Beware the risks of easy access to loans

  • Letters
  • Friday, 05 Jul 2019

REFERRING to the letter “Caution on loan approval” (The Star, July 4), I agree with the author, Johnny Tsen, and support his views on why commercial banks should not grant greater loan access to first-time housebuyers and SMEs.

Tsen, who identified himself as a retired bank executive and worked in the industry for 33 years, thinks that Finance Minister Lim Guan Eng is attempting to tamper with the self-correcting mechanism, or the so-called “Adam Smith’s Invisible Hand” that underpins a free market economy.

Personally, I am very disappointed with the Finance Minister for issuing such a directive to banks to ease their lending policies. I expect more wisdom from a Cabinet minister and I urge Lim not to put the economy of the country at risk of a major national sub-prime crisis that could wreck the livelihood of millions of people in the country. Remember the greed of bank officers in the United States who approved sub-prime loans that caused the financial crisis from 2007 to 2010, resulting in people losing jobs and many families being made homeless? Can anyone guarantee that a similar crisis would never happen in Malaysia?

Our country was spared the crisis not because we do not have greedy bank officers and unscrupulous borrowers but because we were careful in not exposing ourselves to the various types of dubious investments that were allowed in the US at that time.

Greed would lead to abuse of such a directive because when there is money to be made, the loan approvers and borrowers would jump on the opportunity. As the saying goes, “give the devil an inch and he becomes a ruler”.

The Finance Ministry should instead focus on the increasing household debt to GDP ratio, which stood at 83% last year and is alarming by global standards. Whether with good intentions or under whatever circumstances, the government must be careful not to issue directives that will destroy the nation. I am sure nobody wants to live in hardship and suffering.

The government must also put capable ministers in the Cabinet to hold responsible and important positions. Its leaders must serve the nation with integrity and competently, and not make directives that would do more harm than good to the nation and people.

To be fair to the nation with the current economic headwinds, her leaders must make sound and wise decisions at all times or be replaced. It is inexcusable that a minister cannot perform his or her roles and responsibilities competently. Our top leaders cannot afford to make any blunders because the country’s economy is now in grave peril.


Seri Kembangan, Selangor

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