The bankruptcy of young people in Malaysia penalizes consumption

KUALA LUMPUR, Sept 7 (Reuters) – Malaysia, which is aiming to become a “high-income” nation by 2020, is seeing a rise in the number of young people struggling with debts higher than they can handle.

Millennials borrowing to buy homes, cars and other items have added to the burden on households. Malaysian banks’ bad debts are still low, but there has been a noticeable increase in the number of people under 35 declaring bankruptcy.

To the extent that the financial difficulties of young people reduce personal consumption, they are another problem for the Malaysian economy in addition to low commodity prices, a struggling currency and a political crisis resulting from allegations of corruption involving Prime Minister Najib Razak, who denies wrongdoing.

Private consumption growth is slowing, and if this continues, Malaysia’s growth rate could be hit.

“Households are accumulating debt faster than their incomes are growing, which will likely lead to repayment difficulties when the credit cycle turns,” Standard & Poor’s wrote in an August report.

According to S&P, Malaysia has the highest personal debt among 14 Asian economies, with the rate rising to 88% of gross domestic product, up from around 60% in 2008.

Malaysia’s Insolvency Department says 5,547 people under the age of 35 were declared bankrupt last year, more than double the number in 2005, the first year for which it released such data. Last year, the number of under-25s was 635, triple the figure for the previous year.

In Malaysia, a person can be declared bankrupt if a creditor shows that they have an outstanding debt of at least 30,000 ringgits. ($7,116)

Vocational school graduate Hafiz Adam thought the future was bright when he took out a nearly $20,000 bank loan to start a marketing business in Kuala Lumpur. But that didn’t last and two years ago, at age 26, he was declared bankrupt.

“I’m fighting to survive on my own,” says Hafiz, who is now employed as a security guard and is paying off his debt – through a deal facilitated by the Insolvency Department – as he scrambles to raise its Louisiana bankruptcy attorney status.


LM, a 34-year-old mother who asked to be identified by her initials, has accumulated loans to support her three children and her parents.

“I can’t buy a cheap apartment because I can’t pay the deposit,” she said.

Asked why Malaysia has seen a growing number of young bankrupts, the Insolvency Department said via email that after graduation most ‘are burdened with student loans Once they start working, they need transport and accommodation.

Many young Malaysians have grown accustomed to rapid economic growth and a relaxed attitude to debt. Banks, meanwhile, rushed to lend to them.

“Prompted both by national policy and a desire to diversify away from corporate lending, banks have been strongly pursuing the consumer market,” said Nurhisham Hussein, chief economist at the Employees Provident Fund, adding that banks were not solely responsible.

“Consumers themselves have embraced the new openness and have steadily taken on debt, especially as interest rates have gradually fallen over the past 15 years,” he added.

For Hafiz, the idea of ​​owning a home – a goal when he started his business – is remote. “I sleep right after work because I’m tired. It’s my routine.

($1 = RM4.25)

Editing by Nicholas Owen and Richard Borsuk

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