Personal loans top reason for bankruptcy

Personal loans are the main cause of bankruptcy cases in this country, with 49.22% compared with other types of financial loans, said Minister in the Prime Minister's Department (Law and Institutional Reform) Azalina Othman Said.

She said personal loans include secured or unsecured loans from banking institutions, personal loans from money lenders other than banking institutions and friendly loans from individuals.

Apart from that, she said that bankruptcy cases involving business loans are 17.05%, housing loans are 8.28% and credit card debt is 6.35%.

"The data, in terms of age, from 2019 to 2023, show that the 35-44-year-old age group was found to have the highest number of bankruptcy cases, at 13,073 people, compared with only 107 individuals under the age of 25, while those aged 55 and over were 5,297 people.

"Based on gender, there are more bankrupt cases among men at 25,104, compared with 8,912 women. Also, Malays recorded the most bankrupt cases with 19,791 people," she said.
 
Azalina said this when winding up the debate on the Insolvency (Amendment) Bill 2023 before it was passed by the Dewan Rakyat today after being debated by 18 MPs from the government and the opposition.

Earlier, during the debate session, Khoo Poay Tiong (PH-Kota Melaka) wanted an explanation of the types of personal loans which have caused many individuals to go bankrupt and suggested that the payment rate of 5 to 7% to the Malaysian Department of Insolvency be reviewed.

Meanwhile, Muhyiddin Yassin (PN-Pagoh), during the debate session, raised bankruptcy statistics involving racial breakdowns, stating that for the year 2019-2023, Malays recorded the highest number of bankruptcy cases at 58.28%, followed by Chinese at 24.96%. Indians recorded 7.91%, while others is at 8.67%.

Muhyiddin also proposed that the government put emphasis on efforts to help bankrupt individuals to rise and rebuild their economy, besides not letting their bankruptcy status remain for life.

The Insolvency (Amendment) Bill 2023, among other things, provides that bankrupt individuals aged 70 and above and those mentally ill are eligible for automatic discharge through the issuance of the insolvency director-general’s certificate of discharge, in addition to improving the provisions of automatic discharge.

In the meantime, Azalina said that bankrupt individuals should be given a second chance to rebuild their lives and contribute to the country's economic development.