KUALA LUMPUR, Sept 23 — Consumer credit legislation will be introduced to protect businesses and households that deal with financial intermediaries, says Bank Negara Malaysia Governor Datuk Muhammad Ibrahim.
In announcing this, he said the central bank was currently working with the government to formulate the legislation.
“The financial intermediaries are not licenced financial institutions,” he told participants of the one-day ‘Future Finance Conference 2016’, held here today.
Muhammad said appropriate arrangements were also being considered to drive and support the development of alternative financing vehicles to serve the financing needs of small businesses.
He added that the financial sector continued to assume its intermediary role in financing the economy, in particular small and medium enterprises (SMEs).
As at end-July, financing by the banking system to businesses and SMEs stood at RM533 billion, growing at an average annual rate of 9.9 per cent between 2011 and 2015.
Banks remained the largest lenders to SMEs and this relations would likely remain, thanks to the high financing approval rate of close to 80 per cent, he added.
The Governor also said niche institutions such as factoring and leasing companies, angel funds and alternative credit providers of various industries such as motor, housing and consumer retail sector could play an important role in providing consumers with greater funding choices.
“There, however, exist a high bar and strict preconditions that must be met before this funding model can take root and flourish.
“The presence of a strong regulator, a sound and resilient supervisory and regulatory framework, as well as, robust consumer protection statute are some of the critical foundation required to ensure these institutions ‘clear the hurdle’ to become a viable source or financing and benefit our economy.
“The ultimate aim remains in protecting consumers’ interests, preventing predatory practises, managing debt levels, including high household debt and preventing borrowers from falling into financial hardship due to inability to service debt,” Muhammad said.
The conference, hosted by the central bank, gathered industry leaders to discuss opportunities and develop substantive ideas for the development of the financial sector relevant to Malaysia’s future.
It was convened at the midpoint of the ten-year Financial Sector Blueprint to reflect progress and reaffirm commitments for continued development of the financial sector. — Bernama