Based on data from the Department of Statistics Malaysia (DOSM), as of 2022, 2.23 million citizens are still living below the absolute poverty line, struggling to meet basic needs like food, clothing, and shelter. The largest share of this population comes from Sabah (669,800), followed by Sarawak (313,200) and Kelantan (250,800). This data shows that many Malaysians, especially in rural areas, face financial difficulties, often due to a lack of access to formal banking services.
Poverty in Malaysia is a complex issue driven by factors such as financial disparities and limited access to banking, particularly in rural areas. While many urban regions have embraced digital finance, rural communities remain disconnected from its benefits. Digital financial literacy can play a key role in bridging this gap, helping individuals engage with and benefit from digital economic opportunities.
Digital financial literacy empowers individuals by providing them with the knowledge and tools to make informed financial decisions, thereby improving their economic well-being. However, rural communities face barriers to participating in digital finance, such as poor internet connectivity, a lack of digital financial skills, and limited exposure. These challenges have led to growing income inequality and low adoption of digital financial services.
Recent studies have shown that low digital financial literacy can harm an individual’s financial well-being. Without the right information and skills to use digital platforms, rural communities miss out on modern services like mobile banking, digital payments, and microloans. In countries like China and India, improving digital financial literacy has opened doors to entrepreneurship, which helps households boost their income and economic stability.
In Malaysia, many rural communities still rely on traditional banking and cash transactions, which limit their ability to access broader financial services, including digital insurance and investment. As banks cut costs by reducing physical branches, accessibility issues may worsen. Learning digital financial skills can prepare communities for these changes and promote economic mobility.
Studies have shown that improving digital financial literacy among rural communities helps them diversify their financial assets, making them more resilient to economic shocks. It also enhances income stability by creating multiple income sources. Additionally, rural communities benefit from lower transaction costs and the convenience of digital transactions, which can be conducted from home using mobile phones.
Gaining digital literacy can also improve business opportunities. Through digital marketplaces like TikTok and Shopee, rural entrepreneurs can sell their products, reach a wider customer base, and explore new business prospects. For instance, in Malaysia, Nur Rafidah Man from the Jahut tribe successfully marketed her “Jungle Girl” herbal oil on TikTok, earning over RM1 million. This example shows how adapting to modern markets can lead to financial success and stability.
The Malaysian government recognises the importance of digital finance for everyone. However, improving infrastructure alone is not enough. People need to be equipped with comprehensive financial education, especially those in underserved communities. Financial programmes should focus on basic financial concepts like setting goals, tracking expenses, managing risks, and investing, all available via mobile apps. This will help individuals make informed decisions, avoid financial exploitation, and develop a habit of investing for the future.
Moreover, understanding digital financial tools can improve safety and security in transactions by reducing the risk of fraud and scams. People can learn to spot suspicious activities and protect themselves from digital threats. Rural communities can safely use digital financial platforms if they are taught about secure transaction practices.
To promote digital financial literacy in rural areas, stakeholders—such as the government, financial institutions, NGOs, and educational organisations—must work together to address the challenges faced by these communities. The government, in collaboration with telecom companies, could provide subsidies for mobile data plans or affordable smartphones to improve internet access and digital tool usage. These devices could come with pre-installed financial apps and tutorial videos in local languages, indirectly promoting digital financial skills.
Financial institutions, NGOs, and educational organisations could also run community-based training programmes. These could be in-person workshops that provide hands-on sessions and should be delivered in local languages to ensure better understanding and familiarity with digital financial apps.
In conclusion, introducing digital financial literacy (DFL) can help rural communities manage their finances more effectively. It also opens up new opportunities for growth and entrepreneurship. Research consistently shows that digital financial literacy leads to better financial well-being and stronger protection against fraud.
Without this knowledge, rural communities risk falling further behind, missing out on many opportunities to improve their financial stability. In today’s world, digital financial literacy is not just an advantage; it is essential.
Written by: Dr. Ahmad Muhaimin Mat Jusoh
