22 Jul 2020, 4:27 pm
LETTER | Come October, after the brief moratorium on loans, all consumers will have to face the banks they have taken loans with. This will include those who have lost their jobs or had their incomes reduced. Daily wage earners or workers in the so-called "gig" economy will not be exempted.
It is indeed a challenging and painful period for many individuals and families. Firstly, they may already be facing the loss of employment and income, but what may be scarier is the uncertainty of the future in terms of job vacancies or income stability. They will have to meet the banks to renegotiate their loans.
Now more than ever is the time for banks to show compassionate banking. The concept is basically about the banking system acknowledging difficulties faced by borrowers in trying times.
It is the time for bankers to guide consumers and offer positive solutions and alternatives. It is not a time to send lawyers letters to demand immediate settlements.
The banks will be dealing mostly with low and middle-income groups. Many indeed do not have savings. In fact, pre-Covid-19 it had been reported that 52 percent of Malaysians would have difficulty to raise RM 1,000 as emergency funds while only 24 percent were able to sustain living expenses for at least three months or more if they lost their main income.
Borrowers are human and they have families – they should not be dealt with just on a contractual basis. An environment lacking in compassion is not good for business and the country. We are in a difficult time and we need a different approach in managing the crisis.
Bankers need to proactively reach out to customers and deliver personalised advice. Bankers need to be armed with deeper insights and be more sensitive to the unique situation faced by each customer and ascertain which customer will benefit and what kind of advice to deliver.
The traditional approach of being punitive will not do. Banks need to take a more positive advisory and caring role. Thus, compassionate banking.
They should advise customers on various positive approaches to responsible financial management, for example, the importance of savings for emergencies and better credit management.
There are no silver linings to the Covid-19 crisis. It has the potential to tear at the very fabric of our lives including the way we live, work, and play. Banking as an industry can, however, better prepare citizens to be more resilient during times of hardship or great uncertainty.
It requires more than simply taking the traditional approaches to banking; it requires a commitment to knowing your customers, delivering proactive advice, and looking out for them with personalised solutions that improve their financial resiliency and well-being.
PAUL SELVA RAJ is the chief executive officer of the Federation of Malaysian Consumers Associations (Fomca).