Part 1 Banking Analysis Of Some Suicidal And Fatal Economic Policies Which Have Doomed Us

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 I have written frequently about the sorry state of banking and finance in Malaysia. There is no real banking and financial system in Malaysia anymore - for the past 20 years or more. What we have is a weird oligopolistic cartel of banks the majority of which are owned and run by the government. 
The ordinary citizen / entrepreneur has little access to legal and licensed credit facilities to raise a loan to start a business. To fill up this vacuum, over the past 20 years an alternative financial system has been flourishing - the Ah Long financial system.
The Ah Long system is said to be worth tens of billions of Ringgit. No one knows the exact size - it could be bigger. 
The really stupid government cannot understand the amount of taxes they are losing to the illegal Ah Long financial system. The high interest rates of the Ah Long system also bleeds desperate borrowers of their money and actually kills economic growth in the long run. This is what has been happening in Malaysia over the past 20 years and the morons in government cannot see this.
Yet the illegal Ah Long industry in Malaysia is growing and growing. Why? Because there is no banking system in Malaysia. There is only a mafia-cartel of government owned banks pretending to be bankers.

(Please do not ask Bank Negara Malaysia because the BNM fellows ARE NOT BANKERS. THEY ARE CIVIL SERVANTS AND REGULATORS WHO KNOW JACK S..T ABOUT REAL BANKING. How much working capital does a 5 star hotel need? How much working capital does a stock broker need? How can a company make profits and still go bust? Believe me Bank Negara will not know. They are not bankers. Commercial bankers will be able to answer these basic questions.)

More than a year ago a Dato friend of mine (who is very much in tune with the business environment) told me that a senior banker at a Government-owned bank (Cap Harimau) had said that there has been ZERO LOAN GROWTH IN HIS BANK FOR THE PAST 10 YEARS !! 
I said 'WHAT?' No loan growth for the past 10 years ??'

Then my Dato friend said that the banker told him that there has been little or ZERO loan growth in the entire Malaysian banking system for the past 10 years.  This was told to me last year.
Then I started speaking Tamil. "Yennada ithu? Yeppadi da? Yenna aayi-richu? 
So I searched on Google. And true enough there are numerous websites that have data on the Malaysian banking system. And here is just one of them. 
As you can see, true enough the loan growth in the Malaysian banking system has actually been going downhill over the past 10 years or more. See for yourself. 
https://www.ceicdata.com/en/indicator/malaysia/total-loans-growth
 


 
Yes I can see that there are some short spikes  but you can see the trend is down, down, down.
(Ok here let me make a prediction : with this type of performance some bank or banks will go bust at some point. It has to happen.)

Folks, there is so much demand for credit facilities (funding and borrowing facilities) in the country. Every other businessman and entrepreneur is looking for money. As I said the Ah Long industry is booming and booming.  
In such a scenario why is loan growth in the banking system dwindling? 

Here is the reason. Over 20 years ago some donkey advisor to the ketuanan monkeys suggested that 'to control the Chinese we must control the banks and the financial system'. 
So they started cancelling all the licenses granted to Chinese and non bumi owned banks, finance companies, leasing companies and credit companies. 
Up to the late 1990s we had a fantastic financial system. We had 52 commercial banks, hundreds of finance companies, hundreds of leasing and credit companies.  There was always a finance company or leasing company around every corner. They knew their local entrepreneurs and they funded local economic activity.


That is why Malaysia saw high growth rates until the 1990s.

You can see the high GDP growth numbers till end 1990s. In the 2000s (after the so called consolidation of the banking system, the economic growth has gone haywire).

