Young and broke: Addressing youth bankruptcy in Malaysia — Cheah Chan Fatt
Many youth bankruptcy cases stem from personal loans, representing a significant financial burden. Many young individuals resort to personal loans to bridge income gaps or fulfil lifestyle aspirations, often without understanding repayment terms. Similarly, business loans have contributed to the rising bankruptcy figures as young entrepreneurs struggle to navigate the complexities of managing finances in competitive industries. The lack of adequate financial planning and business acumen often exacerbates their financial challenges, leading to insolvency.
Another major contributor to youth bankruptcy is the high housing and vehicle ownership cost. Malaysia's younger generation often aspires to achieve milestones such as owning a home or car, which can strain their finances. These aspirations are further compounded by the increasing cost of living, making it difficult for many to meet their loan obligations. Additionally, other types of debt, such as credit card liabilities and income tax debt, have contributed to the rising trend of bankruptcies. The failure to contribute to retirement savings, such as those required by the Employees' Provident Fund, also adds to the financial instability many young Malaysians face.
One of the root causes behind these financial challenges is the lack of financial literacy among the youth. Many young individuals lack the knowledge and skills to make informed decisions about managing their finances. This gap in financial education often results in poor budgeting, excessive borrowing, and an inability to manage debt effectively. Without a strong foundation in financial literacy, youths are more likely to fall into financial traps that ultimately lead to bankruptcy.
To address this pressing issue, comprehensive solutions must be implemented. First and foremost, financial literacy programs should be made widely accessible to young Malaysians. Initiatives such as the Youth Financial Literacy Programme can educate youth about responsible financial management, budgeting, and the risks of excessive borrowing. By equipping young individuals with the tools to make informed financial decisions, such programs can help prevent future bankruptcy cases.
One of the root causes behind these financial challenges is the lack of financial literacy among the youth. — Unsplash pic
Debt management support is another essential component of the solution. Organizations such as the Credit Counselling and Debt Management Agency (AKPK) provide invaluable services to individuals struggling with debt. These agencies offer counselling, financial education, and debt management plans to help individuals regain control of their finances. Expanding access to such services and raising awareness about their availability can significantly benefit youths facing financial challenges.
Economic empowerment initiatives are also vital in addressing the issue of youth bankruptcy. Programs that focus on alleviating the cost of living and enhancing economic resilience can provide young Malaysians with the support they need to overcome financial hurdles. For example, targeted subsidies, affordable housing schemes, and skills development programs can help reduce the financial burden on the younger generation.
Policy interventions are equally important in tackling this issue. The government should encourage responsible lending practices by financial institutions to ensure that loans are offered based on individuals' repayment capacity. Additionally, amendments to insolvency laws, such as those under the Insolvency Act, can relieve individuals seeking to resolve their financial difficulties. Policymakers should also prioritize incorporating financial education into school curricula to ensure that future generations are better prepared to manage their finances.
Community support and cultural shifts are other critical factors in preventing youth bankruptcy. Building a culture of financial awareness and responsible spending within communities can empower young individuals to make prudent financial choices. Encouraging open discussions about finances and seeking support from peers and mentors can also reduce the stigma associated with financial difficulties.
The rising bankruptcy rates among Malaysian youths highlight the need for immediate and comprehensive action. By addressing the root causes, such as personal loans, insufficient financial literacy, and the high cost of living, and implementing solutions like financial education, debt management support, and policy interventions, Malaysia can pave the way for a more financially stable future for its youth. This collaborative effort, involving individuals, communities, and the government, is essential to ensure that the next generation is equipped to achieve financial independence and resilience.
* Dr Cheah Chan Fatt is a Research Fellow at the Ungku Aziz Centre for Development Studies (UAC), Universiti Malaya.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
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