At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) by 25 basis points to 3.00 percent. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2.75 percent and 3.25 percent respectively.
The global economic recovery has continued in the first quarter of the year, but the growth has been highly uneven across regions. Growth in the advanced economies during this period has remained modest.
In the region, despite some moderation, the growth has remained strong, supported by robust domestic economic activity. Global inflation has, however, increased on account of rising energy and commodity prices.
In several countries, further upward pressure on inflation has been exerted by domestic demand conditions. Although the global recovery is expected to continue going forward, downside risks have increased, arising from the potential for higher energy and commodity prices, possible supply disruptions following developments in Japan, and the heightened volatility in capital flows to emerging economies.
In the domestic economy, the latest indicators point towards the continued strengthening of private investment and sustained private consumption expenditure in the first quarter. The export performance also improved, supported by regional demand.
Going forward, the assessment is for the Malaysian economy to remain firmly on a steady growth path, with growth improving gradually during the course of the year. Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amidst the improved investment environment. The developments in Japan are expected to have a limited impact on the overall domestic economy.
Positive prospects for the region and strong demand for commodities are expected to continue to support the Malaysian economy. Domestic headline inflation has continued to increase, rising to 3% in March to average 2.8% for the first quarter of 2011. The increase was mainly due to higher food and fuel prices. The assessment is that supply factors will continue to be a key determinant affecting consumer prices. Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year.
With the economy firmly on a steady growth path, the MPC decided to adjust the degree of monetary accommodation. At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects.
Wednesday, May 11, 2011
Saturday, April 23, 2011
Najib: It’s for Tricubes to explain 1Malaysia e-mail project
SERDANG: The onus is on Tricubes Bhd to explain to the public its 1Malaysia e-mail project, the Prime Minister said.
“Let them give their explanation. Not everything is on me. It is their proposal, they should sell it to the public,” Datuk Seri Najib Tun Razak said.
He reiterated that the project did not involve public funds as it was a private sector initiative.
Najib had announced on Tuesday that the initiative by Tricubes was part of the seven new projects in the Economic Transformation Programme.
Many had questioned the need to have the 1Malaysia e-mail account for those aged 18 and above. There are also concern about security issues.
Najib had previously said Malaysians would not be forced to set up the account.
More on The Stars
“Let them give their explanation. Not everything is on me. It is their proposal, they should sell it to the public,” Datuk Seri Najib Tun Razak said.
He reiterated that the project did not involve public funds as it was a private sector initiative.
Najib had announced on Tuesday that the initiative by Tricubes was part of the seven new projects in the Economic Transformation Programme.
Many had questioned the need to have the 1Malaysia e-mail account for those aged 18 and above. There are also concern about security issues.
Najib had previously said Malaysians would not be forced to set up the account.
More on The Stars
Saturday, April 2, 2011
CIMB, CIMB Islamic to increase BLR
CIMB Bank Bhd and CIMB Islamic Bank Bhd have announced an increase in their Base Lending Rate (BLR) and Base Financing Rate (BFR) by five basis points from 6.30 per cent to 6.35 per cent, effective April 4.
A statement by the CIMB Group said that the change in the rates followed Bank Negara Malaysia’s decision to increase the Statutory Reserve Ratio (SRR) requirement by 1.0 per cent to 2.0 per cent with effect from April 1. -- Bernama
A statement by the CIMB Group said that the change in the rates followed Bank Negara Malaysia’s decision to increase the Statutory Reserve Ratio (SRR) requirement by 1.0 per cent to 2.0 per cent with effect from April 1. -- Bernama
New SME loan scheme gets mixed feedback
A NEW financing scheme for small and medium enterprises (SMEs) has drawn mixed reactions. While observers recognise that the scheme is a good initiative, they say there is room for improvement.
Koong ... ‘CGC should top up the RM100mil financing amount to benefit more SMEs.’
Credit Guarantee Corp Malaysia Bhd (CGC) has allocated RM100mil of financing for SMEs under a newly-launched credit guarantee scheme called Enhancer Express. The scheme is aimed at promoting the growth and development of SMEs, particularly those in the wholesale and retail sectors, and is available at financial institutions throughout the country for a limited period of three months or until loan approvals hit RM100mil, whichever comes first.
