Latest news with #ConsumerCreditOversightBoard
BusinessToday
21-05-2025
- Business
- BusinessToday
More Than Half of Malaysians Turn To Informal Lending To Survive
A recent survey of over 40,000 Malaysians has laid bare a financial reality long hidden beneath the economic statistics: For many, access to formal credit remains out of reach, pushing them toward informal and often risky borrowing practices to make ends meet. The findings, released by a prominent Buy Now, Pay Later (BNPL) service, paint a stark picture. At one point, more than half of Malaysians lacked access to formal credit, forcing them to rely on pawnshops, unlicensed moneylenders or borrowing from family and friends. However, the rise of digital BNPL solutions like SPayLater appears to be shifting the landscape, offering a lifeline to those previously locked out of the formal financial system. According to the data, 63% of users who previously depended on informal borrowing no longer feel the need to do so since using SPayLater. The service has helped to unlock access to short-term credit, especially for those excluded from the traditional banking system. Yet, the data reveals a persistent divide: 55% of respondents still lack access to traditional credit services beyond BNPL, exposing a growing reliance on alternative financing tools amid limited options from conventional banks. This is further exacerbated by the 18% of users who either do not use or cannot access banking services at all, and another 12% who say their credit needs are unmet by the banking system. For many Malaysians, short-term credit has become not just a convenience but a necessity. 59% consider access to credit essential for purchasing everyday necessities, a sentiment amplified during times of financial stress. A striking 81% of users have relied on SPayLater to weather financial shocks, such as emergency medical expenses, vehicle repairs, baby formula and insurance renewals. Further exploring why users use BNPL, the survey found that: 57% use SPayLater to better manage their monthly cash flow 46% use it to bridge the gap between paychecks 32% use it to handle unexpected expenses 10% use it to fund small business operations Importantly, most users approach BNPL with discipline. 93% of respondents budget for their repayments, treating them like monthly utility bills. As a result, 89% say it has helped them manage their spending and 95% credit the service with improving their debt management skills, a promising sign for Malaysia's broader push toward financial literacy. This financial discipline is having measurable effects. National BNPL delinquency rates dropped from 5.3% in 2023 to 2.6% in 2024, according to the Consumer Credit Oversight Board, a trend that mirrors the decline in late payments reported by SPayLater users. Still, the data reflects a complex relationship with short-term credit. While 42% of users say BNPL gives them more control over their finances, a smaller segment, around 2%, expressed anxiety about needing credit just to afford basic necessities. The solution, many say, lies in greater integration of BNPL services into essential sectors, pointing to an urgent need for credit access in areas tied directly to daily living. As Malaysia continues its journey toward a more inclusive digital economy, these findings spotlight a critical question: Can the financial system evolve fast enough to serve those left behind? If BNPL's growth is any indication, the demand is not just real, it's urgent. Related
Yahoo
23-03-2025
- Business
- Yahoo
Are Malaysians shopping their way into debt? Data shows BNPL use, personal loan-taking on the rise
KUALA LUMPUR, March 24 — Malaysians just can't stop spending it seems, at least according to official data. 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 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.
