Recent business developments highlight an important shift in Malaysia’s banking sector. CIMB, one of the nation’s largest financial institutions, initially projected loan growth of 5–7% for the year. However, the figure has since declined to approximately 2%.
This significant gap between projections and actual performance is closely linked to external factors—particularly global trade tensions and tariff disputes—that have led to greater caution among businesses.
Global Challenges, Local Implications
When countries impose higher tariffs on one another’s goods, the consequences extend far beyond direct exporters. Export-oriented firms face higher costs, reduced competitiveness, and declining demand. At the same time, businesses without direct international exposure are also affected due to the interconnected nature of the global economy.
In such an environment of heightened uncertainty, many small and medium enterprises (SMEs) and corporates are choosing to avoid major risks. One of the first areas where this caution is evident is in their reluctance to take on new loans.
Why Businesses Are Holding Back
Under normal circumstances, expansion plans—such as entering new markets—would involve securing bank financing to fund growth. However, with uncertainty surrounding tariffs, supply chain disruptions, and demand stability, many business owners are delaying such initiatives.
Instead of borrowing to expand, companies are adopting a more defensive strategy, focusing on maintaining current operations until the global outlook becomes clearer.
Banks Exercising Prudence
This cautious approach is not limited to businesses alone. Financial institutions, including CIMB, are also tightening their lending practices. Elevated risks in the market make loan defaults more likely, and excessive exposure could negatively affect banks’ balance sheets.
As a result, the slowdown in loan growth reflects both reduced demand from businesses and stricter lending criteria from banks.
Why This Matters for Malaysia
Loan growth plays a vital role in driving economic activity. Beyond generating revenue for banks, credit availability supports business expansion, job creation, and new investment opportunities.
A prolonged slowdown in loan growth can therefore signal broader economic caution and may contribute to a loss of momentum in Malaysia’s overall economic performance.
Conclusion
CIMB’s moderation in loan growth serves as a timely reminder that Malaysia’s economy is not immune to global developments. Tariffs, trade disputes, and economic uncertainty abroad can quickly influence domestic financial conditions.
For SMEs, the way forward lies in maintaining flexibility. Rather than pausing growth entirely, businesses should consider alternative financing solutions, leverage digital opportunities, and prepare for future recovery when global conditions improve.
Ultimately, adaptability will determine which businesses are best positioned to seize opportunities once stability returns—because opportunities, as always, are time-sensitive.