It said: “Enhancer Express offers loan ranging from RM50,000 to RM100,000. The loans are offered to small businesses that have been in operation for more than three years.”
Under the scheme, borrowers will enjoy a fixed guarantee fee of 4.5% per annum, which is relatively lower compared with a maximum fee of 5.75% for other CGC schemes. The guarantee fees are calculated based on the borrowers' individual risk profiles.
According to CGC, the lending rate for Enhancer Express will depend on the financial institutions, but the maximum rate would be BLR (base lending rate) plus 1.75%, on top of the fixed guarantee fee of 4.5% per annum. The guarantee cover for the scheme is at 70% by CGC.
CGC managing director Datuk Wan Azhar Wan Ahmad says: “The Enhancer Express was designed specifically to expand our SME outreach by improving on our turnaround time for loan processing and approvals. To achieve that, we have simplified the documents required by both the financial institutions and CGC.“By aligning with the industry practice, we expect to further improve on our processing and approval time, which will translate into speedier disbursement of funds to the borrowers.”
He further emphasises that the introduction of Enhancer Express is in line with the Government's initiative to support small businesses towards financial inclusion within the economy, thus enabling this critical segment to develop in tandem with other business segments of the economy.
“With attractive features that are beneficial to the financial institutions as well, we are also looking forward to their greater participation in the Enhancer Express scheme to further promote the development of the small business community,” he adds.
CGC, a subsidiary of Bank Negara, provides credit enhancement services to SMEs with inadequate collateral or without collateral and which has no track record. It has cumulatively guaranteed about RM47bil to more than 400,000 SMEs in the country.
Associated Chinese Chambers of Commerce and Industry Malaysia SMEs deputy chairman Koong Lin Loong says it is a good scheme that SMEs can consider applying for. However, the response will be based on the lending rates because the SMEs' margins are very tiny.
To him, a guarantee cover of between 70% and 80% is reasonable for the scheme. He adds that the tenure of the loan is also important and a payment period of between five to seven years is still manageable for SMEs.
“CGC should top up the RM100mil financing amount to benefit more SMEs, and the loan should be opened for all sectors and not just limited to wholesale and retail sectors. Other sectors, such as manufacturing, construction and services, are also contributing to gross domestic product significantly,” he argues.
Koong says if the qualified SMEs are entitled for a minimum loan of RM50,000, the RM100mil can only benefit 2,000 SMEs. Thus, he reckons that the total loan amount should be increased. However, he acknowledges that Enhancher Express is a good initiative.
Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee says CGC's new financing scheme is not that exciting as the net rate to be borne by the SME will still be high. “Taking into consideration the base lending rate at 6.3% plus 1.5% to 2% lending rate, and the additional CGC fixed fees of 4.5%, the overall cost of borrowing under Enhancer Express is expected to be in region of 12.3% to 12.8%.
“Any borrowing cost above 12% will be burdensome under the current business environment. Retailers now face rises in the cost of goods, and are facing constraints in passing the cost increase to consumers due to price controls and competition from hypermarkets,” he says. He adds although the fixed rate of 4.5% appear to be reduced from the maximum rate that can be charged of 5.75%, it will not benefit those SME borrowers who are good paymasters. As such, Chua contends that those SME borrowers who settle loan promptly should be given rebates to reduce the guarantee fees to between 2.5% and 3%. According to him, prior to the hike in guarantee fee rates by CGC to a maximum 5.75% in mid 2010, the maximum rate was only 3.5%. Chua says the the RM100mil allocated under this scheme is modest and is expected to benefit only 1,000 to 2,000 SMEs in the wholesale and retail sector. Nevertheless, it will be helpful as SMEs in this sector account for almost 45% of the total SMEs in the country.
He thinks that the requirement for a minimum three-year track record should be reviewed because the newer SMEs are the ones requiring help from CGC as banks are reluctant to lend to them. “CGC should play a more active nation-building role, for which it was originally set up for, by helping SMEs who lack collateral,” he says.
