Borhan is a Bangladeshi migrant employed at a bottling plant in the suburbs of Kuala Lumpur. He earns MYR 1,400 (~USD 334) each month. After covering his basic living expenses, Borhan is able to save MYR 750 (~USD 179) approximately. He remits this money to support his family back home in Dhaka. He uses informal channels, such as hawala and private money-changers for remittance, as he does not have a bank account in Malaysia. Although sending all his savings on a monthly basis through these channels is more expensive than sending only what is required, Borhan sees this as a better solution than keeping cash with him.
As Malaysia’s economy continues to expand steadily, an increasing number of Malaysians have started to opt for higher skilled jobs. This has created opportunities for migrants to play a crucial role in filling the gaps in low- and medium-skill jobs, which make up three-quarters of employment opportunities in Malaysia. Like Borhan, thousands of Southeast Asian migrants come to Malaysia each year in search of better opportunities. While the country has achieved one of the highest levels of financial inclusion among middle-income nations, the growing community of migrant workers continues to lack access to formal financial institutions and financial services.
A combination of factors like the increased adoption of smartphones, greater access to the Internet, and growing comfort in using technology have given rise to new and innovative financial solutions. These solutions allow the migrant workers to fulfil their basic financial needs – including the ability to send money home and build small savings in case of an emergency. This blog showcases the drivers for growth and the potential for technology solutions in the Malaysian economy.
Financial inclusion is a key goal for Malaysia’s central bank, Bank Negara Malaysia (BNM) under the 2009 Central Bank Act of Malaysia. The country adopted a Financial Inclusion Framework under the Financial Sector Blueprint for the period 2011–2020. This blueprint aims to create an enabling and holistic ecosystem, which would allow and encourage the delivery of innovative products and services to the low-income segment in a safe, effective, and sustainable manner. As a result, most households in Malaysia now have access to a wide range of conventional and Islamic finance products and services. These households now have the ability to carry out electronic payments nationwide.
The Contribution of Migrants to Malaysia’s Development
Malaysia is on track to become a high-income nation by 2020. Migrant labour, both medium and low-skilled, continues to play a crucial role in the country’s development. As per Malaysia Economic Monitor 2015, there are 2.1 million registered migrants in Malaysia and likely over 1 million undocumented migrants, making up 15% of Malaysia’s workforce. However, the Malaysian Employers Federation estimates that the number of undocumented migrant workers could be closer to 4 million.