IN 2015, Autoriti Monetari Brunei Darussalam (AMBD) introduced the Total Debt Service Ratio (TDSR) to curb excessive borrowing in the country.
The TDSR measures your total monthly debt obligations as a proportion of your net monthly income. Effective from June 8, 2015, AMBD imposed a 60 per cent TDSR limit to customers with net monthly income of BND1,750 and above. The implementation of TDSR aims to protect individuals from falling into a debt trap. The TDSR limits how much individuals can borrow relative to their income to ensure their monthly debt service payments are at a manageable level, and consequently the debtors have sufficient remaining income to cover their daily living expenses. Furthermore, the TDSR helps individuals save money in excess of their mandatory contributions into their TAP/SCP accounts. Last but not least, the TDSR has to be seen as a tool to empower individual to make sound financial decisions on their own.
AMBD, as the regulator and supervisor of the financial sector, is continuously monitoring the effectiveness of the TDSR. While it is still in its early stages of implementation, statistics point towards the positive impact of the TDSR to the economy. For instance, there was a decline in the ratio of “bad loans” to total loans for the household sector, as calculated by the Non-Performing Loan Ratio (NPL) from 2.3 per cent in December 2014 to 1.8 per cent in December 2015, suggesting better and more disciplined debt management by households as well as prudent granting of loans by lenders.
Furthermore, in 2015, there was a marginal growth in household savings by 0.6 per cent to BND6.8 billion compared to BND6.7 billion in 20141. This suggests that with the TDSR in place, households are able to not only manage their finances better but perhaps, to also put their remaining money towards savings instead.
But what about the impact of TDSR on individuals? Data acquired from the last 10 months since the implementation of TDSR has indicated that approximately 3,000 customers have a TDSR level exceeding 80 per cent. What this essentially means is that assuming an average net monthly income level of BND2,000, such customer would only be left with BND400 per month or BND13 a day, to cover their daily expenses. Would a breadwinner be able to support his family’s food, his children’s education on top of paying for his house utility bills with BND13 or less a day? Would there be enough money that she or he could save in case of rainy days or emergency purposes?
There is a need to instil a saving culture in Brunei and develop sound financial management habits among our children to ensure greater socio-economic welfare. It is important to plan your finances efficiently in order to live a stress-free financial life and sustain high quality lifestyle. There are a variety of financial products and services offered by the various financial intermediaries that can cater to your savings needs, ranging from savings accounts for your little ones to more specific savings accounts such as for retirement and education purposes. Prior to opening up a savings account, customers are further advised to shop around for the best savings rate and facilities to suit their individual needs.
Apart from that, those who have higher amount of savings readily available may also wish to opt for other financial products and services that are more sophisticated such as approved investment products that can generate potentially higher returns.
In conjunction with National Savings Day with the theme “Financially Literate Generation” on 28 May 2016, AMBD will be organising several activities throughout the month of May 2016 that are mostly focused towards familiarising the younger generation on the importance of money and savings. At the same time, parents are advised not only to start teaching their kids about the value of money at home (eg to make them earn for their next Lego set) but also to set a good example by creating your own “savings jar”. As they say, good behaviour begins at home and at an early stage. – AUTORITI MONETARI BRUNEI DARUSSALAM
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