This article first appeared in The Edge Malaysia Weekly on August 19, 2019 - August 25, 2019
Bank Pembangunan Malaysia Bhd recently uploaded its audited financial statements for the financial year ended Dec 31, 2018 (FY2018).
What stood out is the development financial institution’s high gross impaired loans ratio. While the ratio is declining (FY2016: 15.02%; FY2017: 12.15%), it still stood at a high 10.95% as at end FY2018.
Note that the average impaired loan ratio for DFIs was 5.1% in 2017 and a forecast 5.8% in 2018, according to Bank Negara Malaysia data.
For the year under review, BPMB impaired RM580.78 million of loans, compared with RM183.67 million the year before.
Its gross impaired loans was at RM2.27 billion as at end-FY2018, lower than the RM2.7 billion in FY2017.
Efforts to prevent loans from going bad or improve loan recovery to lower BPMB’s impaired loan ratio are commendable. But the DFI could have prevented it in the first place if it had adhered to strict credit standards and good corporate governance.
The Edge has highlighted the lax lending practices at the DFI several times.
Now, there is a new chairman and CEO at BPMB. The chairman has said it is undergoing a “clean-up” process.
What remains to be seen is the outcome of the clean-up and whether follow-up action has been taken against the defaulters. Who are these defaulters and how did BPMB allow impaired loans to balloon to such high levels?
Given that BPMB is wholly owned by the government, the public rightly deserves to know.
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