Reducing the CGC approval time with simplified forms is welcome, he adds. However, the association proposes further simplification of the application process by using a single form for submission to the bank and CGC as against having to fill two different forms and going through two different approving authorities.
“Merging the application process with a single approval authority will save time. Also a common standardised loan application form with a single application window will ease further the application process,” he says.
Koong ... ‘CGC should top up the RM100mil financing amount to benefit more SMEs.’
Credit Guarantee Corp Malaysia Bhd (CGC) has allocated RM100mil of financing for SMEs under a newly-launched credit guarantee scheme called Enhancer Express. The scheme is aimed at promoting the growth and development of SMEs, particularly those in the wholesale and retail sectors, and is available at financial institutions throughout the country for a limited period of three months or until loan approvals hit RM100mil, whichever comes first.
It said: “Enhancer Express offers loan ranging from RM50,000 to RM100,000. The loans are offered to small businesses that have been in operation for more than three years.”
Under the scheme, borrowers will enjoy a fixed guarantee fee of 4.5% per annum, which is relatively lower compared with a maximum fee of 5.75% for other CGC schemes. The guarantee fees are calculated based on the borrowers' individual risk profiles.
According to CGC, the lending rate for Enhancer Express will depend on the financial institutions, but the maximum rate would be BLR (base lending rate) plus 1.75%, on top of the fixed guarantee fee of 4.5% per annum. The guarantee cover for the scheme is at 70% by CGC.
CGC managing director Datuk Wan Azhar Wan Ahmad says: “The Enhancer Express was designed specifically to expand our SME outreach by improving on our turnaround time for loan processing and approvals. To achieve that, we have simplified the documents required by both the financial institutions and CGC.“By aligning with the industry practice, we expect to further improve on our processing and approval time, which will translate into speedier disbursement of funds to the borrowers.”
He further emphasises that the introduction of Enhancer Express is in line with the Government's initiative to support small businesses towards financial inclusion within the economy, thus enabling this critical segment to develop in tandem with other business segments of the economy.
“With attractive features that are beneficial to the financial institutions as well, we are also looking forward to their greater participation in the Enhancer Express scheme to further promote the development of the small business community,” he adds.
CGC, a subsidiary of Bank Negara, provides credit enhancement services to SMEs with inadequate collateral or without collateral and which has no track record. It has cumulatively guaranteed about RM47bil to more than 400,000 SMEs in the country.
Associated Chinese Chambers of Commerce and Industry Malaysia SMEs deputy chairman Koong Lin Loong says it is a good scheme that SMEs can consider applying for. However, the response will be based on the lending rates because the SMEs' margins are very tiny.
To him, a guarantee cover of between 70% and 80% is reasonable for the scheme. He adds that the tenure of the loan is also important and a payment period of between five to seven years is still manageable for SMEs.
“CGC should top up the RM100mil financing amount to benefit more SMEs, and the loan should be opened for all sectors and not just limited to wholesale and retail sectors. Other sectors, such as manufacturing, construction and services, are also contributing to gross domestic product significantly,” he argues.
Koong says if the qualified SMEs are entitled for a minimum loan of RM50,000, the RM100mil can only benefit 2,000 SMEs. Thus, he reckons that the total loan amount should be increased. However, he acknowledges that Enhancher Express is a good initiative.
Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee says CGC's new financing scheme is not that exciting as the net rate to be borne by the SME will still be high. “Taking into consideration the base lending rate at 6.3% plus 1.5% to 2% lending rate, and the additional CGC fixed fees of 4.5%, the overall cost of borrowing under Enhancer Express is expected to be in region of 12.3% to 12.8%.
