muhammad bin ibrahim : innovative financial inclusion opening remarks by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at the global symposium on innovative financial inclusion, kuala lumpur, 21 september 2016. * * * while the global economy is still recovering from the global financial crisis, the focus on boosting global growth has never eclipsed the financial inclusion agenda. in fact, policymakers continue to recognise the importance of financial inclusion and have accorded it as a global priority to address the widening income inequality gap, to promote the economic empowerment and protection of low income households and smes and to unlock the growth potential of the fast - expanding middle class population. expanded opportunities to save securely, to invest in productive activities and to protect against unforeseen shocks, would meet the needs of the underserved. this would drive domestic demand, a key engine of growth for many economies. between 2011 and 2014, the world bank estimates that 500 million people have gained access to formal financial services for the first time. if our efforts continue, we are on our way to assisting the remaining 2 billion adults that remain financially excluded. a succession of technology breakthroughs combined with the ubiquity of mobile devices present significant opportunities to scale up financial inclusion to an unprecedented level. beyond the socio - economic demands, there is a moral obligation for us to do more to help the millions who are still living in abject poverty and highly vulnerable to financial hardship, with no means to change their circumstances. this global symposium presents an opportunity for us to explore solutions from different perspectives. i see this as having “ an eye for innovation ”. indeed policy makers are now improving their capabilities in technology and innovation, recruiting talent, establishing dedicated team and intensifying partnership with the private sector, to help them see things a little differently. while there is no shortage of ideas on new and innovative ways to increase financial inclusion, the key challenge to my mind is the ability to scale up and achieve sustainability. the symposium ’ s theme refers to “ harnessing innovation ”, but one needs to truly understand innovation in order to successfully tap on such innovation to attain the dual objectives of scale and sustainability in inclusive finance. with that in view, my remarks this morning will focus on three areas where an eye for innovation is needed : a. first, putting on a new lens to spot the opportunities from existing innovations that can be tailored to financial inclusion ; b. second, identifying and working on our blind spots by driving

the costs of delivering inclusive financial services over time, and thereby enhance the viability for both governments and private actors. sustainability also calls for the strengthening of financial institutions that provide services to low - income and vulnerable groups. the misconduct or underperformance of such institutions can have a disproportionate impact on the poor simply because they have lower buffers. it can also significantly set back financial inclusion efforts by further entrenching the mistrust of formal financial institutions. it is therefore, critical for such institutions to exemplify strong and socially responsible corporate governance, and to have the appropriate technical expertise that will enable them to expand product offerings, increase outreach and develop alternative delivery channels. they must also be adept at identifying and managing financial and operational risks inherent in their business models. this requires investments in systems and in the development of talent with deep knowledge within the institutions. only then, can financial institutions expect to support the low income and vulnerable segments of our communities as long - term partners to create opportunities that will improve lives. a clear picture of policymakers ’ role in promoting an enabling environment for financial innovation and technology finally, policymakers can play a meaningful role to promote an enabling environment for innovation to support financial inclusion initiatives. i shall focus on three areas. first, regulation should aim to be technology - neutral and outcome - focused, proportionate to risks and harmonized across sectors. a technology - neutral approach allows policymakers to assess the merits of innovations based on the outcomes, without fear or favour for the underlying technology. regulation should be proportionate to the risks that products or institutions present to the broader financial system. this requires continued efforts to strengthen the capacity among national regulators and supervisors to assess the benefits and cost of regulation. only then can we really move from proportionality as a concept to practice. regulation between different sectors should also be harmonised to focus on activities that should be regulated, rather than the institutions conducting such activities. for example, if an e - commerce platform collects, pays interest on and mobilises deposits, a banking license may be necessary as public interest is involved. second, communicating clear expectations to the market while incorporating feedbacks through engagements with the private sector is important. countries such as australia, hong kong, the uae, the uk, singapore, and malaysia have issued discussion papers, introducing a sandbox approach which allows fintech solutions to be tested in a controlled environment, with appropriate risk mitigation in place. bis central bankers ’ speeches dedicated