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More help needed for B40, M40

12 May 2020 / 19:34 H.

    THE long lines outside pawnshops in the Klang Valley on the first day of the conditional movement control order on May 4 and the following few days could well be a vivid reminder that more assistance is needed for the B40 and even M40 households.

    According to news reports, the people were there to reclaim their valuables, put up more items as collateral, pay the interest or extend the repayment period.

    Economists and analysts think that the phenomenon is a reflection that more measures are needed to ensure that the effect from either loss of or reduced income is mitigated.

    The situation is especially acute for the self-employed and those who rely on daily wages such as petty traders, hawkers, taxi drivers, cleaners, labourers and sub-contractors.

    Not only that, inflation is now a major concern due to the MCO which has disrupted and fragmented the supply chain, resulting in shortages of certain goods and exacerbated by panic buying and personal stockpiling.

    Externally, as a country which is heavily reliant on food imports, we are also vulnerable to global supply and demand shocks as a result of similar containment measures.

    As such, the MCO combined with similar trends in partial economic shutdown on a global level have caused prices of essential food items to spike. By late April, for example, the price of cabbage increased to RM6.50 which represents a 62.5% increase whereas the price of cucumber increased by 300% from RM1 to RM3.

    In its findings from the second study on the economic impact of Covid-19, the Malaysian Institute of Economic Research (MIER) reached the following projections:

    Malaysia’s real GDP may shrink about 6.9% relative to the 2020 baseline. This translates to a 2.9% real GDP growth for 2020, relative to 2019.

    The number of job losses could be in the region of 2.4 million, 67% of whom are unskilled workers.

    Household income is projected to fall by 12% relative to the baseline, which amounts to RM95 billion.

    Such a fall is manifested in a sharp decline in consumer spending by 11%, despite the drop in general consumer price level by 4.4%.

    And on the same day as the Prihatin 1.0 stimulus package was announced, a Khazanah Research Institute’s (KRI) opinion piece, “The Impact of Covid-19 on the Urban Poor: Three Major Threats – Money, Food and Living Conditions” was published which highlighted a Bank Negara study which estimated the following:

    A single adult living in Klang Valley needs to earn a minimum of RM2,700 a month to live adequately; and married couples with two children require around RM6,500 to similarly “survive”.

    The KRI article also mentioned that data from the National Housing Department showed that 65.8% of breadwinners of households in the People’s Housing Projects (PPR) earn below RM2,000 on average.

    And the average monthly income of households in PPRs remains bound to the range around RM2,000 in the more developed states.

    The figures are RM2,039 for Selangor and RM1,994 for the Federal Territory of Kuala Lumpur.

    The analysts concluded that “these households are probably already struggling to make ends meet and the repercussions from the outbreak will create a huge dent in their finances”.

    Shrinking purchasing power, loss of employment, lower wages, rising poverty (as measured by the Poverty Line Income which officially is at RM980 per month for Peninsular Malaysia, RM1,180 for Sabah and RM1,020 for Sarawak), higher cost of living and a safety net or welfare system on the back of limited fiscal capacity make for grim reading of our socio-economic future.

    On the long queues outside the pawnshops, Prof Denison Jayasooria of Universiti Kebangsaan Malaysia sees this as a phenomenon of the “poor man’s bank”.

    The government should implement the following specific measures to help the people who rely on pawnshops to raise emergency cash:

    The Ministry of Housing and Local Government – the ministry responsible for the licensing of pawnbrokers under the Moneylenders Act 1951 – should set up a one-stop centre to advise and guide borrowers to legitimate/legal pawnbrokers.

    In the medium term, the government should legislate for a comprehensive consumer credit law to ensure a healthy market and enhance protection of borrower’s rights and interests.

    To conclude, it is conceded that it is common in Malaysia for people irrespective of ethnic backgrounds to go to pawnshops as a source of borrowing.

    This is especially so when festive seasons are around the corner.

    Indeed, based on the conditional MCO/Covid-19 scenario, long queues outside pawnshops may well be a new normal – at least for some time.

    Jason Loh Seong Wei is head of Social, Law and Human Rights at EMIR Research.

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