Bank Negara should extend guidelines to non-bank lenders

To ensure overall market sustainability, Bank Negara Malaysia's responsible lending guidelines should also cover non-bank financial service providers, said Ronnie Lim, Executive Vice President and Head of Consumer Banking at Alliance Bank Malaysia Bhd.

"The objective of (Bank Negara's) Guidelines on Responsible Finance is to promote a sustainable retail financing market by requiring financial services providers to engage in prudent, responsible and transparent practices."

"Clear expectations are set on the financial services providers to help consumers make informed borrowing decisions," he said in a report by Business Times Malaysia.

At present, consumer financing companies like AEON Credit Service are not under the purview of Bank Negara's responsible lending guidelines, since these companies are not covered by the Banking and Financial Institutions Act.

Consumer financing firms obtain their money lending licences from the Housing and Local GovernmentMinistry, as stipulated under the Moneylenders Act 1951.

Although Lim considers the guidelines as temporary turbulences, he explained that these measures ensure a more sustainable development not only within the financial industry, but in the country'seconomy as well.

"It's a good thing to do to protect banks and consumers. I look forward to more guidelines that are good for long-term growth of the country."

Lim also noted that the segments mostly affected by the guidelines are the personal loans and credit cards.

"The impact is not really on the hire purchase and housing loans. People still need to buy cars and affordable houses."

"Although the approvals are declining, the demand (for car and housing loans) is still up," added Lim.