The decision by Malaysia’s new government to defer collection of some higher education loan repayments will help ease pressure on borrowers, says Errol Oh
This article was first published in the September 2018 Malaysia edition of Accounting and Business magazine.
‘Wanted: a financial and economics whizz to steer the transformation of a Malaysian government-owned student loan provider. Applicants should preferably also have high-level social consciousness, political skills and passion for education.’
If the National Higher Education Fund Corporation (better known as PTPTN, its Malay acronym) had taken an ad to recruit a new person at the helm, it might perhaps be along these lines. However, rare is the person who ticks all the boxes. Rarer still is such a person who, in the name of national service, is willing to settle for a salary that must surely be lower than what they can command in the private sector.
Thankfully, PTPTN already has a chief executive. In addition, Wan Saiful Wan Jan, a former thinktank CEO and a candidate in the May general election, was appointed chairman in June.
The duo have tough jobs to do. Easy answers are hard to come by when heading a lender that must balance social responsibility with financial sustainability. It gets more complicated when one of the government’s key pledges is to lighten the burden of PTPTN borrowers.
The general election was won by Pakatan Harapan, an alliance of four parties. Pakatan Harapan’s manifesto includes 10 promises that it says it will fulfil within 100 days of forming the federal government. One of these is to defer the collection of PTPTN repayments from those earning less than RM4,000 per month and to lift a travel ban on defaulters. The coalition has also committed to tax incentives for those who help employees repay loans, fixing repayment amounts based on salary, and discounts or full waivers for students from low-income households.
The thing is, a more benevolent approach is likely to worsen PTPTN’s problem with unpaid loans. Almost 430,000 PTPTN borrowers were on the immigration blacklist; that is 15% of the 2.8 million who have received financial aid over the last two decades. That is perhaps the sole low-hanging fruit that can please the borrowers. Any restructuring or rule change that will affect the corporation’s cashflow certainly needs more planning and adjustments.
For one thing, the size of the loans in default is already hampering the ability to give out new ones. Last November, the Higher Education Ministry said that a total of 410,500 borrowers owed RM6.84bn. Of the RM18.97bn in loan repayments, only RM12.13bn was collected as at September 2017.
Education Minister Dr Maszlee Malik disclosed that many potential candidates had earlier declined to take on the position of chairman because it was too daunting.
‘This appointment will be a burden to [Wan Saiful]. He has to devise a strategy to resolve issues regarding PTPTN loans,’ Maszlee told reporters in June, adding that Wan Saiful had sought help and advice from friends in financial institutions.
Given its important role, PTPTN certainly could do with all the help it can get.
Errol Oh is executive editor of The Star
"Any restructuring or rule change that will affect the corporation’s cashflow certainly needs more planning and adjustments"