Finance minister: Household debt down, banks please lend to new homebuyers

PETALING JAYA (June 19): Malaysia’s Finance Minister Lim Guan Eng wants banks to provide greater access to financing to first-time homebuyers, as well as to small and medium enterprises (SMEs) considering the fact that the country’s household debt as a ratio to gross domestic product (GDP) has fallen to 83% in 2018 from 83.8% in 2017.

In a statement today, Lim said consumers have more room now to borrow for wealth accumulation purposes, either in saving schemes, or for non-speculative investments including acquisition of long-term assets.

“Household debt on average is sufficiently backed by assets. According to statistics from Bank Negara Malaysia (BNM), the level of household financial assets is 2.1 times of household debt. This shows that households on average hold more assets than they hold debt, giving them the necessary buffer to face any financing contingencies,” he said.

He noted that BNM’s Monetary Policy Committee (MPC) May 7 decision to cut its Overnight Policy Rate by 25 basis points to 3% from 3.25% has also lowered the cost of borrowing and the reduction has been transmitted fully by the banks to consumers.

“The government has also requested BNM to remind all banks that business borrowers who are not facing loan defaults, but wish to improve their cash flow by restructuring and rescheduling (R&R) their loans for a longer tenure, should not have such R&R loans classified as non-performing loans,” Lim highlighted.

However, he noted that the government recognises that lower income households are vulnerable to shocks, and are in need of assistance to increase their financial strength.

“Thus, the government has successfully done so by improving its cash transfer programme Bantuan Sara Hidup (BSH), introducing the free public health insurance scheme mySalam, and stabilising RON95 petrol and diesel retail prices,” said Lim.

He added that higher consumer confidence is reflected in the rise in retail sales by 6.3% to RM41.6 billion in April 2019 from RM39.1 billion a year ago based on data from the Department Of Statistics Malaysia.

“The overall wholesale and retail trade sales in April 2019 increased by 5.3% to RM105.1 billion from RM99.8 billion a year ago, indicating high consumer confidence,” he added.

In the statement, Lim also commented on the cement price hike issue.

“The government is determined to keep prices of basic items in check.

“The Ministry of Domestic Trade and Consumer Affairs (KPDNHEP) under the leadership of Datuk Seri Saifuddin Nasution Ismail has issued notices under the Price Control and Anti-Profiteering Act to 19 cement producers throughout the country.

“Furthermore, the government will play its role as an effective regulator to ensure cement prices remain competitive and are not raised arbitrarily based on monopolistic factors,” Lim added.