Debts & Lifestyle

Civil servants are finding themselves spiralling deeper into debt as more among them fall prey to the lure of taking hefty personal loans to foot the bill for weddings, home furnishing, or even indulgences like expensive smartphones and cars.

Many even have zero savings to cushion their fall in times of financial emergencies but still apply for loans with great ease, banking on their job security and the easy availability of personal financing offered by non-bank financial institutions (NBFIs). The NBFIs include, among others, Bank Rakyat Sdn Bhd and Malaysia Building Society Bhd (MBSB), and development financial institutions (DFIs) such as Agrobank, SME Bank and Lembaga Tabung Haji.

Encik Ahmad is among those who have fallen into such a trap. Despite having a monthly salary of just RM1,700, 32-year-old Public Works Department general worker pays RM1,480 every month to service his personal and car loans without worrying much about defaulting on his debt.

Like many in the civil service, he is confident of his guaranteed job security and banks generally share the same sentiment as they comfortably issue large personal loans to government employees. If you work in the government, it’s easier to get a loan. Repaying loan instalment must not exceed 60 per cent of your salary every month.

Ahmad supplements his income with RM2,000 a month on average from shooting weddings part-time. He supports a stay-at-home wife and two young sons aged five years and seven months respectively in a single-storey house in Jitra, Kedah, that was provided for by his father-in-law.

He admitted that he finds it hard to save and only has “just enough to eat”, but had decided to buy a thousand-ringgit smartphone to keep up with the latest trend. “Smartphones are a necessity, everyone has a smartphone. Even makciks (aunts) are using smartphones.”

He added that a Honda Civic was preferable to a cheaper local car because foreign cars have “better quality”, saying: “If you want to buy a car, you want it to last long.” Ahmad stressed that he took out a personal loan to buy “necessities, not luxuries”, pointing out that a RM90,000 loan was “not much” as he knows others who have borrowed RM100,000 or RM200,000.

In recent months, economists stressed the need for stricter supervision on NBFIs that issue personal loans primarily to civil servants, voicing concern about the vulnerability of low-income households to economic shocks.

 

Bank Negara Malaysia (BNM) reported in March that 80 per cent of personal loans from NBFIs, which are not supervised by the central bank, goes to government employees with household incomes of less than RM3,000 a month.