This press release is made in response to some unfavourable comments made by Maybank CEO, Datuk Seri Abdul Wahid Omar in The Star, Friday 30 September 2011 (front page and page 7), in relation to "personal loans given out by non-bank entitites" which in our view are misleading to the public and convey a negative picture of Malaysia Building Society Berhad, the oldest local financial institution in the country having served Malaysians for over sixty years.
Dato' Ahmad Zaini, CEO of MBSB said that, "MBSB has made an impact in the industry in mid-2009 when it re-entered the market and provided Personal Financing-i to the government servants at the lowest rate of 4.90% p.a. This was markedly lower than most rates then which were above 7.50% p.a. It was also significantly lower than another source of financing which is credit card at between 13.5% - 17.5% p.a. or its cash advance withdrawals at the maximum of 18%. MBSB believes that the rate offered is the true reflection of the level of risks undertaken by MBSB as repayment is collected via salary deduction. However, in evaluating the creditworthy of a government servant, MBSB does adopt best industry practices and does not "simply disburse personal loans based solely on salary deductions".
He added that," A government servant's PF-i loan amount is arrived at by ensuring that the total deductions (including PF-i installment) do not exceed 60% of his income, hence leaving him with a balance of 40% net disposable income. As government servants would obtain their vehicle hire purchase and housing finance from the government due to the lower rates offered in relation to those offered by the banks, these installments which appear on their salary slips have been factored in as well. Hence, the governments servants do take home sufficient pay to cover their living expenses".
According to Ahmad Zaini, It is also imperative to make known that the behavior of the market is to refinance their PF-i facility. The customers would normally refinance their personal financing beginning the 5th year onwards. This is due to new favourable rates being offered and a higher financing amount eligibility being applicable as a result of salary increments over the years. As such, seventy percent (70%) of the PF-i business is generated from refinancing. While personal loans might have increased over time, acquisition of new customers is not the major contributing factor but increase in salary of existing borrowers. This means that the growth in personal loans is in tandem with the government servants' affordability.
In addition, as opposed to credit card applications which only require submission of copies of existing credit card and identity card with no information of present salary, MBSB requires a list of documents that is similar to home mortgage application.
Ahmad Zaini further emphasize, MBSB, in a smart collaboration with SAS, has also developed a scoring model using the Rapid Predictive Modeling ("RPM") to assess quality of new credits. With this, MBSB has the ability to predict better quality in credits, find a good balance between risk and potential rewards and concurrently, able to understand the risk level of monthly approved personal financing better because the scorecard quantifies risk. SAS is a leader in business analytics software and services and is the largest independent vendor in the business intelligence market.
To summarize, the concerns raised on personal financing offered by MBSB to this captive market are overplayed and do not reflect the actual situation. Government servants are very much aware and disciplined of their financing needs and borrowings and the NPL which is below 1.0% is certainly a reflection of that. MBSB is a Government-linked entity and it is only just that it plays its role effectively as a responsible lender to the Government servants.