The Finance Ministry recently announced that the household debt for Malaysians has reached a staggering amount of RM1.03 trillion, which is 89.1% of Malaysia’s gross domestic product (GDP).
Out of that amount, 62.6% of it comprises long-term loans from banks and non-banking financial institutions for property acquisition and financial investments.
Since 2010, the Finance Ministry has implemented several measures in stages to reduce household debt. Following that, there was a decrease in household debt growth to 6.5% in 2016 from 7.3% in 2015 and 14.2% in 2014, said Deputy Finance Minister Datuk Chua Tee Yong.
When asked what the Finance Ministry was doing to prevent individuals between 25 and 30 from being declared bankrupt due to credit card debt, the Chua clarified that credit card debt was not one of the main reasons why individuals were made bankrupt.
“The biggest reason why individuals are made bankrupt is not because they are unable to settle their card debt but because of personal loans.
“For example, out of the 18,457 individuals made bankrupt last year, 1,770 were due to credit card debt,” he added.
As a precaution, banks only approve credit card applications of those who qualify and the approval rate is only between 50% and 60%.
Educating individuals on spending habits and financial management are crucial in keeping household debt low.
Approximately 204,000 individuals have taken part in the Power Finance Management Programme since 2010. The Credit Management Agency had also assisted 148,000 borrowers in managing their finances since 2010.
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