BNM proposes financial inclusion framework and KYC guidance

The Bank Negara Malaysia (BNM) proposed the financial inclusion framework 2023-2026, with the feedback period ending on March 31, 2023. The framework will consider alignment of strategies toward new emerging growth angles in financial services, along with the achievement of the United Nation’s Sustainable Development Goals (SDGs) and the Environmental, Sustainability and Governance (ESG) propositions for higher value creation. BNM also proposed enhanced requirements and guidance in implementing electronic Know-Your-Customer (e-KYC) solutions for the on-boarding of individuals and legal persons to the financial sector. The e-KYC requirements are relevant for various financial sector entities, including conventional and Islamic banks, with the comment period ending on May 02, 2023.

The financial inclusion framework is aligned with the Financial Sector Blueprint 2022-2026 and is intended to serve as a four-year strategic roadmap to advance financial inclusion. The discussion paper outlines the following key strategies that BNM plans to implement to promote financial inclusion in Malaysia:

• Address the gaps and accelerating the advancement of financial inclusion through identified policy objectives: expanding access to financial services for the unbanked population, promoting digital financial services such as mobile banking and e-wallets, increasing access to financial services for those who are currently excluded from the formal financial system, accelerating small and medium enterprise (SME) development through technology and digital adoption, developing a landscape that can meet the needs of the unserved and underserved segments, and improving targeted support for the vulnerable segments
• Strengthen consumer protection measures to ensure that consumers are not taken advantage of by financial institutions; measures include requiring financial institutions to disclose fees and charges in a clear and transparent manner
• Support micro, small, and medium-sized enterprises by providing access to financial services and integrate the two cross-cutting themes within the financial inclusion strategies: embedding gender equality considerations and strengthening impact measurement and evaluation of financial inclusion efforts 
• Use strategic enablers in industry-wide efforts that support the effective implementation of the framework, with these strategic enablers being forging strategic collaborations or partnerships, data sharing, financial infrastructure, and ensuring a regulatory environment

BNM is inviting written feedback on this discussion paper, including suggestions on areas to be clarified and alternative proposals that BNM should consider. The written feedback should be supported by a clear rationale, accompanying evidence or practical examples, where appropriate, to facilitate greater understanding of its context. BNM plans to publish, in 2023, a list of key performance indicators (KPIs) on consultation with stakeholders that will account for the quality of financial services and components of financial capabilities and health.

Related links:

• Press release on financial inclusion framework
• Proposed financial inclusion framework (PDF)
• Proposal on e-KYC (PDF)