Citing statistics from the central bank, Dr Wan Azizah said while the percentage of credit-card debt has narrowed to 2.3% in the third quarter this year (3Q18) from 2.86% in the corresponding period five years ago, the percentage of personal financing was twice the amount at 4.47% in 3Q18.
“I was told that personal financing is often the escape route for many with huge credit-card balances. Financial institutions sometimes offer such conversion packages due to the lower financing charges of personal financing compared to that of credit cards.
“This so-called ‘solution’ sometimes just multiplies the problem by increasing the person’s liabilities instead of reducing it. This is something that should be looked into,” she said at the inaugural AKPK Financial Literacy Symposium 2018 in Petaling Jaya, Selangor, yesterday.
The worrying trend is also parallel to a recent survey carried out by Credit Counselling and Debt Management Agency (AKPK), a financial counselling agency set up by Bank Negara Malaysia (BNM), which found that 18% of Malaysian working adults were unable to make any savings in the last six months.
The report also highlighted that three out of 10, or 28% of working adults, needed to borrow money to buy essential goods.
Some of the reasons that were attributed to this scenario include higher living costs, lack of surplus income, high debt, lack of financial planning skills and frequent overspending.
AKPK CEO Azaddin Ngah Tasir said intervention is needed to help working adults escape the grip of indebtedness.
“This is evident from the research, as they expressed concern about settling their debts as quickly as possible,” he added.
Data from the Insolvency Department showed a total of 13,338 registered bankruptcy cases recorded between January and September this year, a 2.6% drop from 13,694 cases reported over the same period last year.
The overall number of bankruptcies posted in 2017 was 18,227, with 41.36% or 7,539 comprised of those from the private sector and 4.77% or 869 from the public sector.
At the state level, Selangor documented the highest number of insolvencies at 4,458, followed by Johor Baru (2,086) and the Federal Territories (1,874).
The decline in the number of bankruptcies over the last few years is a positive sign and will not require any further restrictive measures from BNM, said assistant governor of the central bank Abu Hassan Alshari Yahaya. Abu Hassan sits on the board of AKPK.
“We don’t see that (any further tightening) will take place. The responsible lending guidelines are already there. It is a matter of implementation and how banks continue to be diligent in terms of assessing their customers.
“In that sense, we believe that whatever measures that have been put now are sufficient,” he said.
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