Housing finance inaccessibility for low-income earners in Malaysia: Factors and solutions

Habitat International 87 (2019) 27–35

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Housing finance inaccessibility for low-income earners in Malaysia: Factors and solutions

T

Andrew Ebekozien∗, Abdul-Rashid Abdul-Aziz, Mastura Jaafar School of Housing, Building and Planning, Universiti Sains Malaysia, Malaysia

ARTICLE INFO

ABSTRACT

Keywords: Finance Housing Inaccessibility Low-cost housing Low-income earners Malaysia

Globally, several studies have shown that low-income house-buyers faced severe problems in gaining access to house-loan. Therefore, this study investigated the root causes of housing-loans inaccessibility for low-income earners (LIEs) in Malaysia and proffer pragmatic panaceas in an unexplored dimension. This was done sequentially, first, the qualitatively explored and findings from the qualitative phase further tested and analysed via a questionnaire survey. The “quantilised findings” were validated by the Malaysian LCH policymakers. Findings show that the pervasiveness of house-loan rejection for LIEs is about 70%. The study found bad status of Central Credit Reference Information System, insufficient income, lack of creditworthiness, high default rate, fear of inability to recover loan and operating costs from the auction, repayment incapability, lack of evidence of regular income, the absence of collateral, inability to make down payment among others as the root causes of the factors that contribute to the house-loan rejection. The paper concludes that the government should establish a special housing loan scheme for LIEs while rent-to-own scheme should be sustained and strengthened via an independent agency. Also the self-employed should be encouraged to enrol with the Employee Provident Fund and a minimum wage increase to RM1,500/month among others was recommended.

1. Introduction The various international organisation and human rights have stressed the significance of the housing to humanity. United Nations (2016) reports that Article 25 of the Universal Declaration of Human Rights recognises the right to housing as part of the right to an adequate standard of living. This validates Abraham H. Maslow “Theory of Needs” when “housing” was categorised as part of the first category (physiological needs) of human needs in the Theory of Needs (Maslow, 1943). Housing is one of the basic needs or “deficiency needs” because their lack creates apprehension within people. Globally, the government of both the developed and developing countries has applied various programmes and projects intended to alleviate housing finance inaccessibility, most especially for low-income earners (LIEs). This is because housing is positively rooted in the economic, social, and political sphere of any nation, thus, lever to achieve two major policies: affirmative action and poverty alleviation. Hence, the Malaysian Government over the years have made various attempts to ensure that housing is affordable and accessible to her citizens via various programmes (Shuid, 2016; Ebekozien, Abdul-Aziz, & Jaafar, 2017; 2018). Proper housing enables the LIEs to have a healthier value of life. It is a Malaysia version of providing a social safety net (Abdul-Aziz, Tah, ∗

Olanrewaju, & Ahmed, 2018). However, these programmes are not exempted from problems and challenges. One of such problems is housing finance for LIEs house buyers. The challenge of accessing housing loan by Malaysian LIEs has been there since the mid-1990s (Abdul-Aziz et al., 2018; Mahamud & Hasbullah, 2011). This is almost four decades and the problem of accessing housing loan by LIEs still lingers. Accessing housing loan via a mortgage is a challenge to most LIEs. In Central Europe, housing affordability worsened for many (Ball, 2016). The resultant effect of this is urban slums, which is a defining part of urban-scape (Friesen, Taubenbock, Wurm, & Pelz, 2018). Shuid (2004), Hoek-Smit (2008), Yusof, Shafiei, Yahya, and Ridzuan (2010), and Bakhtyar Zaharium, Sopian, and Moghimi (2013) affirmed that the rate of rejection of LIEs house buyers is high but lacked empirical evidence, hence impassive. This gap would be filled as part of theoretical contributions to knowledge in this paper. This is worrisome even with the federal and state governments various low-cost housing (LCH) programmes yet the rejection rate is possible high. The Real Estate and Housing Developer's Association (REHDA), one of the sources of the blame game over who is responsible for the high rejection rate accuses Bank Negara Malaysia (BNM) lending restrictions and tougher credit check designed to curb speculation lies behind the high rejection rate

Corresponding author. E-mail address: [email protected] (A. Ebekozien).

https://doi.org/10.1016/j.habitatint.2019.03.009 Received 2 August 2018; Received in revised form 15 February 2019; Accepted 30 March 2019 0197-3975/ © 2019 Elsevier Ltd. All rights reserved.

