It is deeply concerning that, with the current threats posing our economy, financial institutions still find it acceptable to enable the culture of bad loans that has historically proven itself to be an impediment for our banking sector and indeed our economy.
In fact, the amount of non-performing loans (NPLs) witnessed an increase of more than three times in the last 10 years as revealed in a new report prepared by the Centre for Policy Dialogue.
This is a startling number, and further corroborates just how bad the situation has gotten in terms of loan defaulters plaguing our economy.
It's not hard to understand why this culture still prevails -- corruption, nepotism, and political favoritism continue to wreak havoc when it comes to borrowing and have resulted in an industry that is on the brink of collapse. And the situation is indubitably exacerbated by the fact that this corruption is prominent not only in state-owned banks, as they used to be in the past, but the private sector also seems to have joined the odious ranks of willing defaulters.
Not to mention that, with the central bank continuing to incentivize the practice by offering huge waivers to loan defaulters, the situation has continued to get worse.
To that end, certain recent measures taken by the administration point to some level of pro-activity in tackling this issue, but given that NPLs are often associated with corrupt government officials and those adjacent to them, action needs to be taken within administrative ranks to stop the culture of willing NPLs at the root.
It's clear that our financial institutions need to better understand what makes for a good borrower from a bad one, otherwise the state of our banking sector would not be in shambles as it is now.
