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THE growing use of the ‘Buy Now, Pay Later’ (BNPL) scheme in Malaysia is raising concerns about its potential to contribute to higher debt levels, especially as the ease of accessing credit becomes more widespread.
While BNPL offers a convenient way for consumers to manage short-term purchases, experts are warning about the need for proper financial literacy to avoid the risks of excessive borrowing.
Bernama, in an exclusive, stated today that according to the Second Finance Minister, Datuk Seri Amir Hamzah Azizan, BNPL transactions have surged to RM7.1 billion by the second half of 2024, compared to RM4.9 billion in the first half of the same year.
As of December 2024, there were 5.1 million active BNPL users, the majority of whom are aged between 21 and 45 and have a monthly income of under RM5,000.
Commenting on the trend, Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said this growth reflects both consumer spending patterns and the wider financial landscape.
"One can only repay debt if they have an income, which indicates that they have employment," he explained.
“Overall, the rise in BNPL usage reflects better access to credit, particularly for those who may have previously found it difficult to obtain financing through traditional banking channels."
The Risks of Uncontrolled Usage
However, Dr Afzanizam stressed that unchecked use of BNPL could lead to excessive debt and even "predatory lending," where consumers borrow more than they can afford.
"The main issue here is whether this facility is being misused or overused. When consumers spend beyond their means, it can result in serious debt problems, including bankruptcy," he warned.
He also linked the increased adoption of BNPL to the 'Fear of Missing Out' (FOMO) phenomenon, fuelled by the influence of social media. "Consumers are influenced by what they see online, leading to impulsive purchases that they cannot afford," Bernama cited him saying.
Dr Afzanizam said the importance of financial literacy to ensure that consumers understand the risks and responsibilities associated with BNPL.
"If someone understands their monthly budget and uses BNPL strategically, it can be beneficial. But they must be disciplined and ensure they pay within the stipulated period to avoid high interest charges," he advised.
He also shared a perspective from Islam on debt, noting that it is a responsibility that should be managed carefully.
"In a hadith narrated by Imam Al-Baihaqi, Prophet Muhammad (PBUH) warned against the dangers of debt.
He said: 'Beware of debt, as during the day it brings humiliation, and at night it brings anxiety.' This highlights that debt not only causes financial strain but can also affect a person's well-being if not managed properly."
Consumer Credit Act 2025
In response to these concerns, the Malaysian government is finalising the Consumer Credit Act 2025, aimed at regulating the credit industry in the country, including BNPL schemes. According to the Ministry of Finance, the bill will be enforced once it receives parliamentary approval.
In his Budget 2025 speech, Prime Minister Datuk Seri Anwar Ibrahim announced that the Consumer Credit Bill (RUUKP) would establish a comprehensive regulatory framework for credit activities, including loan provisions under the Moneylending Act 400.
On March 22, Assistant Governor of Bank Negara Malaysia, Abu Hassan Alshari Yahaya, who also heads the Consumer Credit Oversight Board (CCOB), said the Consumer Credit Bill is expected to be gazetted by the end of the year.
Dr Afzanizam welcomed the move, which aligns with Bank Negara’s efforts to tackle predatory lending and household debt issues.
Exercise Caution with BNPL Before Raya Spending
Meanwhile, the Credit Counseling and Debt Management Agency (AKPK) has urged the public to exercise caution with BNPL, especially as the festive season of Ramadan approaches.
Nirmala Supramaniam, Head of Financial Education for the Household Sector at AKPK, pointed out that while BNPL offers short-term convenience, it can lead to long-term financial risks if not managed properly.
"We must understand that BNPL is a form of loan. Therefore, limit its use and ensure that it is only for purchases that are truly necessary. Do not rely too much on BNPL if you do not have the ability to repay it within the given period," she said.
She advised consumers to avoid impulsive purchases using BNPL.
"Before using BNPL, ask yourself: 'Do I really need this item? Can I pay for it in full within the stipulated time?' And make sure to understand the terms and conditions of BNPL, including any hidden charges or interest if payments are delayed."
On the long-term impact of BNPL, Nirmala warned that excessive reliance on BNPL could affect a consumer’s ability to secure other loans, thus slowing down economic growth.
"If consumers are overly dependent on BNPL, their borrowing capacity for other loans will be impaired. This could lead to a decrease in overall spending, which in turn could impact the economy," she said.
However, she also noted that the competition created by BNPL services has prompted banks to offer more competitive products.
"Financial institutions now have to adjust their products to stay relevant, including offering lower interest rates or other incentives. This could ultimately benefit consumers," Nirmala added.
As the festive season approaches, she stressed that Eid should be a time of joy, not financial worry.
"With proper planning and restraint, consumers can enjoy the festivities without the burden of debt," she added. - March 23, 2025
