7 July 2021

The announcement that all bank borrowers will be eligible for an automatic loan repayment moratorium was welcomed. However, just like the first MCO, borrowers of non-bank institutions are once again left in a lurch, without any possible relief in sight. This is where the government needs to impose a full moratorium policy on all loan repayments, not just banks during this full lockdown.

Examples of monthly payments which are not bank loans are of hire purchases from non-bank institutions, items bought on store credit (such as phones, furniture and appliances), licensed money lender loans, lease payments and pawnshop repayments among others.

In fact, the borrowers of these facilities are often the poorer segments of society in far greater need of help during this crisis. The government needs to also provide repayment moratorium for these to give them relief, as many of them are in this situation not because of their foolish actions, but because of the MCO implemented that has prevented them from earning a living.

As part of the framework to make this possible, the government should absorb a portion of the interest rates imposed, or at the very least impose a cap for lending institutions to continue to charge interest on the outstanding principal amount during the moratorium period.  

These non-bank lenders typically charge a much higher rate of interest of up to 18% per annum and such high interest rates should not be applicable during the moratorium.

The government should cap the interest at 5% or 6%. Capping the interest makes the moratorium of value to the borrower, and the borrowers who fall in this category are typically of those who cannot qualify for bank loans. If interest is not capped, the principal outstanding amount will balloon up very quickly, and the whole point of giving the public this moratorium would be pointless, leaving them in more miser.

In return for the lower interest rate during the moratorium, the government should inject low interest soft loans to financial institutions to enable sufficient cash flow for all these lending institutions to enable them to provide this moratorium. This not only protects the individuals, but protects these legal lenders and also protects the government, as these soft loans will eventually be repaid with fair interest. Protecting these lenders by enlarge then also protects the rakyat who have non-bank loans.

We should also remember that the government needs to implement policy in fairness to all of society. It’s not good enough to just provide relief by ending repayment for the rich and middle class, but also to the poorest in our society who use the other financial institutions licensed by the government.

With such a policy, borrowers who are still able to pay their loans are likely to opt out of the moratorium and continue to make their regular monthly repayments, to avoid accruing additional interest, while borrowers who are suffering an income crunch will have relief from monthly repayments for now. These borrowers can resume paying their loans when their financial situation improves with a fair payment without the ballooned amount with sky high interest rates at 18%. While they may not be taking out new loans while facing the income crunch, the least the government can do is to provide them relief for their existing loans. These countless MCO have put people in impossible situations and it’s time to stand up for those who can’t.

The government has repeated the same process of MCO countless times yet expecting results that were different than before, wise men have called it the fool’s game, the least to do is to lend a helping hand to those in financial ruin due to the MCO measures. The moratorium is a temporary relief measure that allows families to concentrate what is left of their savings or minimal earnings on food and other essentials, while protecting them from creditors and even bankruptcy. It will also save many of them from being forced to turn to illegal money lenders or loan sharks which could be detrimental.

This is the key responsibility of the government in this financial crisis brought upon by the mismanagement of the pandemic. I strongly urge the government to impose a moratorium on non-bank loans immediately. We have lost enough lives due to financial strain, let’s ease their burden now.

RAJIV RISHYAKARAN,

ADUN N.34 BUKIT GASING