sustainable microfinance industry. This facilitated greater access to financing by micro-entrepreneurs with no collateral, supported by simple application procedures, minimal documentation and quick turnaround times. The microfinance landscape in Malaysia has evolved from being Government-driven into one with vibrant private sector participation. At the turn of the century, total financing outstanding of the sector stood at USD35 million (RM151 million). Since then, it has multiplied by more than 30 times to USD1.2 billion (RM5.2 billion) in 2016, collectively benefitting more than a million micro enterprises. Despite significant strides taken since the 1970s to develop more inclusive financial systems, including in the countries represented here today, our work in microfinance is far from complete. The full potential of microfinance is not realised until we observe direct linkages to welfare improvements in the micro segment and ultimately, sustainable growth. At the same time, microfinance is also evolving in an era of unprecedented technological change. Adaptability is key for microfinance to thrive and further propel itself forward.

It should not be assumed that the central bank might take action beyond the limits outlined. But this does not mean that it cannot assist in the search for solutions, as far as they do not involve extending further credit. If the problems of individual banks multiply, there is a danger that liquidity may dry out throughout the entire system. In such a case, the central bank would basically be able to supply the market with the necessary liquidity. However, it may then come into conflict with the requirements of a policy geared to economic stability. Consequently, the short-term benefits of an easing of monetary policy should be weighed against the longer-term risks. I would like to sum up my thoughts as follows: 1. Three factors are of prime importance to the competitiveness of a financial centre: economic stability, political stability and the “human factor” (i.e. professionalism, motivation and mentality). Although these factors can each be viewed separately, it is the interaction between them that really counts. 2. Economic stability, in the sense of a balanced development of the economy as a whole, is made possible by the existence of an appropriate economic framework. This is created first and foremost by monetary policy, fiscal policy and competition policy. Economic stability provides the financial services industry with a favourable climate in terms of low inflation and interest rates, moderate tax levels and appropriate exchange rates. 3. Favourable economic conditions are planned and implemented as part of the process of social coexistence.