This article first appeared in The Edge Financial Daily on January 19, 2018

KUALA LUMPUR: The Association of Banks in Malaysia (ABM) has dismissed claims that easy access to loans had led to the high number of personal bankruptcies in the country.

“Loans approved by our member banks are assessed stringently and in accordance with their internal approving guidelines and procedures. Our member banks assess loan applications based on the eligibility of the applicant and repayment capability among other factors,” it said in a statement yesterday.

The association was responding to a recent statement by the Consumers Association of Penang (CAP) that raised concern about the number of Malaysians driven to bankruptcy or on the brink of it.

CAP president S M Mohamed Idris pointed out that financial institutions and cooperatives often do not cross-check the background of their applicants when the applicants take up loan at the financial institutions.

In dismissing CAP’s claims, ABM said rigorous verifications including checks with the Central Credit Reference Information System and various credit report agencies are performed before approvals for loan application are granted.

“Banks adhere to responsible financing practices in providing loans. This is to avoid exposing both the bank and the borrower to increased credit risks,” it added.

ABM also reminded the public to practise prudent spending and do careful planning with regard to using facilities such as debit cards and other payment cards.