Prime Minister Anwar Ibrahim’s name for banks to supply mortgage compensation help may result in abuse and long-term issues, economists say.
PETALING JAYA: Any transfer to assist debtors by making it simpler for them to repay their loans have to be accompanied by long-term methods to enhance the economic system, based on consultants.
In any other case, it should result in abuse and long-term issues, Pacific Analysis Centre of Malaysia principal adviser Oh Ei Solar and Universiti Teknoloji Mara senior lecturer Firdausi Suffian instructed FMT Enterprise.
They had been commenting on a name by Prime Minister Anwar Ibrahim for banks to proceed providing mortgage compensation help to people in addition to small and medium enterprises (SMEs) that had been nonetheless going through monetary difficulties.
He stated such help ought to embrace methods to assist affected debtors reschedule and restructure their loans.
Oh warned that these “short-term fixes” may morph into long-term practices. “(It is going to attain a degree the place) lenders will hesitate to offer out loans,” he stated.
He stated these measures might be very very similar to the mortgage moratoriums granted to debtors to assist them by means of the financial fallout of the pandemic.
“The appropriate long-term repair is to restructure the economic system to deal with the prevailing disparity among the many many socio-economic courses,” he added.
Whereas he expressed help for Anwar’s proposal, Firdausi additionally warned that some debtors may take such help as a “free journey” even when that they had the flexibility to repay their loans promptly.
This, he stated, may add a burden on monetary establishments.
“Such help was crucial as a part of the hassle to ease the burden on debtors (affected by the pandemic),” he stated.
“However are banks prepared to supply extra of such help, and the way will we inform who’re those that actually need it?” he requested.
In any case, Firdausi stated, the proportion of non-performing loans was nonetheless low. As of April, it was just one.8%, based on information from Financial institution Negara Malaysia.
He stated the primary goal of any restructuring needs to be to assist SMEs by means of a nasty patch quite than merely decreasing rates of interest.
“Mortgage compensation help needs to be a brief measure solely,” Firdausi added.
He stated the underlying difficulty was financial growth. “Wages stay low so we have to handle that. In any other case, it should trigger a vicious cycle (of borrowing and repaying) which, in some unspecified time in the future, will see debtors unable to repay their loans,” he added.
He stated social insurance policies that might act as a buffer to these in want must also be strengthened.
Heart for Market Training CEO Carmelo Ferlito stated that other than offering mortgage compensation help, banks may additionally supply recommendation on restructuring and refinancing in mild of adjustments in rates of interest and private publicity.
“This needs to be a part of a method to enhance monetary literacy within the nation, which may be very poor now as evident from the extent of family debt in Malaysia,” Ferlito instructed FMT Enterprise.
“Banks mustn’t dish out loans too simply and find yourself placing residents in a extra fragile monetary place,” he added.