Yet, about 1.7 billion adults remain unbanked with persistent inequality in account ownership between the rich and the poor3. In recent months, new and unprecedented challenges to sustainability and effectiveness of financial inclusion initiatives worldwide have surfaced. Workers, especially in the informal sector and low income segment, have experienced sudden loss of employment and income. Job replacement and reskilling programmes require time to complete before these workers are able to gain new employment opportunities. The limited employment prospects and labour mobility, especially for low-skilled, low income workers, may impede effective usage of financial services going forward. Containment measures, while necessary to contain the spread of the virus, have also reduced accessibility to financial services. This is especially so in areas with poor digital connectivity, and among communities with low digital financial literacy. From a human development standpoint, a United Nations Development Programme’s (UNDP) report estimated that the combined impact of income, health and education shocks arising from the pandemic could signify the largest reversal in human development on record, equivalent to erasing all the progress in human development of the past six years4. The risk of reversing progress in achieving financial inclusion is accentuating why financial inclusion matters now more than ever. Optimising Islamic finance for inclusive economic recovery Policy and regulatory responses across the globe, and likewise in Malaysia, have been focused on safeguarding economic resilience, managing risks to financial stability and minimising repercussions to society. This is done in tandem with the different stages of the pandemic – namely, containment, stabilisation and recovery.

(…) With credit and money markets essentially frozen and equity prices plummeting, banks and other financial firms saw their access to funding eroded and their capital shrink owing to accumulating mark to market losses.” The Lehman bankruptcy had triggered a widespread crisis of confidence. Among other repercussions of the Lehman Brothers collapse, the above-mentioned virtually completed sale of Glitnir assets did not materialise. This kicked off the well-known chain of events. Glitnir turned to the Central Bank for assistance. Not only was the bank unsuccessful in its attempt to sell assets, it was unable to renew a bank loan that it had expected to extend without any difficulty. Ultimately, the Government decided that the Treasury should acquire a majority holding in Glitnir, but before that could be finalised, the bank collapsed. In early October, there was substantial pressure on Landsbanki’s deposit accounts in London, and the British Financial Services Authority (FSA) steadily tightened the demands it made on the bank. Landsbanki’s liquidity difficulties became insurmountable, and it was clear that rescuing the bank would not represent prudent use of the Central Bank’s foreign exchange reserves. The amounts involved were simply too large. By this time, only Kaupthing remained of the three large banks. In view of the prospects for Kaupthing’s liquidity, the bank was deemed likely to survive the storm. On the basis of that assumption, the Central Bank, after consulting the Government, granted Kaupthing a collateralized fourday loan that should have sufficed – as things stood then.