Young, low-income Malaysians are living beyond their means and drowning in debt, World Bank says

There is a high risk of bankruptcy among young people with limited financial knowledge who borrow money for consumer spending, report says

‘Impulse-buying behaviour, easy access to personal loans and credit card financing’ heighten the risks, particularly among those aged 25 to 34

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Due to inadequate income, many Malaysians also turn to family and friends to borrow money from to buy essential goods. Photo: AP

Published: 11:00am, 10 Dec 2019Updated: 4:46pm, 10 Dec 2019

Low-income Malaysians and millennials are piling up debts and risking bankruptcy by turning to banks for loans and credit cards to support their lifestyle choices, says a World Bank Group report.

According to the 21st edition of its Malaysia Economic Monitor, about 27 per cent of households in Kuala Lumpur earn less than Bank Negara’s estimated monthly living wage of 2,700 ringgit (US$650) for a single adult, 4,500 ringgit for a childless couple or 6,500 ringgit for a couple with two children.

Households with income below the living wage tend to take on personal financing loans and credit cards to keep up with lifestyle choices and raise living standards, it said.

“Findings by BNM also show that 73 per cent of those earning below the living wage have either secondary, primary or no education,” the report said.

“In contrast, 72 per cent of those earning above the living wage have completed tertiary education.

“High rates of bankruptcy because of borrowing for consumption rather than for wealth accumulation are an increasing concern, especially among younger borrowers with limited financial knowledge and literacy.”

Defaults in motor vehicle and personal financing loans constituted 49 per cent of the total bankruptcy cases in 2018 while bankruptcy cases involving personal financing and credit card debts had grown by 104 per cent and 43 per cent respectively last year compared to 2012.