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Digital Banking Can Extend Financial Services, Facilities To Underserved MSMEs

A well-implemented digital banking system will boost the economy and encourage greater financial inclusion, allowing for greater participation of micro, small, and medium-sized businesses (MSMEs).

KPMG Malaysia head of financial risk management and fintech/digital banking leader Yeoh Xin Yi said digital banks have the potential to fill the void that is within the economic environment, especially if the recipient of the license already has an existing pool of clients, consisting of MSMEs within a digital ecosystem.

“With a warm base, the digital bank can leverage on existing data and build advanced analytics to understand the profiles of specific segments, thereby understanding the MSMEs’ needs better.

“Digital banks may also extend solutions beyond pure financial services, as MSMEs often require more than just financial support, to grow,” she said at World Islamic Economic Forum (WIEF) Foundation’s Powertalk webinar session recently.

Titled Digital Banking: Driving Financial Inclusion for MSMEs, the webinar also featured Monash University Malaysia head of School of Business Professor Dr Nafis Alam and ShopeePay Malaysia head Alain Yee who shared insights on the constraints faced by MSMEs and the role of digital banking in overcoming these challenges.

Banking institutions are presently the primary source of financing for MSMEs.

Dr Nafis said digital banking brings with it the prospect of extending financial services and facilities to these underserved groups such as MSMEs.

“It is not here to replace conventional financial institutions but to complement them,” he said, adding that the usage of e-wallets, e-hailing, online food delivery as well as activities on e-commerce platforms generate digital financial footprints of MSMEs and consumers.

And this can be utilised by digital banks for a new credit scoring mechanism, thus allowing them to extend their offering to underserved communities and groups such as MSMEs to create a more inclusive and sustainable economy.

Commenting on the role of e-commerce in fostering financial inclusiveness, Alain said Shopee has a strong technological infrastructure of integrated services such as logistics, payment solutions, marketing tools like Shopee Live, seller support programmes and its free Shopee University classes to make it easy for sellers to come online.

He said Shopee has also ensured that even the unbanked can transact digitally on the platform by partnering with 7-Eleven and KK Supermart for cash payments and mobile wallet ShopeePay top-ups.

Additionally, the adoption of ShopeePay by petty traders at Ramadan bazaars, night markets, roadside burger stalls, and rural areas will open doors to capture a growing audience who prefer contactless payments.

“By merging valuable insights and data, we can empower and enable local MSMEs to pivot their businesses online or venture into the digital realm by broadening access to the benefits of the digital economy to everyone in Malaysia.

“Now, with the ecosystem that they are on, imagine the possibilities these businesses can achieve – they can create an improved and sustainable livelihood for themselves and those around them as they scale with access to fintech solutions,” Alain said.

When coupled with digital banking, Dr Nafis said e-commerce platforms could be the game-changer for financial inclusion in Malaysia by creating new income streams and job opportunities.

“On top of that, they also address the income gap between urban and rural communities by providing a level playing field for all.”

Many e-commerce platforms also provide e-wallets as extensions, precipitating financial inclusion.

This is an early indication that financial inclusion can indeed be achieved through the digital economy, with innovations such as e-commerce platforms, e-wallets and strengthening of logistics infrastructure.

Sharing findings from KPMG Malaysia’s report, Digital Banking Malaysia: The Inclusive Agenda, Xin Yi said the unserved and underserved categories from the B40 groups should be onboarded to financial service platforms that can help with their cash flow management, enable micro-savings or deposits, offer micro-insurance to safeguard their basic needs and offer basic financial products to tide them over their financial troubles.

To ensure MSMEs realised their potential of contributing 45 per cent to the country’s gross domestic product (GDP) and 25 per cent to the total export in 2025, as outlined in the 12th Malaysia Plan.

She said digital banking should be considered a valued contributor, increasing the involvement of MSMEs in the economy, as business and consumers in both retail and commercial sectors have pivoted towards e-commerce and digital payments, a development which disruptions have accelerated brought about by the pandemic. – NST ONLINE

BacalahMalaysia Team

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