Brunei lending patterns show improvement

BRUNEI is seeing better lending patterns, indicating measures to curb excessive personal lending and improve businesses' access to bank credit may be starting to take hold, latest government data showed.

In the December 2008 Brunei Economic Bulletin, the Department of Economic Planning and Development said by end-June 2008 the latest available bank loans to consumers shrank 2.1 per cent to $3.65 billion from $3.73 billion during the same period in 2007.

In the same period, lending to businesses grew a hefty 25.6 per cent to $2.39 billion from $1.9 billion in June 2007.

The data shows bank loans going to consumers still dwarf loans going to businesses, but figures also show more lending being shifted to businesses.

The data says by June 2008 loans to businesses and consumers accounted for 39.6 per cent and 60.4 per cent of total loans, respectively. This compared with 33.8 per cent and 66.2 per cent by June 2007.

The data says increased lending to businesses was due to increased loans to players in the transportation (89.3 percent), general commerce sector (6.4 per cent), construction (1.2 per cent), professional services (17.3 per cent), agriculture (12.9 per cent) and the mortgage sector (20.8 per cent).

On the consumer side, personal loans fell 9.5 per cent.

For years, the government has been discouraging excessive personal lending and encouraging Bruneians to develop a savings' habit.

But personal loans continued to balloon prompting the government to put curbs on excessive lending.

In its latest report on Brunei, the World Trade Organisation touted a 2005 Ministry of Finance directive to cap banks' personal loans.

The directive was aimed "to reduce the level of personal debt and promote a savings culture", the WTO said.

"The directive outlines more stringent guidelines on the granting of personal loans and issuance of credit cards. It also requires the banks to set their own prime lending rate, which was previously set by the BAB (Brunei Association of Banks)."

In its 2008 report on Brunei, the Oxford Business Group said the decline in personal loans, was "attributed to a policy shift by banks and government institutions".

Between 2005 and 2007, OBG said there was a noticeable decline in personal lending. It cited data from the Financial Institutions Division of the Ministry of Finance.

The data showed while personal loans still accounted for bulk of total loans, the figures have declined. In 2005, personal loans stood at $3.34 billion, but fell to $3.01 billion the following year. The figure fell further to $2.77 billion as of the first nine months of 2007.

The Brunei Times