Young and broke: Symptom of Malaysia's deeper financial challenges
THE alarming rise in bankruptcy among Malaysian youths is a critical issue, with 877 cases reported in 2024 and over 5,000 since 2020.
This trend highlights the significant financial challenges facing the younger population and calls for immediate action to address the underlying causes.
Multiple factors contribute to this phenomenon – including personal loans, business loans, housing and vehicle loans – compounded by a lack of financial literacy.
Tackling youth bankruptcy requires a collaborative approach involving individuals, communities and policymakers.
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, 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 youths. 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. To address this pressing issue, comprehensive solutions must be implemented.
First and foremost, financial literacy programmes 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 programmes can help prevent future bankruptcy cases. Debt management support is another essential component of the solution. Organisations such as the Credit Counselling and Debt Management Agency (AKPK) provide invaluable services to individuals struggling with debts.
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 youth bankruptcy. Programmes 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 programmes can help reduce the financial burden on the younger generation.
Policy interventions are equally important. 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 prioritise 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 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 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 youths.
This collaborative effort 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, Universiti Malaya.
Comments: letters@thesundaily.com
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