KUCHING: Sarawak needs to build its digital infrastructure, which is now in its foundation stage, before it embarks on a digital banking system, an economist said.
Madeline Berma, an Academy of Sciences Malaysia fellow, said the state government’s interest to start a digital banking system is in line with its digital transformation plan.
She said the need for social distancing and remote and contactless banking transactions in the wake of the Covid-19 pandemic have also become the catalyst to spur Sarawak to establish its digital bank.
“But one of the biggest challenges for the state is the inadequate digital infrastructure at this foundational stage,” she told FMT.
“The state government needs to further develop its telecommunication infrastructure and facilities to support the digital banking system and protect sensitive data.
“It also needs to make sure the system is accessible and inclusive for all Sarawakians, including those living in the villages and longhouses.”
Berma said a digital system, which allows customers to carry out most of their transactions online, will meet the banking needs of Sarawak’s diverse population and businesses and rapid economic growth.
It was reported recently that Bank Negara Malaysia (BNM) is expected to invite applications for digital banking licences early next year, once it has issued the licensing framework for digital banks.
Several non-banks, including the Sarawak government, have expressed their interest to BNM in pursuing such a licence.
Meanwhile, Yeah Kim Leng, an economics professor at Sunway University, said the Sarawak government’s interest to be among the first movers in digital banking is commendable given the readiness by local and foreign private firms to embark on fintech ventures.
However, he said, the role and need for state government involvement in business require thorough deliberation.
“If it is a complementary role, especially in promoting digital banking to under-served or hard-to-reach segments through micro-financing to the rural communities, then the state’s involvement is justifiable.
“Otherwise, it is more cost-effective, less risky and more sustainable and competitive for the state government to facilitate the roll-out of digital banking services by private entities,” he said.