(Kuala Lumpur, 7th) The Public Sector Housing Financing Board (LPPSA) will for the first time launch a rated Islamic bond program next year in order to expand its financing ecosystem and support the government’s efforts in prudently managing national debt.
LPPSA Chief Executive Officer Mohamad Farli pointed out that the upcoming RM25 billion Islamic bond program is expected to receive a AAA credit rating, based on LPPSA’s solid financial foundation, stable salary deduction model, and outstanding financial management record displayed since the agency, under the Ministry of Finance, was established in 2016.
He said this initiative proves that LPPSA does not simply rely on government guarantees, but is actively seeking alternative mechanisms to balance its funding needs.
"As a statutory body, we are very concerned about the targets for strengthening national fiscal conditions as proposed under the Fiscal Responsibility Act.”
“Although government guarantees are still necessary to keep our funding costs low, thereby allowing us to continue offering affordable financing rates to civil servants, the launch of this rated Islamic bond program demonstrates our commitment not to indirectly increase the national guarantee ceiling.”
In a recent interview with Bernama, Mohamad Farli said the agency wants to prove to investors that it has good credit quality.
“Our assets are strong, and our monthly collections are very stable. If all goes well, with a AAA rating, we will be able to attract more investors while helping the government optimize the management of contingent liabilities.”
Regarding LPPSA’s recent success in collaborating with HSBC Bank to launch a RM1 billion Receivables Financing (RF-i) project, he pointed out that this project is a crucial indicator of financial institutions accepting LPPSA’s creditworthiness without government guarantees.
“The launch of this financing mechanism is a success for us. We use our monthly cash flow as collateral for bank financing, and the bank is willing to provide financing based on our own financial and operational strength.”
He said this measure bolsters market confidence in LPPSA’s self-rated Islamic bond program to be launched next year, to meet the financing needs of nearly 1.6 million civil servants.
On loan quality, Mohamad Farli said LPPSA’s non-performing loan (NPL) rate remains below 1%, reflecting its good asset quality.
He admitted that some minor challenges involve military personnel with shorter service periods; when they retire early but still have large outstanding mortgages, they may be able to refinance with banks if they find better jobs after leaving service, but some are unable to continue employment and this leads to non-performing loans.
“However, our duty is not to auction off their houses, but to help them obtain housing finance.”
He said LPPSA also offers a Debt Settlement Plan (DSP), allowing departing borrowers the opportunity to restructure their repayments until their financial situation stabilizes, at which point they can apply to other institutions for refinancing.
On whether to launch a "rent-to-own" product, he said that although some banks have launched such products, LPPSA currently does not see an urgent need; if necessary, it will review this later.
He also mentioned that green financing or new urban projects are not priorities at the moment, as LPPSA is currently focusing on the social elements of the Environmental, Social, and Governance (ESG) framework, ensuring that civil servants can obtain home loans at a 4% interest rate.
He said the Ministry of Housing and Local Government and developers are exploring more sustainable development cooperation models that may include incentives in the future.
Mohamad Farli also shared that since assuming the role of CEO in 2020, his biggest innovation has been digitalizing communication channels through the electronic counter (e-Counter) to support online transactions.
He said the agency also has multiple digital communication channels, including WhatsApp, the Myfinancing app, JAccess, Lia chatbot, IVR self-service, online chat, and e-ticketing.
He reiterated that LPPSA’s mission is to provide convenience for civil servants, with its core mission being to ensure the housing financing facility remains relevant, robust, and reliable.
“We will continue to improve. In the past, civil servants enjoyed many benefits; now the situation is different, but housing is still a basic need, so we will ensure this convenience is protected and continue to provide good security for future generations.”