Almost one in three Malaysians have ‘burdensome’ debts
Some 30% of Malaysian citizens say they have ‘burdensome’ debt, according to the Bank Negara Malaysia’s (BNM) Financial Capability and Inclusion Side survey (FCI 2021).
BNM’s financial inclusion department director, Nor Rafidz Nazri, said the survey found that in many cases these debts were acquired by people in their youth or during their early working life.
He said: “This behaviour is often driven by fear of missing out on lifestyle. Besides, some debts were for unexpected expenses, such as accident or death of sole breadwinner.
“Such risks could actually be managed affordably through insurance protection, such as Perlindungan Tenang scheme,” he said at the #NoFOMO Social Wellness Challenge (#NoFOMOChallenge) campaign launch.
He added that through the basic protection provided under Perlindungan Tenang, Malaysians could protect themselves for a premium of just RM30 per year, for coverage of between RM10,000 and RM30,000.
The survey also found that personal financial risk management was not a priority for many Malaysians, with 47% saying they would have difficulty raising RM1,000 in an emergency. And one in three said they were not interested in getting insurance.
Additionally, 27% of Malaysians were worried about their ability to meet their expenditure when they finish working, while 50% of young Malaysian have no or have not thought about any retirement strategy.
Nor Rafidz said: “Attitude like living for today and letting tomorrow takes care of itself should be avoided. We should actively manage our personal financial risks to provide financial safety net during unexpected events, in order to achieve our financial well-being.”
As a member of the Financial Education Network that aims to raise the level of financial literacy in Malaysia, Nor Rafidz said BNM conducts FCI Surveys periodically to measure the progress of financial literacy among Malaysians.
Two FCI surveys were conducted in 2015 and 2018, while the latest one was conducted in 2021, right after the economy re-opened following the COVID-19 pandemic.
The #NoFOMOChallenge campaign, organised by the Life Insurance Association of Malaysia (LIAM) and 16 LIAM member companies, is targeting the young generation as the group is a key target segment in the industry’s consumer education agenda.
LIAM president Loh Guat Lan said the association has been “actively engaging with the young generation for many years because it is crucial for them to be well-equipped with financial knowledge and should be exposed to personal financial planning as early as possible”.
She said this is to help them make better informed decisions and become financially responsible adults.
“We strive to reach out to more of them so that they are exposed to values in life” she said. “The ongoing consumer education is seen as a strategy to combat the misconceptions on insurance, to educate on key issues and to guide them to become educated consumers.
“Hence, developing healthy financial habits early can set a strong foundation, leading to a better financial decision-making, and reducing the likelihood of falling into debt or financial difficulties later on in life.”
The #NoFOMOChallenge, designed to raise awareness of the industry among young people, runs until May 2023.
Government rules out the reintroduction of the GST for debt recovery
Malaysia has no plans to reintroduce a goods and services tax (GST) or any other broad-based consumption tax, Prime Minister Anwar Ibrahim has confirmed.
He said the government will instead look to reduce subsidies enjoyed by higher earners, Anwar, who is also finance minister, told parliament.
The PM has set up a review of Malaysia’s subsidy programme, prioritising aid for low-income groups, amid high government debt levels and rising living costs. Government debt and liabilities stand at 1.5 trillion ringgit ($114.86 billion), or about 82% of GDP, Anwar said.
Malaysia offers subsidies to all citizens, with transport fuel and cooking oil accounting for the biggest cost to the government. It also subsidises electricity, sugar and flour.
“We need to find ways to increase revenue and conduct a public expenditure review without burdening the people,” he said.