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for those interested to purchase affordable homes (Yee, 2015). While Tan (2012A, 2012B) and Loong (2013) identified down payment as a hindrance but impassive. Abdul-Aziz et al. (2018) identified ineligibility as the root cause of LIEs inaccessibility to secure housing loan in Malaysia but lacked empirical evidence. These gaps among others would be filled in this paper. The market failure to meet the financing needs of LIEs house buyers is a universal phenomenon. Among the measures that have been adopted globally include direct interest subsidy scheme to reduce the interest paid by private lenders (Hanson, 2013), mortgage interest tax deductions (Ronald & Dol, 2011), government-insured mortgages (Tsounta, 2011), and mortgage subsidies (Fetter, 2013). Also, in the United Kingdom, the Housing and Finance Institute (HFI) suggested that first-time house buyers should be offered housing loans by the government to help them pay the deposit as one of several initiatives necessary to increase homeownership (Helm & Ramchandani, 2018). Whether these measures have been considered by the Malaysian Governments for possible implementation is uncertain. If not, they are certainly worth investigating so that “Home Owning Democracy” is not a distant dream for LIEs. The concept “Home Owning Democracy” translates to mean “One Democracy, One Home, and One Malaysian Household.” This urgent action is needed to boost homeownership as evidence mounts that a good shelter has valuable effects on people's wellbeing, their sense of economic strength, and children's academic accomplishment. Hence, the needs to investigate the housing finance inaccessibility for LIEs in Malaysia via an exploratory sequential mixed methods approach. The aim of this paper will be achieved through the following objectives:

employment history, not submitting the “right” income documents, and other required documents as the major possible reasons. The CCRIS is a report that shows the financial status of the borrowers or intending borrowers but not to judge their creditworthiness. It is faster for financial institution to take a decision based on status of the CCRIS report because it captures outstanding loans (if any) and special attention accounts (if any). Almeida, Campello, and Liu (2006) asserted that LIEs often finds it difficult to obtain a housing loan as many cannot afford to pay the down payment and show eligibility pay slip as evidence of regular salary earner. Bakhtyar, Zaharim, Sopian, and Moghimi (2013) affirmed the failure of many families’ eligibility to housing loan because of greater underlying problems of poverty, low wages, and unemployment. While REHDA claimed that housing loan rejection application is on the average of 60% and above (Aruna, 2016). But BNM reported that in the first five months of 2017, RM40 billion of housing loans were approved to more than 152,000 house borrowers. Three-quarters of these borrowers were first-time house buyers and approval rate for housing loans had been stable at 74%, an indication that the rejection rate is about 26% (Sze, 2017). Housing loan rejection is a worldwide encumbrance as earlier stated. The worst hit in housing loan rejection is Africa. In Africa, only about 3% can afford a mortgage while in Kenya only about 11% can earn enough to support a mortgage (Kieti & K'Akumu, 2018). In the United States of America (USA), Wallison (2009) identified income, employment, credit reports, residence status, project status, documentation, finance margins, property value, as factors that affect home loan eligibility. While some American LIEs are not able to make the 10% down payment, the government does intervene in form of subsidies in most cases, same as United Kingdom (UK) housing market (Shain, 2017). Igan and Kang (2011) reported that tightening of LTV as one of the major basis for housing loan eligibility criteria to curtail expectations and speculative incentives as experience in Korea. In Singapore, the government agency (Housing and Development Board (HDB)) via the Central Fund Provident (CPF) has been instrumental to finance the purchase of government subsidised homes sold by the HDB. The Singaporean Government has achieved sustainable housing affordability and homeownership rate of about 91% for its resident households (Phang, 2018). This financing model worth investigating. Fig. 1 presents the proposed conceptual framework and the essence is to investigate the housing finance inaccessibility for LIEs in Malaysia via sequential exploratory mixed methods and proffer new mechanism so that low-income house buyers can gain better access to home finance. The independent variable is the root causes of the housing finance inaccessibility for LIEs while the dependent variable is the LCH demand-supply gap. The following section presents the methodology adopted for this paper.

i. To determine how pervasive is housing loan rejection for the lowincome earners. ii. To investigate the factors that contributes to the loan rejection. iii. To suggest mechanism so that low-income house buyers can gain better access to home finance. 2. Review of literature This section reviewed and highlights literature relevant to the subject matters “housing finance inaccessibility for LIEs in Malaysia.” Inaccessibility to housing loans is a universal problem especially to the low-income group as earlier stated. Previous studies have shown high ineligibility associated with LIEs. For example, Fernandez (2013) affirmed that financial institutions seem to use the default factor as a basis for housing loan rejection. While Rosengren (2008) asserted that most of the studies on housing loan failed to test the relative importance of negative equity and factors related to the borrowers' ability to pay back as prime determinants of loan defaults. The paucity of empirical evidence to address the root causes of these factors (ineligibility of LIEs to housing loans and inability to provide down payment) abound. This is one of the gaps that this study will fill. The World Bank (2018) is worried that without available and affordable housing financing solutions, the LIEs may not be able to secure housing loan for a decent home, especially for a country like Malaysia that depend majorly on mortgages for housing finance. This is imperative because studies have shown a positive relationship between homeownership and stable family home (Helm & Ramchandani, 2018). However, Mohammed, David, and Seow (2012) and Chua (2015) attempted to identify the reasons for the rejection of the housing loan application by banks but lacked empirical evidence. They identified application to the wrong bank, low application score, unfavourable credit score, denied due to credit rule, bad status in central credit reference information system (CCRIS), de-cheque, bankruptcy, debt service ratio exceeded,

