At the onset of the crisis, governments along with financial regulators have deployed sizeable stimulus packages and various assistance programmes in order to contain the crisis and stabilise the economy. This includes addressing demand and supply disruptions, maintaining cash flows and keeping workers employed. In Malaysia, the total stimulus package amounted to USD 73.55 billion (RM3056 billion) with an additional fiscal injection by the government totalling 1/4  BIS central bankers' speeches  RM45 billion. As at September 2020, a total of 2.63 million workers and 321,000 employers had benefitted from the Wage Subsidy Programme, involving an expenditure of RM10.4 billion. To provide further stimulus to the economy, the Bank has reduced the overnight policy rate (OPR) by a cumulative 125 basis points (from 3.00% to 1.75%) this year, alongside reduction in the statutory reserve requirement by 100 basis points (from 3.00% to 2.00%). The reduction in the OPR is intended to provide additional policy stimulus to accelerate the pace of economic recovery. The financial industry, including Islamic financial institutions, also lent support to their borrowers and customers. In the first half of 2020, a total of RM120 billion7 was disbursed in lending/ financing to SMEs, with more accounts being approved8 in aggregate in 2020 compared to the same period in previous years. Islamic financial institutions and related associations have been actively educating and reaching out to affected borrowers about the financial assistance programmes available in response to the pandemic.

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.