Personal finance lending grows

KUALA LUMPUR:  Personal financing expanded by 30% last year, the fastest growth over the last three years, mainly due to lending by nonbank financial institutions (NBFI), said BNM in its 2012 Financial Stability and Payment Systems report yesterday.

Although the majority of borrowers were those earning less than RM3,000 per month, BNM said the credit risk had been well mitigated as about 80% of the borrowers have stable jobs and a regular salary with loan repayments deducted automatically at source.

“These developments are nonetheless being closely monitored particularly in light of recent innovations observed on product offerings by the NBFI,” it said in a statement released in conjunction with its 2012
BNM annual report.

NBFIs accounted for 12% of total credit to the nation’s household sector. But collectively, these institutions provided 57% of personal financing credit to households and such credit has been increasing significantly in recent years.

Last year, overall credit on all facilities extended by the three largest NBFIs expanded at a faster rate of 23.1%. The strong credit expansion was primarily driven by the personal financing activities which grew 30%
last year.

In 2010, personal financing grew 28.7% while in 2011 it recorded a growth of 25.1%. According to the statement, as at the end of last year, the banking system’s gross impaired loans ratio improved to 1.5% for the household portfolio, 2.9% for large businesses and 3% for small and medium enterprises.

“Following the implementation of the Guidelines on Responsible Financing during the year, banks are also more thorough in assessing borrower affordability with more prudent buffers allocated in the computation of debt service ratios, improved processes and documentation in income verification,” said BNM in its report.

The bank’s risk-weighted capital ratio and core capital ratio stood at 15.2% and 13.4% as at end of last year with financial buffers in excess of RM80 billion.

The banking system’s total capital ratio for financial institution was at 14.5% as at end of January this year.
Domestic implementation of the Basel III global regulatory reform package will significantly raise the level and quality of banks’regulatory capital starting January this year until December 2018.

This article first appeared in The Edge Financial Daily, on March 21, 2013



Business & Markets 2013
Written by Zatil Husna of theedgemalaysia.com
Thursday, 21 March 2013