Are Malaysians shopping their way into debt? Data shows BNPL use, personal loan-taking on the rise
For 2024, the Malaysian economy grew 5.1 per cent, surpassing initial estimates as exports rebounded and people kept buying. But so did household debt, which grew to a staggering RM1.63 trillion, or close to 85 per cent of GDP.
So is this a sign that households are doing better? Or was much of that spending financed by debt?
Two useful proxies that may provide a clue are personal loan and credit data because they are mostly debt taken on to finance household consumption.
Malaysians are racking up personal debt
Personal loans have stacked up significantly since 2006.
In January 2007, total personal loans taken were just RM762 million. By January this year, it had grown to RM8.82 billion, according to data provided by data.gov.my.
Bank Negara Malaysia described personal loans as debt usually taken to fund home renovation and weddings but survey findings in the past showed that among the top two reasons people take on personal loans is for 'emergency' and 'debt consolidation', meaning they take on more debt to repay existing debt.
Over the last few months high indebtedness among civil servants became a hot button topic, following a report that showed more of them going bankrupt.
Personal loans were found to be the top factor causing the rise in insolvency among public sector workers.
More debt as BNPL makes credit access easy
Buy now, pay later (BNPL) exploded during the Covid-19 pandemic as people kept indoors looked to online shopping to buy both essential and non-essential goods, and has not stopped growing since.
The service allows consumers to purchase items on credit, that can then be repaid in interest-free instalments.
Unlike credit cards, BNPL users don't need a good credit score to be eligible, which is why it's become so popular.
As of the second half of 2024, there are 5.1 million active BNPL accounts, up from 3.7 million in the first half of 2023, according to data provided to the Consumer Credit Oversight Board by BNPL companies.
The Consumer Credit Oversight Board, a body under BNM that monitors non-conventional credit companies, said easy-to-access credit had likely nudged households to spend more.
By the second half of 2024, transaction value from BNPL purchases grew to RM7.1 billion from RM4 billion in the previous six months and almost tripled in just two years.
Meanwhile, total transaction volume grew from 14.4 million in Q1 2023 to 45.8 million in Q4 2024, or more than three times.
Debt problem?
BNM and the Ministry of Finance, in response to concerns about the level of household debt, said the liability is still lower than household financial assets valued at RM3.4 trillion at the end of last year.
While no analysts have made the correlation between strong consumption driving economic growth over the years and credit-funded spending, personal loan and BNPL data clearly points to households taking on more debt.
Data on BNPL's outstanding balance provided to the CCOB showed an upward trend, that is the amount account holders still owe BNPL providers, scaling to RM2.8 billion by the fourth quarter of 2024.
But rates of overdue payment had declined, dipping to 2.9 per cent by the last three months of 2024 from 5.8 per cent of total BNPL users in the first quarter of 2023.
BNM said BNPL loans account for just 0.2 per cent of total household debt.
Personal loans, however, now account for 12.6 per cent of total household debt.
To see the scale of it, total value of personal loans taken up to January 1 2025 is now just less than 1 per cent lower than debt taken to buy vehicles.
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