MP SPEAKS Urban Well-being, Housing and Local Government Minister Noh Omar’s idea of allowing developers to give out loans to housebuyers is clearly hitting a snag.

Now that the archaic Moneylenders Act 1951 (Amended 2001) is brought into the limelight, it is best to get rid of it so as not to give legal cover to loan sharks, and, more importantly, to protect Malaysia’s financial institutions from systemic risks and possible collapse.

Shadow banking, such as those provided for under Moneylender Act 1951, should be curbed and curtained.

All financial institutions should be placed under the stringent watch of Bank Negara. The archaic powers of licensing moneylenders under the Urban Well-being, Housing and Local Government Ministry should be revoked to prevent a subprime-like crisis from happening in Malaysia.

I have never thought highly of Noh Omar’s intellect. This particular proposal by Noh to allow developers to provide loans to housebuyers is a clear example that Prime Minister Najib Abdul Razak erred in appointing him to the frontbench in the recent cabinet reshuffle.

Second Finance Minister Johari Abdul Ghani puts it very well, that “it doesn't make sense. To me, it doesn't sound logical.” “You must tell the public so that they will not be trapped into simply borrowing without knowing their ability to pay... it is very important,” he told news portal Malaysiakini.

Johari added that if interested home buyers were unable to obtain loans from banks offering current interest rates of between four and six percent, they would not be able to pay the proposed higher rates of 12 and 18 percent charged by developers.

Noh’s idea also did not receive backing from Treasury secretary-general Mohd Irwan Serigar Abdullah who commented that “we need to study (this proposal). I read about it in the papers, and can’t comment much.”

Such is the state of affairs in Najib’s cabinet that a major change to the financial architecture of the nation is being announced by a minister, to be contradicted by the second finance minister and Treasury secretary-general soon after.

The immediate tasks for Najib are:

1) To officially halt Noh Omar’s plan;

2) To abolish the Moneylenders Act 1951 in the upcoming Parliamentary session beginning Oct 17, 2016 and move all powers pertaining to shadow banking currently under the Urban Well-being, Housing and Local Government to Bank Negara.

LIEW CHIN TONG is the MP for Kluang, Johor DAP chairperson and DAP national political education director.