3. Research method This research adopted a sequential exploratory mixed methods approach. It was stirred by the aspiration to better understand housing finance inaccessibility for LIEs in Malaysia, hence the need for this pragmatic worldview. Pragmatic worldview emerges out of actions, situations, and consequences rather than predecessor circumstances (Creswell, 2014). This approach is characterised by an initial phase of qualitative data collection and analysis, sequentially followed by postal questionnaire survey. The quantitative findings were used to validate and clarify the qualitative data findings, and also to seek amplification, with the aim of increasing the generalisability of the findings. Some past studies on housing in Malaysia (Abdul-Aziz & Kassim, 2011; Tan, 2012A; Abdullahi, 2013) preferred explanatory sequentially mixed methods approach while this study adopted an exploratory sequential

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Fig. 1. Conceptual framework of the root causes of housing finance inaccessibility for LIEs in Malaysia.

mixed methods approach in line with Ebekozien, Abdul-Aziz, and Jaafar (2018) approach; in a similar study of finding the underlying root causes of Malaysian LCH leakages. This is a mixed research between the extremes of Plato (quantitative) and the Sophists (qualitative). Several research scholars, for example, Johnson, Onwuegbuzie, and Turner (2007) and Creswell (2014) believed that attempting to join the wisdom of both viewpoints would assist the researcher to address any problems of interest, hence adopted in this paper. The methodological preference for this present study was qualitative dominant because this is a real-life problem that demands pragmatic solutions (Yeasmin & Rahman, 2012). The findings of this study were validated by the Malaysian LCH policymakers (Ministry of Urban Wellbeing, Housing and Local Government), in a discussion session chaired by the Director-General of the Ministry. For the qualitative phase, phenomenology, a type of qualitative research designs was adopted. Plano-Clark and Creswell (2015) affirmed that phenomenology focuses on the experience of the central phenomenon, collected data from participants who have the experience of the subject matter and analysed the meaning via describing themes about the essence of the experience. The oral interview was based on the researchers’ experience, past literature, and a pilot semi-structured questions oral interview test (Denzin & Lincoln, 2017). The interview covered eight states/federal territories that indicated interest to be interviewed and a total of 40 oral interviews was conducted between May 2017 and November 2017. Forty oral interviews were conducted because of the need to cut across the broad spectrum, achieve saturation and validation of findings that emerged during the oral interviews. The study participants were housing developers, state government housing department staff, bankers, property managers and estate agents, auctioneers, house-owners, and tenants across the states covered as presented in Table 1. Purposive sampling technique was adopted because of the need to reach out to the knowledgeable participants in the subject matter. The participants rank, although full identity concealed in Table 1 indicates that those interviewed were considered as the authoritative officers and has authentic information about LCH in Malaysia. For example, Participant NGO1 contribution is often sought after in the Malaysian housing sector because it is the voice of the house buyers. In line with Stysko-Kunkowska (2014), thematic analysis, a method for identifying, analysing and reporting themes within data was adopted. From the 65 codes generated, 15 categories emerged and produced three themes (pervasiveness of housing loan rejection, root causes, and possible solutions).

In line with Creswell (2014), the qualitative findings were used to generate variables and instruments while survey research design was adopted for the quantitative phase because it focuses on describing patterns in a larger group of respondents rather than relating constructs or testing an intervention as affirmed by Plano-Clark and Creswell (2015). The study populations in the quantitative phase were the same as the qualitative phase with the exemption of the tenants and homeowners across the country. A sample size of 361 was derived from the sample size by adopting the Krejcie and Morgan (1970) Thumb Rule of the Table in selecting sample size in relation to a given population. Sekaran and Bougie (2016) acknowledged Krejcie and Morgan (1970) rule as one of the few leading scholars in this regard, hence adopted for the study. In line with Davern (2011) submission, the study adopted disproportionate stratification, a type of stratified random probability sampling techniques. From the 361 questionnaires administered across the country via post office and Google forms, 149 questionnaires were certified useable for the analysis as presented in Table 2. This represents a 41.3% response rate. According to Akintoye and Fitzgerald (2000), response rate within 20–30% benchmark with questionnaire surveys of the construction industry is considered adequate. This study response rate is above this benchmark, hence considered adequate and adopted. In summary, for Objective One to be achieved, findings from the oral interviews were triangulated with the secondary data sourced from BNM (Table 3) to establish the pervasive of housing loan rejection for the low-income earners. For Objective Two, root cause analysis (RCA) was employed to investigate the factors that contribute to the housing loan rejection. RCA is a step-by-step method that leads to the discovery of faults or root cause. Finlow-Bates (1998) opined that typical approaches include asking “the five questions” also known as “why-why” analysis and using cause-effect diagrams. Rooney and Heuvel (2004) identified a four-step process for RCA as follows: step one: data collection, step two: causal factor charting, step three: root cause identification, and step four: recommendation generation and implementation. This paper adopted Anderson and Fagerhaug (2006) main steps of events analysis as follows: Problem understanding (Flow Chart), Brainstorming (Brainstorming), Data gathering (Sampling and survey), and Data analysis (Histogram and Scatter Chart). For Objective Three to be achieved, suggested possible policy solutions to mitigate reluctance by banks to lend housing loan to LIEs that emerged from the oral findings were subjected to Statistical Package for the Social Sciences (SPSS) (Version 22). This was done to compare the mean values for the various sub-groups levels of agreement in regards to the suggested new

