As post-Covid government subsides dry up, data suggests employers have stepped up across Southeast Asia.
The past two years, Southeast Asian economies have been making rapid progress in financial inclusion as advancements in technology and fintech enabled a greater proportion of the population to participate in the financial system. Yet, facing local economic pressures, employers have also needed to step up to support populations this past year.
Vietnam, Thailand, Malaysia, and Indonesia all improved their overall financial system scores within the Global Financial Inclusion Index year over year.
Indonesia, Vietnam, and Thailand also rose in financial system rankings, while Malaysia remained flat. Thailand now ranks number one in the financial system pillar and is the only emerging market to feature in the top 10 for financial inclusion overall. Indonesia, Vietnam, Malaysia, and Thailand made strides in their scores for the volume of real-time transactions and presence and quality of fintechs. All but Indonesia also increased scores for online connectivity, which features in the government support pillar.
However, despite continuing advancements in digitized finance, markets across Southeast Asia have been affected by local market economic factors. Access to capital and credit has declined in Malaysia, Thailand, and Indonesia, while Vietnam has only slightly improved in these indicators by 0.5 and 0.9 points respectively. Scarcer lending appears to have negatively impacted business sentiment. All four markets’ scores fell for the financial system as an enabler of business confidence, though they remain in the top half of the table by rank.
Tracking financial inclusion performance across Southeast Asia
| Financial inclusion indicator | Indonesia | Malaysia | Thailand | Vietnam |
|---|---|---|---|---|
| Volume of real time transactions | +8.0 | +11.3 | +54.6 | +45.1 |
| Presence and quality of fintechs | +33.9 | +16.4 | +16.2 | +20.1 |
| Enabler of business confidence | -15.3 | -5.6 | -4.4 | -7.2 |
| Enabler of small and medium enterprise (SME) growth and success | -18.6 | +0.5 | +11.4 | -12.0 |
| Access to capital | -1.0 | -1.8 | -0.4 | +0.5 |
| Access to credit | -0.8 | -6.6 | -3.8 | +0.9 |
| Employer pay initiatives | +10.4 | +0.4 | +8.8 | +8.2 |
| Employer pension contributions | +0.5 | +2.0 | +13.6 | +12.0 |
| Employer insurance schemes | +16.0 | -7.4 | +8.2 | +8.7 |
Dive deep into data: Download the full 2024 Global Financial Inclusion Index report (PDF)
In contrast to declines outlined above, some markets have seen an uptick in employer support, with Thailand and Vietnam improving both their score and rank, and Indonesia improving its score with its rank falling slightly. Malaysia is the exception, as both its rank and score fell in the employer support pillar. All four markets registered increased scores for employer pay initiatives and employer pension contributions. Three out of four (excepting Malaysia) increased employer insurance schemes.
What do these findings tell us? Southeast Asia has seen the unwinding of the state-led measures implemented during Covid designed to provide a financial buffer to individuals and businesses. Subsidies introduced during the pandemic across the region have now largely been removed. Given the financial impact on households, which this inevitably has entailed, employers have increased financially inclusive policies. In particular, by offering more flexibility on pay initiatives—such as advancing pay cheques or increasing regularity of payments—employers have been able to assist members of the workforce experiencing short-term financial strain.
“What has remained consistent,” Chung Wan says, “and we see as a secular trend, is the continued advancement in the financial system based on ongoing investment into digitization. In this area, markets in Southeast Asia are standout world leaders.”
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