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| KUALA LUMPUR: Bank Negara Malaysia's updated policy document on personal financing could reshape the country's lending landscape when it takes effect in 2027.
Its success, however, will hinge on whether safeguards like financial education are designed to support borrowers, rather than becoming bureaucratic hurdles that discourage responsible borrowing, according to industry observers.
While banks have largely welcomed the new policy as a step toward better consumer outcomes, many note that details of the financial education module - such as its content, delivery and cost structure - remain unclear.
Under the revised rules, the central bank will cap loan tenures, prohibit flat-rate interest methods and mandate financial education for high-value loans.
Borrowers seeking more than RM100,000 must complete a financial education module conducted either by lenders or the Agensi Kaunseling dan Pengurusan Kredit (AKPK), while banks are encouraged to advise higher-risk applicants to do the same before applying.
Other measures include limiting repayment periods for unsecured personal financing to 10 years - even for loans secured by property for personal use - and prohibiting the Rule of 78.
Buy Now, Pay Later (BNPL) schemes will also come under stricter scrutiny, requiring affordability checks for facilities above RM1,500 and compliance with Shariah principles. Bankrupt individuals will be barred from access.
Consumer groups, meanwhile, lauded the initiative, particularly its emphasis on financial education for large personal loans, calling it an important tool to promote responsible borrowing.
Malaysia Consumers Movement legal advisor Sukhdave Singh called it "a positive step," but stressed that financial discipline remains essential.
"A mere struggle to make ends meet or to satisfy wants in life should never be a factor to seek a personal loan," he told Business Times.
He cited Department of Insolvency data showing 33,388 bankruptcy cases between 2019 and February 2023, nearly half of which were linked to personal financing.
Sukhdave urged banks to tighten eligibility standards, warning that without stronger safeguards, borrowers risk falling into long-term debt traps.
He added that people will understand and appreciate the perils of being in debt, especially when facing bankruptcy, which can have a lasting impact on an individual's financial standing in a lifespan.
Sukhdave said the policy is largely a post-credit approval measure and should not impede access to loans for eligible borrowers.
The Federation of Malaysian Consumers Associations (FOMCA) echoed the positive sentiment, saying financial education could help high-risk borrowers better understand repayment burdens and default risks.
Chief executive officer Saravanan Thambirajah said that with effective financial education, borrowers will be more informed about interest costs, repayment schedules and the long-term impact on their financial well-being.
It may also prevent consumers from falling victim to scams or investing borrowed money into unprofitable ventures, he said.
Saravanan stressed, however, that the modules must be practical, easy to understand and time-efficient.
"They should not become an exhausting process but instead give consumers confidence and knowledge to make responsible decisions. What is critical is that the programme should be designed in a way that encourages borrowers, not discourages them.
"If the process is too difficult or time-consuming, there is a real risk that consumers may be deterred from borrowing from licensed financial institutions and may instead turn to illegal moneylenders or 'Ah Long'. This would put them in an even more vulnerable situation," he said. |
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