Government, Banks Must Provide Further Assistance On Loan Repayment
In a recent Q&A session between BusinessToday and Anbound Research Centre (Malaysia), we asked David Leow, Research Analyst, on his thoughts on Malaysia’s direction with the moratorium and what the banks and the government can do to help struggling Malaysians who are cash strapped.
According to David, given the current situation, it is appropriate to impose the moratorium; otherwise, the risk of more businesses and individuals affected by the pandemic, particularly SMEs, going bankrupt cannot be ruled out. Many parts of Malaysia are still under strict movement controls a year and a half after the pandemic struck, and many businesses and individuals are still severely impacted.
“Without the moratorium, more businesses and people in the bottom half of the M40 and B40 are expected to go bankrupt in the future,” says David.
Additionally, whether or not businesses and individuals are prepared to repay loans when the moratorium expires next year will be heavily influenced by factors such as the pandemic, employment, and the economy.
“According to ANBOUND researchers, there is still room for improvement in the overall framework and direction of social development, and even a redefinition of innovation is required to form a macroeconomic stabilisation mechanism. Nonetheless, as an emerging market country, Malaysia’s economic prospects and prosperity are worth anticipating, despite a number of development challenges,” he adds.
In general, there are several measures in place to prevent non-performing loans. Banks, for example, could detect NPLs early. Instead of relying solely on lagging indicators such as past due payments, banks should place a greater emphasis on leading indicators such as increased use of overdrafts, seeking new credit lines, late information supply, and so on.
“Banks can also diversify or hedge their exposure to rising NPLs by entering into joint-venture risk-sharing agreements with third parties. Furthermore, banks should improve communication with their customers in order to better understand their financial situation and needs,” David comments.
David concludes by saying how the government will continue to assist those who may face cash flow problems next year will be determined by how the economy performs in the coming year.
“If necessary, the government can consider extending the moratorium or extending it to businesses and individuals in need.”