KUALA LUMPUR: Some Malaysians are facing difficulty in repaying their loans, especially those earning less than RM5,000 per month and residing the urban areas, says Prime Minister Tun Dr Mahathir Mohamad.
He said the household debt in the country now stands at 82.1% of the country’s gross domestic product (GDP).
This, he said, is higher compared to other countries with greater income capita such as Italy, which is at 40.3% of its GDP, Japan (58.1%), and the United States (76.3%).
“Although the risk of household debt on the domestic finance is under control, there are signs of difficulties in repaying loans, especially among those earning less than RM5,000 monthly and are living in urban areas,” he said in his opening speech at the National Financial Literacy Strategy 2019-2023 yesterday.
Dr Mahathir said that this observation is also supported by the increasing number of borrowers who participate in debt management programmes organised by the Credit Counselling and Debt Management Agency (AKPK).
“I was made to understand that 80% of the participants in these programmes were too optimistic about their ability to repay their debts and bear the cost of living when they decided to borrow money.
“Some did not even think of repaying these debts when borrowing,” he added.
Therefore, he said it is important to increase financial literacy among the people.
Dr Mahathir said that the government will expedite the creation of the Consumer Credit Act to protect consumers and encourage a healthy credit market.
The formation of the new Consumer Credit law will strengthen the protection framework for credit consumers in the country, he added.
He said that the ability to make sound and wise financial decisions is not only relevant when wanting to purchase financial products or borrowings.
It also helps when purchasing insurance and investing, and managing their income will definitely help consumers to lead a life free of financial burdens, he said.
“It is important for consumers to protect themselves from unfair market practices or manipulation as we live in an era of complex and challenging financial environment,” he added.
He said it is also vital for consumers to be aware of the modus operandi of financial crimes.
Consumers, he added, should be wary of financial services offered in the cyberworld so they will not be exposed to cyber crimes.
On a separate issue, the Prime Minister also said that the government will look into setting a cap for government guarantees on public projects.
“There should be a limited amount the government can guarantee. In the case of loans taken by the government, it shouldn’t exceed 55% of the GDP but for guarantees, there is no limit.
“As a result, we see some guarantees amounting to very big sum, like RM42bil and all that.
“So we have to look into that,” he told reporters on the sidelines at the event.
Dr Mahathir was commenting on the findings of the Special Parliamentary Select Committee on the Budget which confirmed that the government’s debt and liabilities stood at RM1.09 trillion as at the end of last year.
The committee’s chairman Datuk Seri Mustapa Mohamed said out of the RM1.09 trillion, some RM132.7bil were from government-guaranteed loans.