Then circa 2000 the ketuanan donkeys decided to "consolidate" the banking and financial services sector. There was a more nefarious racist intention - they wanted to control the non bumi (aka Chinese) access to banking and finance.
So overnite the commercial banks disappeared. The merchant banks disappeared. ALL the neighborhood finance companies and credit and leasing companies disappeared. The local women who could borrow RM30,000 to buy equipment to set up a hair dressing salon suddenly found out that their local family owned finance company was de-licensed.  
Now there were only five (or is it six) main local anchor banks remaining. Plus the foreign banks which are not allowed to open any new branches at all. 
Here is the latest news (from yesterday) detailing what I am trying to say:

 
https://www.nst.com.my/business/2022/04/792137/red-alert-traditional-banks


Malaysian banks are forewarned!
Traditional banks risk losing SME business to non-traditional competitors
57% of SMEs expect to take up new or alternative borrowing issues with traditional banks - lack of transparency, information, guidance.SMEs didn't think banks did enough to help themSMEs require finance but less optimistic about their banksmajority (70%) SMEs less than satisfied with banksstrong interest in borrowing funds 60% SMEs expect to take up alternative/non-traditional borrowingworrying trend for banksconsidering 1.15 million SMEs in Malaysiaemploying 48% of workforce, contributing 38% of GDPtraditional banks must simplify process, transparency, customer service
My comments:
Ok I dont agree with their conclusions. 
First of all there is no such thing as "worrying trend for banks" because they dont care. Especially the GLC banks. Government owned banks. The CEOs still get paid millions. Worry or no worry they all still get paid. So why should they worry?
There is also no such thing as :  Traditional banks risk losing SME business to non-traditional competitors
There is no such thing as non-traditional competitors other than the Ah Long. The Ah Longs are now the defacto bankers in the economy.The traditional GLC banks cannot be bothered if they lose business to "non-traditional competitors". Because most of them are GLCs. Government owned. Bukan duit bapak dia. 
Their CEOs will still get paid millions of Ringgit in salaries. At 5PM they just pack up and get the company driver to send them home. What is there to worry about. 
If their banks get into trouble, the Government will bail them out. So what is there to worry about?

In the meantime there are not enough banks, finance companies, leasing companies and credit companies in the Malaysian economy.
The SMEs (which actually contribute more than 38% of the GDP) cannot get sufficient financing, funding or credit facilities from banks. 
Because there are so few banks in the country. The ketuanan donkeys wanted to "control the Chinese businessmen" by restricting banking licenses and wiping out the highly efficient Malaysian banking and financial system (before 2000s). 
Why the hell do you want to 'control' the Chinese businesses? 
Now :
the Malaysian economy has stopped growing like beforethe Ah Long industry has become mega and is bleeding the economy
and the banking industry itself is now under threat (according to NST above).
 
p.s. Why the hell do you want to control the Chinese businesses? Or control the economy? And which moron idiot conspiracy theorist told you that you can "control the economy" by controlling the banks? 
Didnt you know that some companies generate more cashflow and wealth than the banks? Some MNCs have cashflows which are larger than the Malaysian Budget. 
There are local companies which generate more business and have more cash than our banks. 
My first banking job was working for a Singapore bank which had a branch in Kota Bharu. One of our clients there had vast rubber estates in Southern Thailand. The closest (and safest) banks were in Kota Bharu.  So they would deposit their cash collection at our branch in Kota Bharu. Their cash deposits were many times greater than the bank's own funds.  They had more money than the bank. 
So which idiot told you that you can "control the Chinese businesses" by controlling the banks?
Here is a question - ok so after the bank consolidation in 2000, you control almost all the banks in Malaysia. Congratulations.  So how many Chinese businesses have come under your control since then? Can you name just one? Bodoh!

Instead you have killed the economy. Without a vibrant, competitive and fully open banking and financial system the economy will die. This is happening already now.
The Ah Longs are taking over. 

No loan growth means no economic growth. No jobs growth. Your university graduates will become Food Delivery boys. Your next generation : sleeping on the sidewalk.

Now the donkeys say they will license FIVE digital banks.  Why FIVE? Because there are five fingers on one hand. So they can only count up to five. Woi you have two hands lah. Tolol!

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.
By Syed Akbar Ali 

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