A credit market that functions effectively contributes significant benefits to the economy, helping financial consumers capitalise on economic opportunities and build wealth, and businesses to grow and create jobs.
With intense competition in the retail credit market, changes are being observed in the lending practices of credit providers in the personal financing segment which are contributing to unaffordable borrowing by households. Of specific concern, there has been the emergence of new financing products that give the appearance of affordable borrowing but actually encourage the imprudent accumulation of debt that financial consumers cannot really afford without significant risk of hardship over the duration of the financing facility due to inadequate financial buffers.
While financial service providers (FSPs) are already required to conduct suitability and affordability assessments for each new and additional financing facility offered to financial consumers, more specific requirements are necessary to prevent unhealthy developments in the personal financing segment.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
