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Selamat Pagi dan Selamat Datang!
Which means good morning and Warm Welcome in Bahasa Malaysia.
We heartily welcome members of the Digital Financial Services and Global Standards Proportionality working groups as well as our partners to Kuala Lumpur – Head Quarters of the Alliance for Financial Inclusion. Many of you have travelled here, many from very far, and some come here not for the first time. It is a great pleasure for me to welcome you all and I would like to express our appreciation for making this enormous effort to attend these very important meetings. I am very sure once again it is going to be worth it. According to the latest data, we have 93 WG representatives from the AFI family in the room who come from 51 member institutions from 50 countries, out of which are 34 women and 59 men. In addition, we welcome our partners and stakeholders today, and two representatives from Bank Indonesia who are observing the meetings.
We are actually relieved and delighted that we can hold face-to-face Working Group meetings as the world is further normalizing. After our LAC members went ahead and hosted the first physical WG meetings last year in Ecuador, El Salvador and Costa Rica, continued with the WG meetings at the GPF in Jordan, we are now also able to go back to Africa and Asia, with this year’s WG meetings in Malawi, Nepal, and Malaysia.
Malaysia is the host country of AFI’s headquarters and home basis of the Management Unit. You can see that we find such excellent conditions here in Kuala Lumpur to host the global financial community for events of this kind. I take this moment to convey my heartfelt appreciation to the Assistant Governor and to Bank Negara Malaysia for graciously hosting AFI in their state-of-the-art premises and for co-hosting this year’s DFS & GSP working group meetings. BNM must have been looking very far ahead when the bid to host AFI was submitted in 2013 after the GPF was held here in this auditorium. Time is indeed flying.
Having joined AFI in 2009, Bank Negara Malaysia has been one of the longest serving members, and, independent from AFI as such one of the most passionate advocates for financial inclusion and we are grateful for that. As a leader within the network on digital financial services and global standards proportionality, BNM is the perfect co-host for these working group meetings. Just to remind you, BNM was one of the earliest regulators to issue frameworks on regulatory sandboxes, digital banks, e-money, e-KYC, and payment systems amongst others.
We therefore also look forward to learning from Malaysia’s experience on leveraging digital innovations to advance financial inclusion and rapidly recover from the covid-19 crisis at the working group meetings. I am sure these provide valuable learnings to the members of the AFI network.
At the outset, I would like to congratulate you as the working group members and thank you for the content leadership that working groups demonstrate. Your work is not only the backbone of regulatory guidance AFI is developing through the Policy Models and the Policy Frameworks, it is also helping us to provide other complementary services to members such as capacity building, regional initiatives, in-country technical support and in engagement with private sector stake holders and developed country partners. For example – all our capacity building activities as based on knowledge products developed by working group members. Further, it is also heartening to note that your work through the working group umbrella is increasingly being referred to for the in-country support programs, bringing about tangible policy change.
Dear members, partners and colleagues,
It is indeed very timely for the DFS and GSP working group meetings to take place together this week in Kuala Lumpur. Why is it timely? Innovations in digital financial services from virtual assets to AI to cloud computing are moving forward fast and are raising new issues for global standard setting bodies in respect of their remit to preserve financial system integrity and stability. This is therefore a vital time to participate in a global dialogue to define and shape regulatory responses to digital innovations which appropriately balance opportunities and risks.
Further, we are witnessing increasing ownership and usage of virtual assets globally, including many developing countries, despite the so called “crypto winter”. Recent events in the sector including the collapse of prominent players have emphasized the need to develop holistic and internationally coordinated regulatory approaches which can ensure new risks to financial integrity and stability are monitored, whilst establishing safeguards for consumer and investor protection. I am happy to learn that DFS & GSP working groups are jointly working on this topic to examine the balance between financial inclusion and financial integrity.
Colleagues,
Let me also say a few words on the bigger picture, our current operating environment. At the moment when the global health crisis is actually easing and the world is moving into a post-pandemic status, we again find ourselves in a very critical situation, a situation that some observers refer to a ‘poly-crisis’. The world economy is expected to remain stressed, with inflationary pressures and slow growth in most regions due to heightened geo-political tensions, supply chain disruptions, climate shocks, and migration of people within and across countries. It is therefore fair to say that today policymakers are more and more challenged to manage conflicting macro objectives, and the current developments threaten many countries in the Global South and are beginning to show implications in undermining an inclusive society, most likely and once again hitting hard the most vulnerable: women, young people, the forcibly displaced, the elderly, and people with disabilities. Our achievements over the past decades are clearly at risk.
