LETTER | Think long-term when it comes to loan moratoriums

LETTER I am a self-employed businessman with a brick-and-mortar retail store in the Klang Valley. In the past year or so, I have had to deal with the economic brunt of the lockdown. Business has not been good but Alhamdulillah, I have managed to keep my family afloat, thanks to self-prudent measures.

Much has been said about the government’s unpopular move to not institute a blanket moratorium.

Those who are up in arms accused the government of not caring for the welfare of the people. I am surprised that many are not able to see beyond having to not repay your loans for a couple of months. Yes, that puts extra cash in your pockets now, but you still have to repay your loans at the end of the day.

In fact, I myself took this temporary relief when my business could not operate during MCO 1.0. The six-month moratorium was a welcome reprieve, although I had to pay a little bit more given the extension to my loan tenure.

After MCO 1.0, I quickly adapted and applied for the government’s Automation & Digitalisation Facility (ADF) to take my business online. Revenue picked up, albeit slowly at first, and thankfully by the time the blanket moratorium ended in September 2020, my business had stabilised and I managed to continue my loan obligations.

For those not facing the predicament above, why bother with a loan moratorium in the first place?

My analysis of the issue points to the pervading mindset among Malaysians of instant gratification.

Malaysians are very happy to see money in the short term. It is why moves like a blanket moratorium, i-Sinar withdrawals and BPR/BPN cash assistances are incredibly popular.

This is a dangerous mindset to have. Call me old-fashioned but I am a firm believer of working hard, building wealth and settling my debts – and then enjoying quality life in my golden years.

My mindset of delayed gratification is what has moulded me into a successful businessman today. I faced the 2008 global financial crisis and now this Covid-19 pandemic – both of which dealt a heavy blow to my business operations. Both times, what helped was my discipline of setting aside additional profits for a rainy day, instead of succumbing to the temptation of instant gratification.

Last year, both the government-subsidised ADF and the loan moratorium helped me return to the black faster.

Today, there are again calls for a blanket moratorium. The government has already clarified that the moratorium and reduced instalment are available for those who need it, on an opt-in basis. So, I am totally puzzled as to why some quarters insist that borrowers who do not have any problems repaying their loans be offered a moratorium. This is like offering medicine to the healthy.

I applaud the government for not kowtowing to the pressure by certain groups to institute a blanket moratorium. And to those that are blatantly asking for the government to “compel” banks to offer interest-free moratoriums, they must be out of their minds!

Are they aware of what this might do to banks in general? Let us face it, banks may not be everyone’s favourite institution. I have had my fair share of disappointments with bank managers and loan officers each time I needed a business loan. But truth be told, all our fates are intertwined to that of the banks in this country.

Let me explain. Banks are the lifeblood of the economy. It’s not us against them. We are all in this together. Why? Need I remind you that the rakyat’s savings are all stored in these banks? As such, our own interests are served when banks do well. If I had placed RM500,000 in savings with my bank, my interests are served when the bank ensures that it lends my money carefully, that is, to a borrower with a good likelihood of repaying his loan. If that borrower defaulted on his loan, the returns on my savings would surely be affected, or worse, I might never see my money again!

By forcing banks to give automatic blanket moratorium to all, we are piling on more pressure on the banking sector, which may lead to adverse effects later.

If banks do badly, so will we

Both my children have little interest in business. They are employed and contribute to the EPF monthly. They are also against a blanket moratorium, because they told me if banks made less profit, their EPF dividend might be affected because EPF has a sizeable stake in most banking groups.

So, bank earnings get passed on to EPF members in the form of annual dividend to grow their retirement fund. I guess the same argument applies to other major investors in banks, such as PNB, Tabung Haji and Socso. All these institutions represent the rakyat’s interest: PNB manages our Amanah Saham investments, Socso manages social security for the Malaysian workforce, Tabung Haji manages savings for hajj and the list goes on and on.

Those chastising the banks for “doing well” and insisting on a blanket moratorium for a majority of borrowers who do not even need it do not seem to realise that when our financial institutions keep doing well, everyone in the ecosystem benefits. A healthy banking sector is also crucial to help us recover from this pandemic. By the same token, if banks do badly, so will we.

So, my two takeaways here are that firstly, Malaysians should be cautious of instant gratification, because when it comes to delaying loan repayments, the cost will catch up on us later. And secondly, the push for a blanket moratorium by certain quarters is akin to encouraging healthy people to take a medicine. Why take something that you do not need? I speak of course of politicians in this regard and bear in mind, they’re not the ones shouldering the burden of the additional cost of your loan later. You are!

I am sure many Malaysians are educated enough to discern facts from propaganda, so let’s base our decisions on facts and reality.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.