Wednesday, 10 July 2013

New rules won't hurt consumer financing segment

The article was first published on Business Times.

'New rules won't hurt consumer financing segment'

Muhammed Ahmad Hamdan

BANK Islam Malaysia Bhd does not see the new regulation on household debts introduced by Bank Negara Malaysia recently as having a negative impact on its consumer financing segment.

Business development director Khairul Kamarudin said Bank Islam is, in fact, optimistic of achieving around a 20 per cent growth in its consumer financing segment this year.

"We welcome the new regulation by Bank Negara. We don't see it affecting our consumer financing segment as we have been practising similar guidelines since two years ago," Khairul said after launching Bank Islam's new Visa platinum credit card here yesterday.

Bank Negara last Friday announced that commercial banks must now set 10 years as maximum tenure for personal loan financing and 35 years for property loans.

"Ninety five per cent of our property loan borrowers has tenures of below 35 years.

"Our personal loan segment only offers a maximum tenure of 15 years, compared to other banks that offer personal loan tenures of more than 20 years," Khairul said.

Housing loan segment accounts for 50 per cent of Bank Islam's consumer financing portfolio, while personal loan is 30 per cent.

"We believe that Bank Islam has strong product distribution channels which will support the growth of our consumer financing segment," he added.

The new rules set by BNM were to curb excessive household debts and to reinforce responsible lending practices by key credit providers.

This is in light of the country's increasing household debts - averaging at an annual rate of 12 per cent over the last five years.

Khairul said Bank Islam expects to secure between 25,000 and 30,000 new subscribers for its new Visa platinum credit card by year-end.

"The target is relatively low as it is based on the industry's performance. Nevertheless, we will run various campaigns and initiatives to attract new subscribers for the Visa platinum credit card, including those who have already subscribed from other banks."

Currently, Bank Islam has a total of 138,000 active credit card members, including 2,000 Mastercard platinum credit card holders.

Its consumer card segment, which comprises 1.6 million cards, constitutes about five per cent of the bank's total consumer financing portfolio.
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