Cash, Gold and Digital Financial Services in the Malaysian Heartlands

  • 2 November 2019
  • 3 minutes read
Image of a market place in Kota Bharu, Malaysia, 2018.

Image of a market place in Kota Bharu, Malaysia, 2018.

At the end of September 2018, the UN Capital Development Fund launched a digital-finance–focused Inclusive Innovation Hub in Malaysia. The Hub was set up as a part of the i3 program, funded by MetLife. The Hub aims to enable service providers, including financial institutions and fintech start-ups, to introduce products and services that promote inclusive finance in Malaysia for low- and middle-income people.

By supporting service providers to deploy responsive financial products and services, the Hub focuses on harnessing innovation, client-centricity and technology in order to build sustainable and scalable business models meant to serve the underbanked. By doing so, it strengthens the financial well-being of low- and middle-income populations–-in Malaysia, that means the so-named bottom 40% (B40) and the lower part of the middle 40% (M40) income groups.

To assist in the process of serving these low- and middle-income communities, the UN Capital Development Fund (UNCDF) conducted consumer insight research in Malaysia. The goal was to better understand these population segments’ financial needs, any pain points around digital technology and the role of financial services–-both traditional and digital–-in their daily lives.

UNCDF carried out the research in three geographic areas: greater Kuala Lumpur, Kota Bharu on the eastern coast, and Kota Kinabalu in eastern Malaysia. These areas were chosen for their ability to represent a range of people, as they include both rural and urban residents, as well as a range of digital financial service availability. Kuala Lumpur is the main fintech hub in the country, while Kota Bharu and Kota Kinabalu are not often served by companies based in the capital city. The team spoke to a wide variety of working people of different genders, ethnic groups and life stages (from younger and single to older and married in order to develop deeper insights into the daily lives and financial needs of low- and middle-income people.

In Kota Bharu, the team completed focus-group discussions and market visits. One of the recurring themes was the importance of gold as an investment and as a method of savings. Both male and female respondents spoke of the cultural and religious importance of this precious metal. Women, in particular, described gold as “their essence,” a way to augment their beauty and to add to their glow. Beyond this view of gold as a tool to make them more beautiful to their husbands, they also saw it as a financial investment, a way to ensure savings for their future.

The importance of gold in Kelantan, the state where Kota Bharu serves as the capital, became clear even from a quick stroll around the local markets: within low-income communities, fruit and vegetable markets were sprinkled with gold stalls, and women’s wrists sparkled with jewellery. Gold is not cheap –-the team saw pieces as expensive as RM4,000–RM5,000 (US$957–US$1,196)1. Yet, respondents said they were willing to save substantial amounts of cash in order to buy gold jewellery, even pieces that cost more than their monthly household income. Some respondents spoke of having to take out a personal loan to finance their purchase, something that struck the team as quite unusual since respondents were unanimously adamant against acquiring debt, viewing it as a burden to be avoided at all costs.

This finding begs the question, why are low- and middle-income people in Kota Bharu willing to save up and spend twice their monthly income to buy what could be seen as a luxury? In fact, the people with whom the team spoke do not view gold as a luxury. Rather, they see it as a good way to save: investing in gold ensures that their money is safe and is being used to provide a secure financial future while, at the same time, increases their sense of beauty and self-esteem. This rationale helps explain why, in a debt-averse culture, people are willing to spend so much money on gold.

Interestingly, most often they buy gold with cash. People shared stories of taking thousands of ringgit, in cash wrapped in paper envelopes, to buy gold jewellery outright. Proprietors of gold stalls in the markets told the team that they rarely accept anything but cash; they do not accept credit or debit cards and do not have machines. Bank transfers are almost non-existent due to a 2% bank charge, and online banking is not generally trusted. In Kelantan, cash is king–-even for purchases as large as gold.

This ‘cash-first’ mentality and a lack of trust in digital services can be difficult to change, especially when online purchases are viewed with scepticism and mobile network coverage is patchy at times. Low- and middle-income customers in Kelantan often have little incentive to use digital financial services and to move away from their cash-based existence, which means it could be challenging to create meaningful digital financial services for these segments. However, this challenge can be overcome. These populations clearly have a need for savings and investment products and have demonstrated an ability and readiness to engage with these financial practices. If appropriate digital financial products and services–-ones that meet their needs and improve their lives–-are offered, digital financial inclusion in the Malaysian heartlands may be able to improve.

1: Conversion rate: US$1 = RM4.1807 (Source:, 1 November 2018).


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Molly Sanborn

Customer Insight & Behavior Trends Research Intern


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