Bankruptcy has become a growing concern among young Malaysians, with personal loans emerging as the leading cause. According to the Insolvency Department, 15,413 bankruptcy cases in 2024, representing 49.11% of total bankruptcies, were linked to personal loans.
Director-general Datuk M. Bakri Abd Majid reported a worrying rise in such cases, increasing to 2,776 in 2024 from 2,225 in 2023. Most affected individuals are aged 25 to 44, the demographic often drawn to a lifestyle of luxury but lacking sound financial management.
He stated that young people are easily attracted to a luxurious lifestyle, and poor financial management which leads them into unpaid loan debt, eventually resulting in bankruptcy.
High-Interest Rates: A Catalyst for Debt Spiral
Adding to the problem is the steep interest rates on credit cards, ranging from 15% to 18% annually. For young professionals just entering the workforce, this financial burden often spirals out of control, making debt repayment increasingly challenging.
Tighter Loan Approval Measures Needed
In response to the alarming trend, Bakri urged financial institutions to adopt stricter conditions when approving loans for young individuals.
This approach could help curb the rise in bankruptcies by ensuring that only those with the financial capacity to repay are granted loans.
A Glimmer of Hope: Second Chance Policy
Despite the grim numbers, there has been progress in reducing overall bankruptcy cases. The introduction of the Second Chance Policy in 2024 resulted in 142,510 individuals being discharged from bankruptcy, surpassing the target of 130,000. This achievement marks a significant drop in the number of bankrupt individuals, now at 133,844 compared to 233,483 in 2023.
Bakri emphasized the importance of bankrupt individuals cooperating with the department to resolve their status. He highlighted that restrictions under the Insolvency Act 1967, such as travel bans and disqualifications from becoming company directors, could be eased through applications for a Certificate of Discharge (KPI) and compliance with specific conditions.
Financial Education: A Necessity for Youth
Addressing this issue requires not only policy changes but also improved financial literacy among young Malaysians.
By equipping the youth with financial management skills and fostering responsible spending habits, the alarming trend of personal loan-driven bankruptcies could be mitigated, paving the way for a financially secure future.
By: Kpost
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