(The Star) PETALING JAYA: Financial institutions believe that personal financing, although on the rise, is not a cause for concern as it still constitutes a lesser segment of the total household debt.
RHB Bank Bhd acting director of retail banking Vince Au Yoong told StarBiz that although personal financing expanded by 29.4% last year, the outstanding balance accounted for less than 5% of total household debts.
“Additionally, almost half of the household debts were from long term secured borrowings to fund house acquisitions of about 46.2% in 2009,” he said.
Personal loan, as one of the components of household debts, has a been a topic of concern among some economists who worry that growth seen in consumer spending may have been a result of debt instead of income growth.
Personal loans was up 14.3% in March from a year ago and 1.9% higher than February.
Most of that views are from bankers. They of course are not to be concerned with 50% of their clients salary will go to them every month, to settle their installments. I read in one of the Bank Negara's reports that they are not concerned too. They argued that the level of investment/saving rates of our population are very high. So when you net it off, it's okay.
Well, looking at too much of big picture can be dangerous. First we need to look at the demographic profile of the borrowers. If they are young and having high saving rates, I think I would agree with the rest of the arguments. Unfortunately, my hunch tells me that it's the young people that are having high level of debt and low level of saving. The older people is doing the reverse, having low level of debt but high level of saving. Unless we are talking about the old people will come out to bail their sons and daughters, all we need is to take a big recession to stir shit in the pot and sending it to a fan....you get the picture(Yaaaak!).