Berjaya Group founder Tan Sri Vincent Tan Chee Yioun has called on the government and the country’s banking sector to help lift the low-income Malaysians out of poverty by strengthening their financial capabilities.
He noted that one of the problems in the banking system is that it is not designed to help the low and middle-low class households, reported the New Straits Times (NST).
“Banks currently offer many services and if they can serve the poor, they could help low-income individuals plan for the future and build financial stability. It is important to offer low-income individuals access to financing, especially to buy their first home,” Tan told NST in an interview.
He said majority of low-income earners or those in the B40 (bottom 40% or poor) households do not own a home due to their inability to secure a loan.
With their loans rejected due to their low income, these households turn to renting.
“What happens if they become jobless and they cannot pay their rent? We will have more homeless people in Malaysia…We want Malaysia to be a good country. We don’t want too many homeless people. We want people to have a better understanding of living. There are so many poor people around and with the current state of the economy, more people will be jobless…more people will get poorer,” said Tan.
“If you want Malaysia to be like Japan, Korea, Taiwan, Singapore, and European countries, we have to start by uplifting the living standards of the B40 group so more people here will be employed and have good jobs.”
He shared that this is the reason why he set up Better Malaysia Foundation (BMF) – to help the urban poor out of poverty, albeit government assistance is needed to achieve this.
BMF launched a new social enterprise programme to help the government address home ownership aspirations of the country’s low-income households, or B40 group.
Tan, who serves as chairman and founder of BMF, explained that the social enterprise will facilitate the development of properties that come with a low monthly cost of ownership.
For this initiative, it has designed a five-bedroom, four-bathroom show apartment, measuring 900 sq ft, in collaboration with Berjaya Land Bhd.
It has also submitted its proposal to the government early this month, which includes recommendations for the government to guarantee the B40 group’ loans, 100% financing as well as longer housing loan tenure of up to 60 years for such group.
He believes the banks would lend such group of buyers if the government would guarantee their loans.
“If there is a government guarantee, I am sure the banks will lend. The banks would have no fear that they would not be able to get their money back if they have to foreclose. If there should be a foreclosure, the house would be sold back to the government, which is the guarantor,” said Tan.
And with the pandemic, he hopes more developers will build affordable homes for the B40 group.
He noted that while developers can still make a 10% to 15% profit from affordable housing, developers are worried they cannot sell all the units in their project.
“They are worried that if they build too many units they cannot sell. If they build 1,000 affordable homes and there are 10,000 buyers, the ministry will choose the people who are eligible to buy the 1,000 units. The 1,000 potential buyers will pay a small deposit and then they will apply for a loan but 60% of the loan applications are rejected and the developer is stuck with the unsold units,” said Tan.
“Developers want to sell all 1,000 units but only 400 buyers can pay for it, and the other 60% is still dangling there. So what does the developer do? If the developer is making only a 15% margin he needs to raise 85% of the cost to build 1,000 homes. However, in this case, the developer can only raise 40% and he is short of 45% as he is waiting for the remaining 60% of buyers,” he explained.
“After one experience like that, do you think developers will want to build affordable homes?” he asked.
Meanwhile, he said the B40 households should consider acquire a house instead of renting. However, banks should help them by extending them loans.
“If banks give them 100% financing with 40 to 60 years payback period, I am sure the B40 group will be able to pay the monthly installment. If they are renting a house for RM900 a month, they can convert the rental into a housing loan that pays for their own house and build up equity. So instead of paying rent, they can use that same amount to pay for the loan and at the end of the day, they will own a home,” said Tan