Frankly Speaking: Civil servants should not vet home loans

This article first appeared in The Edge Malaysia Weekly, on May 6, 2019 - May 12, 2019.
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Two weeks ago, at the opening ceremony of the Home Ownership Campaign-Malaysia Property Expo 2019, Finance Minister Lim Guan Eng told homebuyers to refer to his ministry if they had difficulty in getting bank loans.

He asked for the list of rejected applicants and said the Ministry of Finance (MoF) will check with the banks as to why the loans were rejected. Action will be taken against banks that “deliberately” turn down those who are eligible or who fulfil the criteria.  He also reminded banks not to hinder the government’s efforts in ensuring that eligible applicants are able to secure loans.

The minister may mean well, considering the many grouses about houses being out of the reach of many, especially those in the B40 group. But regularly reproaching the banks for rejecting loan applicants  may send the wrong signal to investors.  The government may be perceived as being meddlesome and interfering in how businesses are run. Banking, after all, is business and banks need to manage their books prudently and within the guidelines set by regulators.

The country’s total household debt as a percentage of GDP was a high of 88.4% in 2015, and eased to 83% as at end-2018. A high level of household indebtedness is a risk factor that would make the economy more vulnerable to internal or external shocks.

More importantly, at a time when there have been repeated calls for the government to reduce its role in business, this is one area where the banks and Bank Negara Malaysia should be left to do what they know best.

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