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Table 1 Background of the participants. ID

State/Territory

State Government Housing Department Staff (S) S1 State A S2 State B S3 State C

S4 State D S5 State E S6 State F S7 State G S8 State H Housing Developers (P) P1 State C, E, & F P2 State C P3 State H P4 State G P5 State G P6 State F P7 State C P8 State D P9 State H Bankers (B) B1 State C B2 State C B3 State E B4 State C Auctioneers (A) A1 State C A2 State C & E A3 State E Estate Valuers/Property Consultants (E) E1 State E E2 State C E3 State C & E E4 State C & E E5 State C E6 State C E7 State C & E E8 State E

Description (Before 09/05/2018)

Position

Eastern Malaysian state State-controlled by the ruling party State-controlled by the opposition

The state once controlled by the opposition party (2008–2013) State-controlled by the ruling party State-controlled by the opposition State-controlled by the opposition State-controlled by the ruling party

Town and Planning Officer Senior Executive, Project Chief Assistant Head Head of Assistant Secretary Senior Assistant Secretary Assistant Secretary Assistant Chief State Secretary Deputy Director State Government Secretary Executive Director Senior Assistant Secretary

One of the top private developers in Malaysia Private developer One of the top private developers in Malaysia One of the top private developers in Malaysia Private Developer Private Developer Private Developer Private Developer Private Developer

Assistant Manager (Sales and Marketing) Project Manager Assistant Marketing Manager (Logistics) Area Marketing Manager Project Manager Director Director Director Engineer (Special Project)

Commercial Commercial (Special Financing Scheme) Commercial

Branch Manager Branch Manager General Manager Customer Services Officer

Housing Housing Housing and others

Director Principal Partner Senior Auctioneer

Property Property Property Property Property Property Property Property

Director Principal Partner Senior Partner Valuation Manager Principal Housing Reviewer Director Senior Estate Planner Director, Research & Planning Senior Manager Research Analyst

Consultant Consultant Consultant Consultant Consultant Consultant Consultant Consultant

Non-Governmental Organisation (NGO) in Housing Sector NGO1 State E & G House Buyers Association House-Owners (H) H1 State E Salesman (Private Organisation) H2 State E Clerk (Government Organisation) H3 State C Typist (Government Organisation) H4 State C Ass. Driver (Private Organisation) Tenants (T) T1 State E T2 State E T3 State C Total Number of Participants

Top Official

Salesman (Private Organisation) Store Owner Store Owner

mechanism so that low-income house buyers can gain better access to home finance. One-way analysis of variance (ANOVA) using Post-hoc via the Tukey HSD test was adopted for the purpose (Pallant, 2016). The reliability of the 5-point Likert scale measurement (Tables 4 and 5 respectively) was determined using Cronbach's alpha coefficient. The range of internal consistency results among the items on each factor were 0.636–0.774. This is considered adequate and higher than the meek reliability in the range 0.50–0.60 as suggested by Nunnally (1978) as sufficient for this type of study and confirm by Akintoye and Fitzgerald (2000).

