KUALA LUMPUR, July 23 — Putrajaya is rushing the creation of a new law that will protect consumers while encouraging spending as Malaysia’s household debt crosses 80 per cent.
Prime Minister Tun Dr Mahathir said the Consumer Credit Act is critical because household debt is now at 82.1 per cent of Malaysia’s gross domestic product (GDP).
“Therefore the efforts to increase financial literacy is extremely important and will complete the Consumer Credit Act initiative to strengthen the protection framework for credit consumers in Malaysia,” he said at the launch of the National Financial Literacy Strategy 2019-2023 here today.
“The Act is important because its intention is to ensure that credit consumers receive a fair service when dealing with creditors.
“The formation of this Act will be fast-tracked to protect the consumers and encourage a healthy credit market,” he added.
He pointed out that Malaysia’s household debt is higher than many high-income nations such as Italy which is 40.3 per cent of its GDP, Japan which is 58.1 per cent of the GDP and the US which is 76.3 per cent of its GDP.
The world’s oldest elected official noted that there are already signs that many borrowers find it difficult to repay their loans, especially among those who earn less than RM5,000 a month and those who live in rural areas.
Data from the Credit Counselling and Debt Management Agency’s Debt Management Programme showed many Malaysians are far too optimistic about their capacity to finance their loans.
“I was made to understand that around 80 per cent of the programme’s participants were too optimistic about their ability to repay their debt while bearing their day to day expenses when they made the decision to apply for a loan.
“There are even those who didn’t plan on paying their debts when they applied for a loan,” said Dr Mahathir.