Malaysia risks sub-prime crisis if blacklisted PTPTN borrowers allowed to buy homes

The federal govt’s proposed measure creates a dangerous mentality, according to expert

by NUR HAZIQAH A MALEK/ pic by MUHD AMIN NAHARUL

THE decision to allow blacklisted National Higher Education Fund Corp (PTPTN) borrowers to buy homes has received mixed reactions, with certain quarters claiming that these former students should settle their debts first before venturing into big-ticket items.

Others agree with the government’s move to allow these students, who defaulted on their study loan to the state-owned fund, to buy their first home.

Institute for Democracy and Economic Affairs senior fellow Dr Carmelo Ferlito said the proposed leniency for these blacklisted borrowers is not a good move by the government.

“There is a lot of talk about financial literacy in Malaysia and the issue of household debt related to financial instability.

“The proposed measure, first of all, creates a dangerous mentality; it is like saying it does not really matter how much debt you get into if it is for buying a house,” he told The Malaysian Reserve (TMR).

He added that the economy is evolving through fluctuations, and when the economy slides downwards, those who are especially vulnerable will bear the brunt of the situation.

“Every individual situation will be different. Surely, for those having trouble paying PTPTN, I do not see any help in incentivising more credit.

“The message the government should send is that home ownership can come over time by hard work and saving, not by easy credit,” he said.

Ferlito said the clemency sends a dangerous message which can move the nation to a subprime-type situation. “Young graduates should focus on working hard and increasing their productivity to reach — eventually, one day — home ownership, which is a long-term project and not something ‘ready-to-eat’.

“To expose the country’s household debt also makes the economy more fragile and unstable in the event of a crisis,” he said, adding that the move could relate to the increase of affordable homes planned in the medium term as well.

“It might help the (property) market in the beginning, but what if the borrowers become unable to honour the loan?” he said.

Meanwhile, Knight Frank Malaysia Sdn Bhd MD Sarkunan Subramanium said the study loan is only a small portion of an individual’s borrowings.

“PTPTN is only a small loan, but banks will be wary of the ones who don’t pay their loans,” he told TMR.

The government’s proposal had created a storm among social media users too.

“I wonder, PTPTN’s monthly repayment is less than RM200 and yet some can’t pay, how do they plan to pay for a home monthly which can go between RM800 and RM1,500?” Twitter user @AzriFathurahman posted.

Other Twitter users, who responded to TMR’s tweet regarding the news, also addressed the inability of these borrowers to pay their loans.

Some social media users highlighted that the proposed move will only help to increase debts, while another opined that it would encourage borrowers to default on their home loans.

On Wednesday, Housing and Local Government Minister Zuraida Kamaruddin said borrowers would be eligible for any housing loans and will be removed from the Central Credit Reference Information System. However, they may not buy cars or other big-ticket items.

The move will be included in the Youth Housing Policy, which is expected to be released in October this year.

In addition to allowing borrowers to purchase a home, 10,000 units of affordable homes is set to be built in Bandar Malaysia and 30% of them would be allocated to youths.