While there are attempts to publicise takaful offerings, these efforts remain fragmented and lack of focus on advocating greater appreciation and understanding about the value of protection. Households and businesses remain unaware and uninformed in making decisions relating to financial protection. Recognising this persistent challenge, the Bank and the Securities Commission recently spearheaded the establishment of the Financial Education Network and the launch of the National Strategy for Financial Literacy to increase the impact of financial education initiatives and to elevate financial literacy among Malaysians. Efforts to improve financial literacy will also require industry associations to drive the development of best practices for industry-wide adoption. In this regard, the Malaysian Takaful Association should be consistently proactive and agile in responding to emerging opportunities and resolving impeding industry issues. Takaful industry as a game-changer in empowering financial resilience As Malaysia advances towards the shared prosperity vision, it is crucial to ensure balanced and inclusive growth. The takaful industry has a critical role in enhancing the socio-economic wellbeing of Malaysians. This vision cannot be achieved without addressing the specific needs of the lower income group. According to a study by Khazanah Research Institute, people in the lower income category now have lesser residual income. The cost of living burden is the heaviest for lower income households, who spend 94.8% of their income on basic expenditure. Not much is left for savings or for financial protection in the event of misfortune. Overcoming the issue of affordability requires long-term and broader measures to grow people’s income.

One approach to this challenge would be for the Bank to return to basics and improve the three channels of financial intermediation, namely, banking, equity and debt, through a number of measures. First, the Bank could increase investment in the financial infrastructure in Asia. Just as physical infrastructure, such as airports and highways, facilitates the movement of people and goods, financial infrastructure, such as the payment and settlement systems for the banking and securities sectors, facilitates the safe and efficient movement of money. The importance of a robust payment and settlement system in this region is underscored by the events of 11 September. Secondly, the Bank could expand the technical assistance programme to assist economies in restructuring the banking sector. Small and medium-sized enterprises employ the most workers in Asia and they are mostly dependent on bank financing. The banking sector in Asia, devastated by the Asian financial crisis, has not fully recovered. Banks understandably are adopting a very conservative lending strategy towards companies with a lower credit rating, such as Small and Medium-sized Enterprises. The Bank’s assistance in speeding up the banking sector reform would help SMEs to get back on their own feet, thereby reducing unemployment and poverty. Thirdly, the Bank could expand assistance in building up the institutional capacity of individual economies to improve corporate governance in the private sector. Emphasis should also be made to improve the auditing, disclosure and transparency standards of publicly-listed companies.