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4. Results and discussion The presentation of this section follows the order of the objectives of this paper. Findings of the qualitative research that emerged from the oral interview of the level of pervasiveness of housing loan rejection for LIEs were subjected to secondary source validation. This is one of the contributions to the existing knowledge because of the empirical approach adopted to arrive at the rejection rate. The state government in State C, F, and G is aware of the high rejection rate for house-loan application up to 70%. The government participants confirm this

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position to ascertain the pervasiveness of housing loan rejection because the participants go to different banks and return back to them. Participants (T1, T3, H4, E5, and E6) accuse BNM of lax enforcement towards commercial banks in granting of housing-loan to LIEs. This allegation was countered by B1, B2, and B4; that BNM is only performing its supervisory role in regards to the memo issued to banks in Malaysia. While B3 says, “ …. our intention is to avoid exposing the bank and our esteemed customers to increased credit risks …. ” Table 3 presents the summary of the approved and outstanding housing loan from Malaysian Financial Institutions from 1996 to 2015. The housing loan data available in Table 3 is a combination of all category of residential building. Findings from Table 3 shows that the highest average percent approval across the board is 30.88%, and this took place in 1997 and followed by 28.28% in 1996. Among the least percent approval is 16.85% in 2006 and 13.00% in 1998 respectively. Table 3 results validate the oral interview findings that reports about 70% rejection rate, an indication of possible lax policy and enforcement. Hence, the need for a multifaceted mechanism to address this long existing encumbrance. Findings agree with Ng (2017). He reported that REHDA assessment of rejection rate by banks can be as high as 73%. This study's finding deviates from the Association of Bankers in Malaysia (ABM) and Sze (2017). ABM stated that rejection rates remain as low as 28%. While MayBank Group President said rejection rate is within 20–30% (Aruna, 2016). Obviously, findings from this paper sourced from Bank Negara Annual Report from 1997 to 2016 and oral findings is difficult to reconcile with Sze (2017). The major issues to housing loan rejection from the oral interview findings, which include no collateral, lack of proper documentation, weak employment history, application to the wrong bank, and age of the LIE (NGO1, E3, E8, B3, S3, S7, P6, & S8). Others are high default rate associated with LIEs, repayment incapability, no evidence of regular income, failed verification with central credit reference information system (CCRIS) and other credit report agencies, unwilling to pay and high household debts, hence, resulting to inability to secure housing loans (NGO1, B1, B2, B4, & S7). Participants across board agree that the inability to obtain housing loan even after securing approval

Table 2 Summary of background information on respondents. Category

Classification

Frequency

%

Organisation

Housing Developers Government Housing Department Staff Bankers in Loan Section Estate Managers and Valuers Auctioneers Total Kuala Lumpur Penang Johor Selangor Sarawak Perak Kelantan Kedah Sabah Malacca Pahang Terengganu Negari Sembilan Perlis Labuan Putrajaya Total 0–5 years 6–10 years 11–15 years 16–20 years Above 20 years Total

34 18 32 35 30 149 11 15 12 10 8 7 9 9 9 9 9 9 9 9 5 9 149 0 8 24 36 81 149

22.8 12.1 21.5 23.5 20.1 100 7.4 10.1 8.1 6.7 5.4 4.7 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 3.4 6.0 100 0 5.4 16.1 24.2 54.4 100.0

State/Territory

Work Experience

because, from their experience, only about 30% of the cleared and certified eligible house-buyers for LCH return back to the state from banks with positive results. While participants (B1 and B4) says the rejection rate of LIEs application for house-loan is about 40%. B4 says, “ …. I will prefer to go after one big fish than after small 7 fishes …. .” The state government housing department participants are in the best

Table 3 Approved and outstanding housing loan from 1996 to 2015. Year

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Housing Loan in RM (Million)

Percentage (%)

Approved (Series2)

Outstanding (Series4)

Total Application

Approved (Accepted)

Outstanding (Rejected)

Total

17,281 22,407 11,369 23,566 28,271 32,117 34,965 35,931 42,520 43,601 40,246 56,958 68,425 69,254 88,319 97,260 99,290 124,230 129,051 115,730

43,825 50,156 76,100 83,714 96,300 111,176 126,880 145,795 164,280 180,109 198,663 212,923 232,851 250,110 266,116 299,660 334,413 375,240 426,800 478,178

61,106 72,563 87,469 107280 124,571 143,293 161,845 181,726 206,800 223,710 238,909 269,881 301,276 319,364 354,435 396,920 433,703 499,470 555,851 593,908

28.28 30.88 13.00 21.97 22.69 22.41 21.60 19.77 20.56 19.49 16.85 21.10 22.71 21.68 24.92 24.50 22.89 24.87 23.22 19.49

71.72 69.12 87.00 78.03 77.31 77.59 78.40 80.23 79.44 80.51 83.15 78.90 77.29 78.32 75.08 75.50 77.11 75.13 76.78 80.51

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Source: Bank Negara Annual Report from 1997 to 2016.

