COMMENT The Urban Wellbeing, Housing and Local Government Ministry should clearly spell out the terms and conditions for issuing moneylending licences to allay public fears of long-term economic blowback from developers providing loan facilities for housing projects.

This follows the cabinet’s decision yesterday asking the ministry to review and improve the policy.

Noh Omar's recent announcement has raised a lot of concerns, including from his cabinet colleague, Finance Minister II Johari Abdul Ghani, who had rejected the idea.

These do not bode well for good governance, which the Centre for Better Tomorrow (Cenbet) promotes and upholds.

While Noh was merely stating a fact and that developers had long been able to apply for such licences, the fallout, including repudiation from his cabinet colleague were poorly managed.

To show that it is on top of this issue, the ministry should spell out the criteria for granting of moneylenders licences to developers such as their financial standing, debt recovery processes, ratio of loan to be disbursed (full cost of property or portion), etc.

It must also answer why developers can give loans to house buyers who fail to secure financing from banks at higher interest rates.

Such explanation will enhance transparency on public policies and help allay worries about long-term impact on the property sector and the country's macroeconomic health.

As it is, issuing developers with moneylending licences will complicate the macro property market credit policy regulated by Bank Negara Malaysia.

Any abuses by unscrupulous developers will be difficult to supervise.

The Moneylenders Act lacks the regulatory framework to monitor and enforce best practices, unlike the banking industry.

Another major concern is the further ballooning of Malaysians' household debts, which is already among the highest in Asia. Malaysia's debt-to-GDP ratio was at 89.1 percent last year.

Allowing developers to charge interest of up to 18 percent on borrowings may further increase household debts.

In this respect, the government should take the opportunity to look into the primary cause of this problem - the soaring property prices.

Among others, it should look into the escalation of construction material costs and land holding costs contributed by bureaucratic red-tape of the federal, state and local governments.

It should also relook at the credit policy set by Bank Negara Malaysia, in particular, for first time housebuyers, with a view of making it more flexible to fit the present economic climate.

GAN PING SIEU is Centre for a Better Tomorrow (Cenbet) co-president.