Many Bruneians continue to live in debt

Many Bruneians continue to live in debt


Spending spree: Financial experts have stated that most loans taken out by Bruneians are used to finance consumption activities rather than productive investments. Picture: Bt file photo
DEBBIE TOO
BRUNEI-MUARA

Sunday, February 3, 2008

AFTER the personal loan capping directive, personal loan applications are decreasing. Of the total loans, around 61 per cent were under the category of personal loans, which indicates that most of the loans (close to $6 billion by end of 2005) were used to finance consumption activities rather than going into productive investments. The amount of loans increased by $2 billion from 2001 to close to $6 billion.

On May 16, 2005, the Ministry of Finance issued a personal loan capping directive to the Brunei Association of Banks (BAB).

The objectives of the directives is to reduce the level of personal debts, to promote savings culture and to boost financing to the private sector.

"Before the loan capping directive, it was very easy to apply for a loan, they could loan up to 36 times their salary and the repayment period could go on till their retirement age, but now after the capping, they could only loan up to 12 times their salary and they have a repayment period of not more than six years," said Siti Mas Haji Matasim, a personal banker from HSBC.

She added that the capping directive limited the amount of the loans applied did affect the number of applications.

"Now we get only about two to three loan applications per month," she said.

However, she added that there is no specific age group that applies for loans more than others.

"There will always be people applying for loans, from different generations, you have the fresh graduates, newlyweds, and for the older generation, they would apply for a personal loan for maybe their children's studies, and so on," she said.

"We do not ask them specifically what they apply the loan for, as it is not necessary," she went on to explain.

Baiduri Bank's personal financial planner, Norasfarina Kamarudin said that from Baiduri Bank, there are more locals that apply for personal loans than foreigners.

She added that the criteria for foreigners and locals are different where the foreigners are offered to loan up to four times their salary as compared to locals, who can loan up to 12 times their salary.

When asked whether the personal loans are used for business purposes or to help finance their consumption activities, she replied that there were a number of personal reasons that people took personal loans for.

"Some use it pay off their credit cards, some of the use it for weddings, home renovations, but most of it are more for consumption activities," she said.

She added that some customers have applied for loans from other banks as well.

"One of the criteria from the new directive is that the customer's salary has to be banked into the bank that he or she is applying a personal loan from, but some people move their salary to other banks to apply for loans there as well," she said.

Both personal bankers added that whether it is credit cards or home loans or personal loans, most of the banking clients are still in debt to the bank.

The Brunei Times