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Table 4 Root causes of reluctance by banks to lend house-loan to LIEs. Code Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18

Root Cause

Mean

Bad status of Central Credit Reference Information System LIEs insufficient income Lack of creditworthiness LIEs debt ration exceeded the loan-to-value ratio Fear of inability to recover loan and operating costs from the auction BNM directive harden the process of house-loan approval No evidence of regular income High default rate within LIEs from experience No collateral, and guarantor LIEs see housing provision as a right from the government (Entitlement mentality of some LIEs, hence, tends to default) Lack of proper documentation Weak employment/job history (Mostly new employee) Inability to pay high-interest rate LIEs lack bank requirements for house-loan Marital status of the LIEs (married or divorced) (Joint account) Age of the LIEs (house-loan applicant) Application to the wrong bank Original residence of the LIEs

4.43 4.38 4.38 4.36 4.24 4.23 4.21 4.19 4.12 4.11 3.52 3.38 3.37 3.34 3.14 3.11 3.05 2.96

SD 0.548 0.539 0.526 0.572 0.565 0.508 0.501 0.502 0.506 0.689 0.776 0.882 0.748 0.802 0.771 0.781 0.841 0.706

Rank st

1 2nd 2nd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th

Remark Important Important Important Important Important Important Important Important Important Important Important Neutral Neutral Neutral Neutral Neutral Neutral Neutral

Reliability coefficient (Cronbach's alpha) = 0.636.

from the bank because of unfulfilled 10% down payment is also an issue. The literature survey yielded a total of 17 potential causes from Tan (2012B), Mohammed et al. (2012), Loong (2013), Bakhtyar et al. (2013), Paramesran (2013), Chua (2015), Property Times (2016), Abdul-Aziz et al. (2018) among others; while the oral findings yielded 10 new causes; making a total of 27 possible causes. Thus, the study went further to categorised, filtered duplications, and merged similar or closely related causes in each of the two groups (literature and oral interview) as adopted by Rosenfeld (2014). The process ended up with a final list of 18 independent root causes as presented in Table 4 and was ranked by the 149 respondents. Fig. 2 and Fig. 3 shows a scatter plot and histograms respectively in descending order of the overall mean. This study modified and adopted Abdul-Aziz and Kassim (2011) ranking order of overall mean as 1.00–1.49 = highly not important, 1.50–2.49 = not important, 2.50–3.49 = neutral, 3.50–4.49 = important, 4.50–5.00 = very important. The root causes of 3.50 overall mean and above are the major root causes of reluctance by banks to lend housing loan to LIEs as follows: bad status of central credit reference information system (Q1) was ranked 1st and lack of proper documentation was ranked 11th among others as shown in Table 4. Findings show that weak central credit reference information system (CCRIS) is the main root causes of reluctance by banks to lend housing loans to LIEs as shown in Table 4. The CCRIS is a mechanism created by the Malaysian Central Bank (Bank Negara Malaysia) to synthesises credit information about an intending borrowers or borrowers into formal standardised credit reports via the Credit Bureau, and accessible to the every financial institution. Although this report does not judge their creditworthiness but gives a clear picture of their financial status to the financial institution to take a decision because information captured include outstanding loans (if any), special attention accounts (if any), and loan or credit facility applications made in the past one year and number approved/rejected. This is an indication that 1st to 11th root causes are the major reasons banks are reluctant to lend to LIEs in Malaysia. The need to address this long-time encumbrance facing LIEs cannot be overstressed. This is one of the major contributions of this study using a pragmatic multifaceted approach based on the findings so that homeownership for Malaysian household can become a reality for all. This finding agrees with Tan (2012B), Loong (2013), Bakhtyar et al. (2013), Paramesran (2013), and Abdul-

Aziz et al. (2018). They opined that low-income, poor credit history, and lack of collateral are the major possible causes of reluctance by banks to lend housing loan to LIEs but lacked empirical evidence. Also, findings agree with Property Times (2016) that identified a case of unwillingness to service the loan. House buyers in this category feels that it is their right and part of government responsibilities to provide them home at no cost. This view is derived from government slogan “Home Owning Democracy Concept,” translated to mean “One Democracy, One Home, and One Malaysian Household.” In regard to Objective Three, findings from the oral interviews were subjected to further questionnaire survey. The possible policy solutions that emerged from the oral findings that can facilitate purchase of LCH and mitigate reluctance by banks to lend housing loan to LIEs, which include the federal and states should set up housing loan scheme for only LIEs (E3, E4, E6, P8, P9, B3, S7, & S8); rent-to-own via managed by an independent agency should be strengthened (S7 & S8); the government should buy LCH and place them in a rent-to-own scheme and managed by an independent agency via a provision in the yearly budget (NGO1 & S8); and self-employed should be encouraged to enrol with EPF (B4). Others are EPF Account II should be reviewed upward from 30% to 50% as down payment for the house purchase (NGO1), the government should ensure the enforcement and compliance of EPF from the organised private sector and employer that default should be sanction accordingly (NGO1); joint education for LIEs via video, social media, roadwork by banks, EPF, and government housing agencies (S8) should be encouraged; and upward review of LIEs household income to RM1,500 minimum (S3, S7, E5, E6, P9, & NGO1). Also, LIEs should work out an alternative source of income (B4); BNM should be forceful in monitoring banks (NGO1 & S8) and state and federal governments should provide subsidies for a down payment in the event that the LIEs cannot afford to provide down payment (S3, S7, S8, P6, & NGO1) among other. Table 5 presents the 15 possible solutions from the qualitative findings and compare the mean of the various sub-groups levels of agreement in regards to the suggested new mechanism so that lowincome house buyers can gain better access to home finance. Table 5 shows that among the 15 possible solutions evaluated, Q19 was ranked 1st with a mean score (4.42), others are shown in Table 5. This finding shows an overall mean range of 4.42 to 3.77. This shows that majority of the respondents agree with the findings from the oral interviews.

