Reducing-balance hire purchase now offered by 14 of 20 banks in Malaysia
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Key points
- The amended Hire-Purchase Act (in force 1 June) abolishes the flat-rate method and the Rule of 78.
- 14 of 20 banks now offer reducing-balance financing; remaining 6 banks to migrate by 31 December 2026.
- Providers that are not ready have a grace period until 31 March 2027.
Implications
Facts
Adoption: 14 of 20 banks offer hire-purchase loans on the reducing-balance method; remaining 6 banks to migrate by 31 December 2026. The grace period ends on 31 March 2027, with full application from 1 April. Source: remarks by Armizan, Minister of Domestic Trade and Cost of Living (Malay Mail, 19 September). 1
Framework: the amended Hire-Purchase Act took effect on 1 June 2026. It abolishes the flat-rate method and the Rule of 78, and interest is calculated on the outstanding balance. Same source.
Coverage: the ministry aims for 80% of hire-purchase providers to comply by year-end. 429 operators registered with the Malaysian Hire Purchase Companies Association are affected. Same source.
Analysis
Under the Rule of 78, lenders captured much of the interest early even if a loan was repaid ahead of schedule; under the reducing-balance method, more early repayment means less interest income. Effective-rate pricing also makes comparison across lenders easier. In Malaysia, licensing of BNPL and other providers under the Consumer Credit Act 2025 also began on 1 June, so 2026 is a year in which both price disclosure and provider regulation in consumer credit tightened.
Counterpoints and uncertainties
Large banks have already migrated, so the impact may concentrate on smaller non-bank providers. The view that effective-rate disclosure will intensify competition is speculative; actual pricing trends will show whether it does.
Key figures
- Banks offering reducing-balance hire purchase: 14 of 20 banks (remaining 6 banks to migrate by 31 December 2026). Banks offering hire-purchase loans under the reducing-balance method. Hire-purchase financing, Malaysia. Basis date: 19 Sep 2026. Source: Malay Mail: Fourteen of 20 banks now offer reducing balance hire-purchase financing, says Armizan
Sources
SEA Lending Brief
A weekly summary of lending, credit and regulation across Southeast Asia.
Reports are for information only and are not investment advice.
A Japanese version of this article is available: 日本語版