“Any borrowing cost above 12% will be burdensome under the current business environment. Retailers now face rises in the cost of goods, and are facing constraints in passing the cost increase to consumers due to price controls and competition from hypermarkets,” he says. He adds although the fixed rate of 4.5% appear to be reduced from the maximum rate that can be charged of 5.75%, it will not benefit those SME borrowers who are good paymasters. As such, Chua contends that those SME borrowers who settle loan promptly should be given rebates to reduce the guarantee fees to between 2.5% and 3%. According to him, prior to the hike in guarantee fee rates by CGC to a maximum 5.75% in mid 2010, the maximum rate was only 3.5%. Chua says the the RM100mil allocated under this scheme is modest and is expected to benefit only 1,000 to 2,000 SMEs in the wholesale and retail sector. Nevertheless, it will be helpful as SMEs in this sector account for almost 45% of the total SMEs in the country.
He thinks that the requirement for a minimum three-year track record should be reviewed because the newer SMEs are the ones requiring help from CGC as banks are reluctant to lend to them. “CGC should play a more active nation-building role, for which it was originally set up for, by helping SMEs who lack collateral,” he says.
Reducing the CGC approval time with simplified forms is welcome, he adds. However, the association proposes further simplification of the application process by using a single form for submission to the bank and CGC as against having to fill two different forms and going through two different approving authorities.
“Merging the application process with a single approval authority will save time. Also a common standardised loan application form with a single application window will ease further the application process,” he says.
Thursday, December 30, 2010
Loan in Malaysia: Grameen, The World's Most Generous Bank
Loan in Malaysia: Grameen, The World's Most Generous Bank: "KUALA LUMPUR, Dec 29 (Bernama) -- Who has heard the story of a bank that has loaned over USD10 billion to the poor without collateral, ye..."
Grameen, The World's Most Generous Bank
KUALA LUMPUR, Dec 29 (Bernama) -- Who has heard the story of a bank that has loaned over USD10 billion to the poor without collateral, yet has a repayment rate of over 98 percent? For those who have yet to hear the story of Grameen Bank, the world's first micro-credit organisation, is indeed an extraordinary one.
Despite defying all the rules of conventional banking, Grameen Bank has single-handedly lifted the Bangladesh poor from poverty. More amazingly, it has even reformed social development and economy not only in the country but across the world.
The man that came up with the idea is now befittingly a Nobel Laureate. Professor Dr Muhammad Yunus, founder and Managing Director of Grameen Bank, started the bank while his country was going through famine in the 1970s. And his inspiration came one morning in 1976, while he was walking past a village to the university in which he served as an economics professor.
"I encountered a poor woman who explained to me that she earned only two cents a day from making these beautiful bamboo chairs, all because she had to borrow from a loan shark. The loan shark had demanded that she sell her products to him at a price so low that she made a profit of only two cents a day".
Muhammad said at that moment, he needed to pay the loan shark only USD1 to set her free from debt and help her out from that cycle of poverty. And so he did.
The happiness and relief in the poor woman inspired him to look for other people in the village who owed the moneylender. He found 42 people who needed a total of only USD27 to pay off the loan shark, as well as to buy raw materials for their businesses. With that amount of money they managed to become debt free and at the same time sell their products to the highest bidder, thus improving their economic status.
In doing so, he found that he had helped the first woman make a profit of USD1.25 a day, instead of only two cents. Thus began a journey for Muhammad to set up Grameen Bank which breaks the cycle of "low income, low saving and low investment".
Muhammad shared the inspiringly famous history of the bank during a luncheon in Malaysia recently, while delivering a keynote address titled "Social Business and Poverty Reduction". The special luncheon was organised by Khazanah Malaysia and the Malaysian Directors Academy (Minda).
BANK FOR THE POOR
Grameen means "rural" or "village" in Bangla. Its tagline is "Bank for the Poor". It provides micro credit to the rural poor in Bangladesh, so that they may start or finance their business and keep their income growing.
Muhammad says the bank lends tiny loans of USD200 per month to about 8.3 million borrowers all over Bangladesh and are paid back in weekly instalments. Amazingly, although the bank lends out to those living below the poverty line, it manages to recoup nearly 98 percent of its loans.
The economics professor says one basic fundamental of the banks since inception is that banks should go to the people and not the other way.
"We meet all these 8.3 million borrowers at their doorsteps. They don't have to go anywhere. We meet them every week and do banking at their doorstep.