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4.38 4.26 4.03 4.38 4.38 4.21 4.24 4.38 4.26 4.18 4.24 4.09 4.03 4.26 4.09

4.44 4.33 4.44 4.06 4.17 4.22 4.33 4.00 4.11 4.17 4.17 4.06 4.00 4.11 4.22

4.34 4.38 4.34 4.28 4.28 4.28 4.22 4.22 4.22 4.28 4.22 4.06 4.22 2.66 2.47

4.40 4.17 4.34 4.29 4.29 4.43 4.23 4.23 4.20 4.31 4.23 4.40 4.31 4.34 4.34

4.57 4.63 4.57 4.37 4.33 4.33 4.40 4.30 4.30 4.20 4.27 4.23 4.20 4.10 3.87

0.560 0.532 0.631 0.551 0.503 0.516 0.531 0.532 0.594 0.550 0.495 0.648 0.562 0.997 1.053

0.715 3.592 3.340 1.202 0.589 0.969 0.668 1.660 0.332 0.428 0.117 1.691 1.626 26.876 28.855

0.583 0.008 0.021 0.312 0.671 0.427 0.615 0.163 0.856 0.788 0.976 0.155 0.171 0.000 0.000

0.02 0.09 0.09 0.03 0.02 0.03 0.02 0.04 0.01 0.01 0.00 0.05 0.04 0.43 0.45

Also, the finding is statistically significant difference at p < 0.05 level in Q21, Q20, Q33, and Q32 scores because the Sig is less than 0.05. This statistical significance is clear in the effect size as shown using eta squared, as shown in the last column of Table 5. In line with Cohen's thumb rule, this indicates a highly large effect for Q33 (0.45) and Q32 (0.43) while a medium effect for Q21 (0.09) and Q20 (0.09) respectively (Cohen, 1988 pp.284–287). The significant difference among the mean scores was identified using the Post-hoc comparisons and adopted the Tukey HSD test. This indicates that the Q21 mean score for housing developers is significantly different from the auctioneers. While Q20 mean score for auctioneers is significantly different from housing developers and valuers. This finding indicates that the perception that “… government should review Employee Providence Fund (EPF) Account 11 contribution of LIEs from 30% to 50% ….” is higher in the auctioneers sub-groups than the other two sub-groups (valuers and housing developers). Similarly, Q33 and Q32 mean score for bankers is significantly different from housing developers, government housing department staff, valuers, and auctioneers. This finding shows that bankers are not willing to subsidies hidden charges on LIEs housing-loan from their corporate social responsibility and also not willing to lower the down payment (10%) that could have increased the chances of LIEs accessing housing loan. This finding agrees with Lens (2017) that suggested subsidy policy should be given to the extremely low-income group to enable them to secure home. The study findings agree with the two major parties manifesto (in the just concluded 14th Malaysian general election) for the need for viable subsidies for LIEs (Daily, 2018). Studies show that subsidies are provided for affordable housing but tailored towards other types of affordable housing, such as MyDeposit scheme target middle class (M40) first-time house-buyers to pay the deposit, limit to 10% of the house price or a maximum of RM30,000, for houses less than RM500,000. Similarly, for MyFirstHome, this assists the first-time house-buyers that earned less than RM3,000 a month to obtain 100% financing to buy a home within RM100,000 to RM220,000 (Tan, 2016). Thus, the need for the governments to set-up housing loan scheme for LIEs. The proposed scheme should be accessible to only LIEs for the purpose of purchase of LCH only. Findings from the oral interview suggest that the government should strengthen rent-to-own via independent agency because the scheme does not involve large sum to become house-owner. The finding agrees with Cagamas recommendation on rent-to-own (Thean, 2017). There is the need to persuades the government to sustain the rent-to-own scheme while findings from the present study urge governments to buy LCH on auction and place them on rent-to-own scheme via an independent agency for the management of the property. This would mitigate the habit of unwilling to pay because it is government property. This finding agrees with NikMustapha, Abdul-Rashid, and Nasir (2011) that opined the need for intending housing loan seeker to have a meeting with the housing loan officials for details and requirement. This concept can educate selfemployed with the amended EPF Act 1991 as amended 2012 (Act 452), voluntary participation (irregular income earners) of those who are not covered under the EPF law are eligible to enrol in EPF. Finding agrees with Tan (2012A), he affirmed that wage desperation within the income earners and this has resulted in poorest households and high housing loan rejection for this category of people. Finding also agrees with the proposal by Pakatan Harapan's (PH) (Chie, 2017), This was before the 14th Malaysian general election, while the then ruling party (Barisan Nasional) (now opposition) plans to raise the minimum wage in phases to at least RM1,500 within five years (Daily, 2018).

