85% in AKPK’s debt management programme earn less than RM5,000

This article first appeared in The Edge Financial Daily, on October 18, 2018.

Azaddin: A majority of the indebted individuals in the programme are aged between 30 and 50 years. Photo by Shahrin Yahya

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KUALA LUMPUR: Around 85% of the participants of Agensi Kaunseling dan Pengurusan Kredit’s (AKPK) debt management programme earn less than RM5,000 a month.

AKPK chief executive officer Azaddin Ngah Tasir said a majority of these indebted individuals in the programme are aged between 30 and 50 years.

“[As of Aug 31,] 40% of indebted individuals we have helped admitted to poor financial planning on their part, with 57% of these cases involving credit card woes and 26% from personal loans,” he said in his keynote address at the launch of AKPK’s Pay-on-Time Campaign yesterday.

On whether the government’s push for affordable housing may create the issue of tardiness on home mortgage payments, given that a bulk of the indebted individuals are from the lower-income group, Azaddin said it all boils down to financial planning.

“There are also people who earn RM5,000 and below who have houses and are not in the debt management programme. So again it has do with planning and how well they manage their finances that is key. At the end of day, you need to assess what your affordability is before committing to any loans,” he said.

Since its inception in 2006 and up to Sept 30, 2018, a total of 817,851 individuals attended AKPK’s counselling services and from that, 243,699 participants applied to enrol in its debt management programme.

The programme is to assist borrowers in improving and empowering their financial standing through the provision of a personalised debt repayment plan. The programme, along with counselling, is a service provided for free to individuals by AKPK, which is an agency under Bank Negara Malaysia that is mandated to raise financial literacy among Malaysians.

A total of 18,009 cases have successfully exited the programme, with a total outstanding of RM718.4 million.

AKPK’s Pay-on-Time Campaign is aimed at instilling good payment habits among Malaysians and getting them to become good paymasters.

Azaddin cited a finding in 2016 by the Organisation for Economic Co-operation and Development that stated that only 55% of Malaysians paid their bills on time.

He also shared findings from the Asian Institute of Finance in 2015 which stated that 70% of Gen Ys who owned credit cards tended the pay the minimum monthly payments while 45% of them did not pay their debts on time at some point.

“If this trend continues, we might be looking at a steady rise of indebtedness and bankruptcies involving Malaysian households.

“The public must realise that paying on time is the smartest thing they can do for their financial well-being. To pay on time, they would need to cultivate the discipline of documenting their loan and payment amounts,” said Azaddin.

AKPK’s Pay-on-Time Campaign will run for a period of eight weeks till Dec 12.