"It's a big task. But it's the only way we can get them to do banking with us, as over 97 per cent of our borrowers are women. If you ask them to come to our office, it won't happen. The men will take over, being the mobile ones. Women usually stay home trying to settle numerous tasks in care giving", he explained.
An inevitable question arises: why does Grameen Bank tend to give out loans to women? The bank's website addresses this frequently-asked-question with the following answer:
"Women in Bangladesh are neglected by society. Through the opportunity of self-employment and the access to money, Grameen Bank helps to empower women. In addition, studies have shown that the overall output of development is greater when loans are given to women instead of men, as women are more likely to use their earnings to improve their living situation and to educate their children".
BANKING FOR EDUCATION
Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the bank own 90 percent of its shares, while the remaining 10 percent is owned by the government.
While watching the success of Grameen Bank in elevating the living standards of its borrowers, another question came to Muhammad's mind: what will become of the future of their families?
It was a natural question to ask, considering that the parents are mostly illiterate. This almost guarantees the perpetuation of the traditional cycle of poverty, ill health and other social maladies that come with it.
"We decided that we must ensure the children of all these families go to school in order to break out of that cycle and move on to a different direction", he says. So that plan was then set into motion.
Then a wonderful and unexpected thing happened. The children not only went to school, but thrived and excelled in their studies. They soon found themselves going to high schools and subsequently, colleges.
"There were thousands of them, flourishing and excelling in school. We didn't at all expect this as we thought having them go to primary school was the best achievement we could hope for from these Grameen kids. But the reality turned out to be much better than we expected", he says.
But then another problem surfaced. While parents were happy that their children were progressing academically, they soon realised that the cost of tertiary education was beyond their means.
"So then we had scores of children who were academically excellent but couldn't further their education. We debated within Grameen bank on how best to ensure that they stay on, and we came up with this solution - to introduce the education loan. Now, nobody is left behind".
As a result, there are now more than 50,000 students with Grameen education loans in medical schools and engineering schools in universities across Bangladesh.
Muhammad believes that children from wealthy families are no different than the poor ones in terms of capabilities. However, opportunity-wise, there is a big difference.
"And that makes all the difference in their lives.
"If the poor children could go to the best schools in the world and compete with their best talents, they'll be as capable and as talented as everyone else."
GRAMEEN STUDENTS IN MALAYSIA
Muhammad speaks fondly of Malaysia and his relationship with Khazanah Chief Executive Officer Tan Sri Azman Mokhtar. The former has visited Malaysia many times, even before the Grameen idea took off outside of Bangladesh.
"Malaysia is almost like my second home. In fact, the first time the Grameen idea was taken outside of Bangladesh was in Malaysia, with the first application in Penang", he revealed.
In 1994, Malaysia bestowed Muhammad the Tun Abdul Razak award in recognition of his remarkable contribution to the world. Since Grameen Bank's inception in 1976, he founded 25 companies, all of which aimed at improving the living situation of the poor.
He says on hearing his sentiments on education, Azman immediately come up with idea of providing scholarships to Grameen students to study in Malaysia.
Today, Yayasan Khazanah sponsors 10 students who are children of Grameen Bank employees in select universities in Malaysia via the Khazanah Asia Scholarship. The foundation also continues to annually select five students from families that are served by the Grameen Bank to be recipients of the scholarship.
"The students that get this fantastic opportunity are from families with very low income", explains Muhammad.
He describes the programme as one that binds both Grameen and Khazanah very closely and says he is happy with the partnership.
Today, the bank is the source of ideas and models for many institutions in the field of micro-credit. But in Bangladesh, it represents a whole lot more.
"It is the future of the second generation of borrowers", says Muhammad.
"Of where they can go, and what they can be. They no longer have to go back to age-old cycle of poverty. They can now take it forward".
-- BERNAMA
Eight cooperatives suspended for failure to meet lending guidelines
KUALA LUMPUR: Cooperative Commission of Malaysia (CCM) is coming down hard on some cooperatives over the high interest rates charged on loans taken by civil servants.
