In advancing the Islamic financial inclusion agenda, crucial criteria such as injection of innovation and enhancement of products and services as well as distribution channels to reach targeted groups especially the rural areas are essential:  4  BIS central bankers’ speeches    One of such example in Malaysia is the introduction of profit and risk sharing investment accounts, where savings are matched with funding required by SMEs for financing specific projects.   Greater outreach to microenterprises and SMEs can also be achieved through the wider application of equity-based structures in financing for Islamic microfinance and SMEs. This contributes towards the overall objective of generating inclusive growth that enhances job creation.   Other financial products such as microtakaful and waqf can also provide a financial solution for lower income groups and small businesses.   Through Islamic finance, we can also further explore the concept of agent banking or branchless banking to leverage on the role of traditional community centres such as mosques. This would harness more efficient means of outreach amongst Muslims, which is of particular relevance in many OIC Members.   Another important sphere that has not been explored exhaustively, Islamic financial institutions may also leverage on its large distribution network to facilitate the collection and mobilisation of zakat and waqf. Fifth, proportionate regulation can achieve objectives of inclusion, stability and integrity Proportionate regulation ensures that the costs of regulation do not outweigh the benefits of regulation and that regulation is commensurate to risks.

The cost of building brick-and-mortar branches to outreach to rural users is high. Hence, the Bank developed the agent banking initiative to leverage on technology and deliver financial services to the rural groups in a low cost and scalable manner. It saves cost and the impact is enormous. Under the agent banking initiative, licensed financial institutions provide financial services to customers through third-party agents, such as retail outlets and post offices. Agents perform banking transactions such as deposit and withdrawal of funds in a safe manner using real time terminal technology i.e. Point-of-Sale (POS). Putting in place a mechanism to monitor performance is crucial to determine whether policy initiatives are effective. Just to give a flavour of what we have done, we actively track the coordinates of agent banks to ensure that access is provided to sub-districts in need of financial access points. Since its implementation in 2012, 95% of sub-districts now have at least one financial access point, a significant increase from 2011. As at August 2013, there were 5,661 agents and the total number of transactions has exceeded 25 million, with a total value of RM2.8 billion. Fourth, Islamic finance can play a huge role in financial inclusion given the strong parallels between the two The concept of financial inclusion – to develop a prosperous, egalitarian economy that contributes towards social development and social justice – is very much in line with the core principles of the Islamic economy, which place great emphasis on social justice, inclusive growth and equitable distribution of resources.