Sunday, April 19, 2009

Bank Negara: Ensuring Access To Financing

I think the Governor of Negara, Tan Sri Dr Zeti Akhtar Aziz got it right when she said that the main issue now (in the face of the global economic crisis) is NOT the cost of borrowing but the issue of access to financing.

The various moves by Bank Negara lately are to be applauded and I believe will have a great impact on cushioning the effect of the crisis on our economy and possibly even help early recovery. One noticeable move by Bank Negara was the lowering of the BLR, at a historic low. This has greatly assisted consumers in paying lower interest rates on things such as housing loan. With this savings in interest rate, the ordinary citizen now has more disposal income. Apart from reducing his burden, he may now divert his extra income to other services and products, thereby increasing demand which is good for economic recovery. I notice that Banks like Standard Chartered are among the early ones to automatically respond to the reduced BLR by reducing the interest rates in their housing loan statements.

Good start Zeti! I do hope however the private banks understand Zeti's desire to ensure greater access to financing by actually ensuring greater access to financing. The private Banks need to revise their so-called check lists (which has never served them well anyway, judging from the kind of "losses" they seem to be reporting") and actually learn to understand the business of their respective potential clients.

I have seen potential businesses never getting off the ground because the initial "clever" young assessing officer does not understand the business of the respective client and does not support the loan application. Even some board members, who supposedly sit in to decide on a loan application are not well versed with the business that is applying for the loan. This is counter productive to the creation of a productive and vibrant economy. Private Banks have to learn to evaluate businesses on a case by case basis and not use one standard operating procedure for all.

Private Banks also have to play a major active role in strengthening the economy and not be merely profit driven as they conventionally are. After all, they are an oligopoly and the consumer really does not have much choice in the terms and conditions of the loan they offer.

Private Banks must learn to balance their profit motive with the more important objective of nation building. Creativity and wise courage is needed.

SMEs are important as fundamental bases of the economy and this is one sector that the Banks must help develop. Surely the "qualifications" of clients of this nature should be different from the multi-biilion dollar borrowers. I really wish Banks will wake up and form new relationships with SME borrowers instead of merely the conventional lender-borrower relationship. However, I often find many textbook bankers who lack total creativity and common sense and consequently, many SMEs are unable to take off.

Time taken in the approval and assessment of a loan application is of the essence. This means Banks should not take too long to assess a loan.

Credit cards should follow suit with interest rate adjustments so that they remain not only market sensitive but act in the national interest in helping out the economy. Credit card companies should reassess their relationship and approach with their customers more positively and creatively. We should all have learnt something from the financial crisis.

I cannot help noticing how a political leadership change seem to bring out the best in institutions and professionals within the GOvernment. I hope this "new found attitude" will eventually spread to the civil service and other sectors of the Government.


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