Eight cooperatives have to-date been suspended temporarily for failure to comply with CCM's guidelines.
A CCM spokesperson told StarBiz that the suspension would be lifted once the cooperatives involved were able to comply with the guidelines and restructure their lending methods.
Dr Yeah Kim Leng says the impact on banks’ revenue will not likely to be sizeable.
The suspension of some of the eight cooperatives first came into effect on Dec 1.
The spokesperson said as the members of the eight cooperatives had already had their loans approved, only those that failed to comply with the guidelines in the future would not be successful in their loan applications.
CCM recently issued more directives to cooperatives and banks that contravened its guidelines, telling them to discontinue lending or make monthly salary deductions on loans taken by civil servants.
The spokesperson added that the directives were meant only for loans issued by the cooperatives on Dec 1 and Dec 15.
Currently, National Co-operatives Organisation of Malaysia (Angkasa) is the cooperative that has been mandated by the Finance Ministry to make salary deductions on loans taken by Government servants.
To date, there are 577 cooperatives involved in lending activities, of which 32 use banks for such purposes. Of the 32, eight were suspended for failure to comply with CCM guidelines.
The eight are Koperasi Bersatu Tenaga Malaysia Bhd, Koperasi Pendidikan Islam Malaysia Bhd, Koperasi Wawasan Pekerja-Pekerja Bhd, Koperasi Kobaru Bhd, Koperasi Pendidikan Usahawan Bhd, Koperasi Putri Terbilang Malaysia Bhd, Koperasi Wawasan Malaysia Bhd and Koperasi Serbaguna Pekerja-Pekerja Malaysia Bhd.
Industry observers believe the move by CCM would have minimal impact on civil servants' refinancing ability and household debt.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said the move would not affect Government servants' refinancing ability.
“It will not exacerbate the current household debt level as the banks and cooperatives will have to adopt a more cautious approach now that deductions at the income source is no longer available, thus increasing the risk of delinquency,'' he said.
On the impact on banks' revenue, Yeah said it was not likely to be sizeable as the cooperative market was not large and that alternative arrangements, such as deductions from bank accounts, could still be made as long as the borrower was credit-worthy.
Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings, Anandakumar Jegarasasingam, concurred that the move was not likely to have any immediate impact on Government servants' refinancing ability.
“In the absence of direct debit for repayments, it is likely that borrowers could be tempted to stretch the time taken for repayments and perhaps, at occasions, even default on repayments.
“In the near term, the lack of direct debit facility would make collections harder for cooperatives and hence lower their appetite for such lending. Over the long term, the viability of these cooperatives' societies itself would be tested,'' he noted.
Anandakumar said the revenue impact to the banking sector was likely to be negligible as most borrowers would eventually approach the banking sector for credit facilities.
“The most significant risk for the banking sector would be loan defaults by cooperatives that borrow from the banks. However, at least in the near term, a massive bank loan default by the cooperative societies appears fairly unlikely,'' he noted.
Consumer Association of Penang president S.M. Mohamed Idris said he supported the move by CCM to disallow some cooperatives to carry out direct debit and deductions on civil servants' salaries.
“We have written to the Finance Ministry in March this year, asking for a limit on the number of salary deductions carried out by Angkasa to ensure civil servants have sufficient take-home pay to live on.
“The problem is that civil servants have too many debts as Angkasa makes salary deductions so easy. Salary deductions are only needed for the purchases of houses and cars and these are already carried out by the Public Services Department. In fact, we have asked that Angkasa be shut down as it is nothing more than a debt collector,'' Mohamed Idris added.
Federation of Malaysian Consumer Associations secretary-general Muhammad Sha'ani Abdullah said Angkasa had no right to claim monopoly over the financial standing of Government servants or cooperative members to reap profit.
“Even airlines and Bursa Malaysia have eliminated commission payment to travel agents as well as remisiers. In such a situation, any intermediary body must stop claiming to easy ride for their financial gains.
“Angkasa, as an umbrella body, should provide value-added and other services innovatively that can benefit its member cooperatives,” he noted.