Reliability coefficient (Cronbach's alpha) = 0.774 The mean difference is significant at the 0.05 level.

1st 2nd 3th 4th 4th 4th 7th 8th 9th 9th 9th 12th 13th 14th 15th There should be joint education (banks, EPF, & housing dept) The government should review EPF Account 11 from 30% to 50% for LIE for house purchase The government should increase the minimum wage Governments should set-up a housing loan scheme for LIEs Rent-to-own should be strengthened and sustained EPF Account 11 should allow for down payment for LIEs BNM should be more forceful with banks The government should buy LCH, place them on rent-to-own scheme managed by independent agent The government should subsidise interest rates for LIEs loan A joint task force should be established to curb unethical job A policy against supplementary agreement should be enforced by BNM The government should subsidies for LIEs for hidden charges The government should subsidies for LIEs for down payment Banks should lower the 10% down payment, only for LIEs Banks should use part of their corporate social responsibility to subsidies hidden charges for LIEs Q19 Q20 Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30 Q31 Q32 Q33

4.42 4.35 4.33 4.30 4.30 4.30 4.28 4.25 4.23 4.23 4.23 4.18 4.17 3.89 3.77

Rank Possible solutions Code

Table 5 Suggested mechanism to mitigate reluctance by banks to lend house-loan to LIEs.

Overall

Developers

Govt Staff

Bankers

Est. Valuers

Auctioneers

S.D

F Stat.

Sig

Eta Squared

A. Ebekozien, et al.

5. Conclusion and recommendation The need for house buyers to be financially responsible, discipline and plan towards owning a home cannot be overstressed, although the government should lead to ameliorate and enhance programmes and projects towards homeownership most especially for the LIEs. 33

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Fig. 2. Scatter plot of root causes of reluctance by banks to lend housing loan to LIEs.

Fig. 3. Histogram of root causes of reluctance by banks to lend housing loan to LIEs.

Therefore, government participation in both housing finance as well as home ownership for the LIEs is inevitable as displaced by the Singaporean Government. The study found that the pervasiveness of housing loan rejection for the LIEs is about 70%. This is possibly one of the variables enhancing the Malaysian LCH demand-supply gap. This has significantly reduced the positive impact of governments (federal and states) and private housing developers on LCH delivery that ought to have been alleviated even with various programmes and projects to enhance home ownership over the years. This study identified the root causes of the housing loan rejection and proffer multifaceted pragmatic ways to mitigate them. The “quantitised” findings were validated by the Malaysian LCH policymakers. The study shows that new evidence to the current body of literature in regards to the inaccessibility of LIEs to housing loan has been added. While rent-to-own managed by an independent agency, joint task force, joint education for LIEs among others are some of the possible solutions proffer that emerged from this paper with a paucity of literature in the past. The findings of the present study have pragmatic significance. Therefore, the paper concludes that the governemnt should set-up a special housing loan scheme that can be accessible to only LIEs such as the Syarikat Perumahan Wilayah Persekutuan (SPWP) and financially empowered across the country to mitigate inaccessibility to eligible homeowners within the low-income target. Also, the government should buy-up LCH in the auction market and place them on a rent-toown scheme, to be managed by the indepenedent agency. The existing scheme (rent-to-own) should be sustained and strengthened by the

government; this would mitigate the issue of inaccessibility of housing loan because it does not involve any financial commitment from the LIEs end. The study recommends a minimum of RM1,500 per month income for LIEs to enable some of them to be eligible by being creditworthy to secure approval for housing loan. The informal LIEs (selfemployed person) should be encouraged to enrol with EPF while the EPF Account 11 should be reviewed from 30% to 50% for the purpose of making down payment for housing loan. This is one of the models used by the Singaporean Government to finance the purchase of homes and promote home ownership. In addition, policymakers and scholars will be able to extract new knowledge and treat the findings as an avenue for knowledge-based development and advancement in regards to root causes of inaccessibility of LIEs to housing loan in Malaysia constructs that would be tested in future studies. Acknowledgment This work was supported by the Universiti Sains Malaysia, with grant no: 1001/PPBGN/816296. Appendix A. Supplementary data Supplementary data to this article can be found online at https:// doi.org/10.1016/j.habitatint.2019.03.009. 34

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