PETALING JAYA: Raising the bankruptcy threshold is just manipulating existing data and will not change the fact that many Malaysians are becoming bankrupt, say financial experts.
Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SMEs committee chairman Koong Lin Loong said this does not resolve the actual problem and could backfire on the nation's economy as a whole.
He said that data from the Insolvency Department showed that 18 people were becoming bankrupt every day.
Koong added that the Department had raised the threshold before.
"If you put the threshold too high, the number of bankruptcies will become low – but we have to ask why so many businesses or individuals are not able to service their loans?
"This is fact – we have to go down to the ground and solve the problem from the root, not by increasing thresholds and please ourselves because the number of bankruptcies is low," he told The Star.
He said the bankruptcy threshold needs to be set based on the existing economic situation and randomly increasing it would affect the economy.
"It will give out the wrong signal that our bankruptcy rate is not serious when it is actually alarming," he said.
Koong said those who would have been declared bankrupt under a lower threshold "could escape and make more loans."
"Financial institutions will also be misled and a lot more money will go down the drain," he said.
Meanwhile, financial expert Prof Dr Mohamad Fazli Sabri welcomed the government's move to relook at the bankruptcy threshold but said this should only be a short-term measure.
"If we raise the threshold, we will have fewer bankruptcies, but we will still have a lot of people under financial stress and the statistics will not represent the actual situation.
"The high cost of living and the increase of the Overnight Policy Rate (OPR) are among the reasons why many are struggling financially," he said, adding that increasing the OPR is one of the ways to control inflation.
"We have increased the bankruptcy threshold from RM30,000 to RM50,000 – and now to RM100,000 because of the pandemic.
"If we increase it to RM150,000 and the situation does not improve, are we going to increase it to RM200,000 next year?" questioned Prof Mohamad Fazli.
He said the government needed to come up with better solutions to help the people in the long run.
"We can't keep on moving the goal post or it will never end.
"We need to look at ways to create more job opportunities, how to control inflation and at the same time we need to improve financial education," he said.
It was previously reported that 18 individuals were declared bankrupt every day in the first five months of 2022.
The report also noted that nearly 60% of those declared bankrupt from 2018 until May this year were between 25 and 44 years old.
In response to this, Prime Minister Datuk Seri Ismail Sabri Yaakob said the government was reviewing the need to raise the bankruptcy threshold.
The number of bankruptcies in the country has been decreasing from over 16,000 cases in 2018 to about 6,500 cases last year.
Amendments to the Insolvency Act on Sept 20, 2020 raised the bankruptcy threshold from RM50,000 to RM100,000.
