KUALA LUMPUR: The difficulty Malaysians have in repaying loans is a reflection of poor financial literacy, says Tun Dr Mahathir Mohamad.
The Prime Minister said this was especially true for those living in the cities and earning below RM5,000 per month, based on a study conducted by the Credit Counselling and Debt Management Agency (AKPK).
He said it was with this in mind that the government is accelerating the enactment of the Consumer Credit Act, which he says is important, to protect users’ interests and to encourage a healthier credit market in the country.
“I was made to understand that about 80% of those who underwent the Debt Management Program with AKPK were found to be overly optimistic about their ability to repay debts.
“As such, efforts to improve financial literacy is of utmost importance, and complements our initiative in enacting the Consumer Credit Act.
“This act is important to ensure credit users get a fair treatment when dealing with credit issuers and debts,” he said when launching the National Strategy for Financial Literacy 2019-2023, here, yesterday.
The National Strategy, which was formulated by the Financial Education Network, sets out priorities and actionable plans to equip Malaysians with the knowledge to make informed financial decisions and nurture healthy attitudes in financial management.
It aims to empower individuals to manage money wisely, plan ahead and invest for their future, and protect themselves from financial fraud and abuse.
He said the current Malaysian household debt of 82.1% of national gross domestic product is very high compared to other high-income nations.
“The risk of our household debt affecting the domestic financial stability is under control, but there are already signs that some borrowers are having difficulties repaying their debts,” he said.
Mahathir, however, noted that the issue of low financial literacy among developing nations was not exclusive to Malaysia, and that this was a global issue plaguing other nations as well.
Commenting further, Mahathir said the ability to make sound financial decision was not only relevant in making loans and purchases, but is equally important when securing insurance coverages, making investments and managing income.