Eight cooperatives have to-date been suspended temporarily for failure to comply with CCM's guidelines.
A CCM spokesperson told StarBiz that the suspension would be lifted once the cooperatives involved were able to comply with the guidelines and restructure their lending methods.
Dr Yeah Kim Leng says the impact on banks’ revenue will not likely to be sizeable.
The suspension of some of the eight cooperatives first came into effect on Dec 1.
The spokesperson said as the members of the eight cooperatives had already had their loans approved, only those that failed to comply with the guidelines in the future would not be successful in their loan applications.
CCM recently issued more directives to cooperatives and banks that contravened its guidelines, telling them to discontinue lending or make monthly salary deductions on loans taken by civil servants.
The spokesperson added that the directives were meant only for loans issued by the cooperatives on Dec 1 and Dec 15.
Currently, National Co-operatives Organisation of Malaysia (Angkasa) is the cooperative that has been mandated by the Finance Ministry to make salary deductions on loans taken by Government servants.
To date, there are 577 cooperatives involved in lending activities, of which 32 use banks for such purposes. Of the 32, eight were suspended for failure to comply with CCM guidelines.
The eight are Koperasi Bersatu Tenaga Malaysia Bhd, Koperasi Pendidikan Islam Malaysia Bhd, Koperasi Wawasan Pekerja-Pekerja Bhd, Koperasi Kobaru Bhd, Koperasi Pendidikan Usahawan Bhd, Koperasi Putri Terbilang Malaysia Bhd, Koperasi Wawasan Malaysia Bhd and Koperasi Serbaguna Pekerja-Pekerja Malaysia Bhd.
Industry observers believe the move by CCM would have minimal impact on civil servants' refinancing ability and household debt.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said the move would not affect Government servants' refinancing ability.
“It will not exacerbate the current household debt level as the banks and cooperatives will have to adopt a more cautious approach now that deductions at the income source is no longer available, thus increasing the risk of delinquency,'' he said.
On the impact on banks' revenue, Yeah said it was not likely to be sizeable as the cooperative market was not large and that alternative arrangements, such as deductions from bank accounts, could still be made as long as the borrower was credit-worthy.
Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings, Anandakumar Jegarasasingam, concurred that the move was not likely to have any immediate impact on Government servants' refinancing ability.
“In the absence of direct debit for repayments, it is likely that borrowers could be tempted to stretch the time taken for repayments and perhaps, at occasions, even default on repayments.
“In the near term, the lack of direct debit facility would make collections harder for cooperatives and hence lower their appetite for such lending. Over the long term, the viability of these cooperatives' societies itself would be tested,'' he noted.
Anandakumar said the revenue impact to the banking sector was likely to be negligible as most borrowers would eventually approach the banking sector for credit facilities.
“The most significant risk for the banking sector would be loan defaults by cooperatives that borrow from the banks. However, at least in the near term, a massive bank loan default by the cooperative societies appears fairly unlikely,'' he noted.
Consumer Association of Penang president S.M. Mohamed Idris said he supported the move by CCM to disallow some cooperatives to carry out direct debit and deductions on civil servants' salaries.
“We have written to the Finance Ministry in March this year, asking for a limit on the number of salary deductions carried out by Angkasa to ensure civil servants have sufficient take-home pay to live on.
“The problem is that civil servants have too many debts as Angkasa makes salary deductions so easy. Salary deductions are only needed for the purchases of houses and cars and these are already carried out by the Public Services Department. In fact, we have asked that Angkasa be shut down as it is nothing more than a debt collector,'' Mohamed Idris added.
Federation of Malaysian Consumer Associations secretary-general Muhammad Sha'ani Abdullah said Angkasa had no right to claim monopoly over the financial standing of Government servants or cooperative members to reap profit.
“Even airlines and Bursa Malaysia have eliminated commission payment to travel agents as well as remisiers. In such a situation, any intermediary body must stop claiming to easy ride for their financial gains.
“Angkasa, as an umbrella body, should provide value-added and other services innovatively that can benefit its member cooperatives,” he noted.
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