As financial regulators are now increasingly under pressure to refocus on their conventional mandates, i.e. monetary and financial stability, there is a real danger of financial inclusion being crowded out from the policy agenda. However, in this regard, we should learn from previous crisis. Both the 2008 Global Financial Crisis and the COVID-19 pandemic have demonstrated that financial inclusion is an important tool to mitigate negative impacts of economic crises, and to strengthen resilience, especially for vulnerable segments of the society. In this context, it is important for policymakers to emphasize the complementarities between financial stability and monetary stability objectives with financial inclusion in order that the real concerns and interests of developing and emerging economies are taken account of. In other words, these are not competing but complementary objectives.
Against this background and as we are beginning the two working groups meetings today, it is important to highlight once again that the future of financial services will continue to be shaped by technology, probably even more than in the past, and faster. Central Banks acknowledge this and are working both on policy and financial architecture. For example, many central banks – including in AFI member countries – are exploring Central Bank Digital Currencies or CBDC. Our position, based on the work that the working group has carried out, is that CBDC holds promise for financial inclusion. But the jury is still out! We need to look at it as one of the many tools to advance financial inclusion and payments efficiency. Another example is the advance of BigTechs into mainstream finance and its potential for financial inclusion. They leverage huge amounts of customer data, deploy artificial intelligence, big data analytics and other cutting-edge techniques to offer financial services at scale. These advances in technology, business model innovations call for a global convergence around challenges of risks of technology and regulatory/supervisory approaches to manage these risks. We clearly see this emerging convergence over the past years.
Old patterns such as North/South do not work anymore. Knowledge is spread in pockets all over the world, and everyone can indeed learn from everyone. This refers to the highly active peer learning among AFI members, but also explicitly includes the emerging dialogue among developed and developing countries.
This also entails close partnership and cooperation with private-sector players and stakeholders. This is to enhance mutual understanding of the fintech innovations, risk profiles, their role in financial inclusion and to take a collective approach to governance and regulatory standards. In that regard, I would also like to take the opportunity to thank partners and stakeholders such as the Bank of International Settlements, Bill & Melinda Gates Foundation, UNCDF, CGAP, MasterCard, Celo and others who will contribute to the working group deliberations this week.
Finally, these global developments and future of finance also call for a discussion on the future of Central Banking. We discussed the topic of “Contemporary Financial Regulation” at the 2022 Global Policy Forum in Jordan. Key takeaway from the discussion was that the mandate and responsibilities of financial regulators are rapidly evolving with the entry of new players and technological innovations. We will continue these discussions at this year’s Global Policy Forum under the theme of “Sustainable Central Banking”. More details on the GPF will follow in due course.
Ladies and Gentlemen,
Before I end, let me also touch upon a few broader issues. The update of three of our flagship Network commitments, the Denarau Action Plan, the Sharm El-Sheikh Climate Change Accord, and the Sochi Accord on Inclusive Fintech during the 2022 GPF in Jordan, brings to our attention the emphasis on the need to keep our policy focus on gender, inclusive green finance, financial innovation, and targeting vulnerable groups including youth and forcibly displaced persons.
2023 will be a strategically important year for AFI as we continue exploration of AFI’s intergovernmental organization (IGO) status. We will also look to pilot AFI’s financial inclusion country assessments with at least two members on a voluntary basis and this will be led by the GSP working group.
Further, we are incredibly excited to host this year’s Global Policy Forum in this region co-hosted by the Bangko Sentral ng Pilipinas. The organizing team just concluded the first visit to Manila to finalize the theme, dates, and other key aspects. We will focus on aspects related to sustainable central banking, clearly linking to the discussions from GPF 2022 on contemporary financial regulation, scope of central bank mandates etc., and perhaps also a call to maintain financial inclusion as a key policy priority.
I would like to end by thanking you the working group members for your participation and thanking the organizing team from Bank Negara Malaysia and my AFI colleagues for organizing this meeting.
While you are here, please take some time out of the busy schedule to explore the vibrant of Kuala Lumpur that embodies the old and the new, diverse culture, arts, and culinary offerings. Don’t miss Roti Canai – The humble Malaysian bread which it is rated as one of the best street foods of the world!
Wishing you a week full of mutual bonding and fruitful deliberations.
Terima Kasih – which is thank you in Bahasa
© Alliance for Financial Inclusion 2009-2024
