To lend or not to lend, that is the question - economic considerations for Malaysian bankers

Yong, Wooi Keong * (2012) To lend or not to lend, that is the question - economic considerations for Malaysian bankers. In: Annual Summit on Business and Entreprenuerial Studies (2nd), 15 - 16 October 2012, Kuching, Sarawak.

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Abstract

The purpose of the research is to see if a few macroeconomic indicators can provide a broader perspective to Malaysian bankers to augment existing loan procedures & bank loan policies in order to reach a loan decision faster, either to accept or reject a loan application to the private consumer. Following Institute of Banker’s Malaysia’s (IBBM) Certified Credit Professional Handbook, before a loan can be made, a banker must evaluate the broad risk factors in evaluating credit, and a possible general model that can be used to assess a potential borrower’s basic credit factors is known as the 7 C’s of Credit. It is important to note that all the “C’s” are important, but may be listed in the order of importance sequentially as Character, Capacity, Capital, Conditions, Collateral, Control and Common Business Sense. Here, “Conditions” have been described as macroeconomic issues like globalization, foreign currency markets, economies of major trading partners, legislative and regulatory frameworks as well as social trends. Certainly this is a wide list of issues, and while it is useful for bankers to bear these issues in mind, it may be said that such a wide list of descriptors lack focus and may even be disadvantageous due to its vague nature. In this paper, it is the search for the most relevant macroeconomic factors that should be included and considered by Malaysian bankers in “Conditions” that is being investigated in order to sharpen the list of criteria that must be considered by bankers by pin-pointing which economic indicators that can be most helpful to bankers. In light of the 2008 Global Financial Crisis, it seems pertinent and urgent that bankers have a reliable set of indicators to guide them in their decision making for this purpose.

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