Introduce social financing mechanism to improve home ownership -- Economists

12/02/2022 11:58 AM

By Zufazlin Baharuddin

KUALA LUMPUR, Feb 12 -- Bank Negara Malaysia (BNM) could consider some form of social financing mechanism to boost home ownership among the bottom and middle 40 per cent household income (B40 and M40) groups, in line with the “One Family One Home” target.

Sunway University economics professor Prof Yeah Kim Leng said the elements of social financing would be in the form of directed credit, interest rate ceiling and subsidies, all of which could help to ease possible credit rationing faced by vulnerable households.

“The B40 and M40 typically face greater barriers in obtaining financing, especially if they are evaluated by financial institutions to be in the high credit risk category.

“Therefore, any initiative to facilitate access to financing, while maintaining prudential standards, will greatly enhance the overall well-being of the people,” he told Bernama.

Recently, the National Affordable Housing Council set a target of “One Family One Home”. Prime Minister Datuk Seri Ismail Sabri Yaakob followed up by saying that there is a need for BNM to review its financing model to make home ownership easier with the focus on direct purchase and rent-to-own options, particularly for People's Housing Project (PPR) units and other affordable housing.

Yeah also said that the current banking system-based financing is the best mechanism to support home ownership for the two groups given its well-established risk management systems.

Meanwhile, Malaysia University of Science and Technology economics professor Dr Geoffrey Williams suggested that the central bank modify the terms in the loan financing model.

He said financial institutions could offer multi-generational loans that take into consideration family members and their ability to pay, rather than a fixed loan repayment schedule.

“It is likely the repayment schedule could be longer, or the house would be part-owned by the finance provider even at the end of the loan period.

“So it would revert, in part to (the) family, and part to the bank after the borrower passed away,” he said.

Additionally, he said, the banks could offer a rent-to-own loan where the loan repayment is fixed to the rent cost, with the house as collateral, rather than have the loan repayment fixed to the loan cost.

“Another (option) is long-term rental based on home-use, rather than home-ownership. Not everyone needs to own a house. 

“In general, we need a wide portfolio of options to allow people choices in the housing market to suit their needs over the long term,” he said.

Williams also highlighted the need to reform the supply-side in the housing market, reduce cartels and end subsidies to house developers which distort the market.


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