KUALA LUMPUR, June 18 — Addiction to shopping topped the reasons why younger people get into serious debt problems, according to a survey by the Credit Counselling and Management Agency (AKPK) that polled over a million Malaysians who are in financial distress.
Thirty eight per cent of the AKPK survey respondents said they got into debt because of spending on goods or services they don’t actually need, with close to a third within this category admitting they typically buy on impulse, Utusan Malaysia reported today.
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A fifth said they buy as a way to cope with stress while 19.5 per cent admitted they buy without first thinking. From the 1.5 million people that have sought AKPK’s help, 65 per cent of them are between 28 and 30.
“They make the bulk of those getting help from us. Typically the four financial facilities that enable these debts are credit cards and personal loans. Then when they get married and have kids they take up home and car loans,” Rohanizam Talib, AKPK corporate communication chief, was quoted as saying.
Household debt reached RM1.53 trillion by the end of 2023 or around 84.2 per cent of the country’s gross domestic product, which has prompted economists to caution about a looming debt crisis if policymakers fail to intervene.
Some economists believe debt levels exceeding 80 per cent of GDP can negatively impact economic growth.
In Malaysia, many young people get into debt even before the start of working life.
AKPK said a large number of graduates are already saddled with student loans, mostly in the form of National Education Fund Corporation, and then go on to pile on more debt once they get hired as more credit facilities are made available.
A previous survey on workers aged 28 to 30 showed debt from credit card and personal loans were the most to be restructured, possibly indicative of reckless spending. Car and home loans were the least to be restructured.
The “shopping addiction” problem appeared worst with the emergence of buy-now-pay-later schemes, which expanded rapidly during the Covid-19 pandemic as people turned to online platforms and delivery services to do their shopping.
“Most of those who always take up credit are the youths because they have a tendency to live a lavish lifestyle,” Rosnizam was quoted as saying.
“They spend based on this YOLO (you only live once) or FOMO (fear of missing out) mentality. This mindset is what usually drives them to spend on credit.”
Housing loans form the bulk of total household liabilities, making up over 60 per cent of the RM1.53 trillion debt accrued for 2023, a staggering 4.2 per cent increase from the previous year. Yet house prices grew at 4.1 per cent that same period, increasing at double the rate of income.
Economists said Malaysia’s growth has been largely debt-financed, with credit significantly helping sustain the private spending that is driving GDP.
A key reason for this is stagnant nominal wage growth.
The average household spending has roughly quadrupled since 1993, from RM1,161 to RM4,534 per month, while the median income increased just slightly from RM1,500 to RM2,062 from 2010 to 2020, according to the Household Expenditure Survey Department of Statistics Malaysia.
Spending on housing, water, electricity, and gas has increased by 440 per cet in that same period, from RM245 per month in 1993 to RM1,068 per month in 2019. Spending on groceries and eating in restaurants has risen by 280 per cent and 440 per cent, respectively.