NBFIs remain largest provider of personal financing

PETALING JAYA: Non-bank financial institutions (NBFIs) remain the largest provider of personal financing with almost 60% of total personal financing for households, Bank Negara Malaysia (BNM) said in its annual Financial Stability and Payment Systems report.
It said however, that new personal financing facilities approved by NBFIs declined both in number (-14%) and value (31.3%) terms.
"The excessively high levels of personal financing extended in earlier periods (of up to RM300,000 under a single facility) have almost disappeared from the NBFI market as a result of more robust affordability assessments, aligned to the central bank's responsible financing standards. The average financing amount disbursed by NBFIs correspondingly declined to less than RM30,000 per facility," it said.
BNM said the moderate expansion in financing for personal use was in line with the moderate trend of aggregate household debt over the past two years.
Household debt grew by 9.9% to RM940.4 billion as at end 2014. About 45.7% of household debt was for residential properties, 16.6% for hire purchase and roughly 20% was for personal financing and credit cards.
The amount of new household debt assumed was RM3.8 billion lower in 2014 than in the previous year.
BNM said the borrowings continue to be heavily concentrated in financing secured by property and financial assets, thus reducing the net exposure to household in the event of stress.
It said new unsecured borrowing accounted for a substantially lower share of total new household debt for the year (2014: 8.6%, 2013: 16.5%).
New household borrowings are also of higher quality, BNM said. About 80% of new loans (based on the number of new loan accounts) have a debt service ratio (DSR) for all outstanding debts of less than 60%, while half have a DSR of less than 40%.
For borrowers with RM3,000 monthly earnings and below, the share of new loans (based on the number of new loan accounts) with a DSR of less than 60% is higher at 91.8%, while the share of new loans with a DSR of less than 40% remained stable at about 58%.
BNM said this accords households with greater buffers and flexibility to weather financial challenges.
"Reflecting these developments as well as the stronger performance of the economy in 2014, the ratio of household debt-to-gross domestic product (GDP) rose marginally, compared with earlier years, to 87.9%," it said.
BNM added however, that at the aggregate level, household financial buffers remain strong.
The ratio of household financial asset-to-debt has consistently been maintained at more than two times over the past three years as the pace of growth in household debt was brought more in line with the growth in household financial assets.