The risk posed by high Malaysian household debt
May 11, 2014
Yoga – Sports for all
April 8, 2020

Many Malaysian families living on the edge

Household debt in Malaysia has been rising rapidly due to the rising costs of living and the weakening economy. Those affected feel abandoned as they are unable to get bank loans, and over time they become the prey of money lenders.

Several nights ago, I went to one of the branches of a local bank to carry out a banking transaction at the ATM. To my surprise, the queues at all three teller machines there were long.  I then noticed that much of each queue consisted of people who looked like “Ah Longs” (nickname for loan sharks) or their representatives. These men carried stacks of ATM cards with which they were, one by one, withdrawing cash from the machines. After several transactions at the ATM, the men left the teller machine and moved to the end of the queue to enable the queue to move along. As I was almost reaching my turn at the machine, I heard a commotion coming from behind me.

There was a man in his forties who was begging one of the “Ah Long” looking men not to withdraw money from his account. This man apparently needed the cash to pay the finance company urgently as the latter was threatening to repossess his car. As expected, the man in the queue appeared unmoved. My turn at the machine came. Not wanting to spend more time than necessary at the bank, I quickly carried out my transaction and left.

I have been deeply disturbed by this event, and my mind keeps replaying this incident. Every ATM card that the “Ah Long” guys hold is quite probably a family in financial distress. These families are unable to make ends meet, and their thoughts are probably filled with how they are going to meet their daily commitments. People who are already highly debted to the banks are easy pickings for one of the “friendly” money lenders who have their numbers pasted all over town. Then I remembered another incident from about a year ago.

My secretary was receiving several calls from a gentleman who insisted on meeting me with regards to a business proposal he wanted to urgently share with me. I was impressed with his persistence, and had my secretary arrange an appointment for him to meet me. However, to my surprise, when I met him he was dressed up as Mr. T from the “A Team,” fully adorned in metal around his neck and wrists. After finishing my courtesies with him, I enquired on the nature of the business he wanted to propose to me. This gentleman then told me that he has been under the employ of a “Big Boss” ( I only know one Big Boss – Bruce Lee) for whom he was managing a lending business. He wanted to start a money lending company as he knew the business very well, and assured me that it was a very lucrative one as well. He invited me to be his investor.

To impress me of his capabilities, he even explained how he had set up the present operations he has been managing for his Boss. What I heard produced a cold shrill up my spine. It was unbelieveable how they were able to manipulate people who had an urgent financial need, and turn them into virtual slaves. Believe me, it was scary. The incident at the bank has given me an almost real-life experience of how much control “Ah Longs” have over the lives of their “borrowers.”

One the principal reasons people turn to “Ah Longs” is to service their bank loans. As soon as an average person is unable to service their bank borrowings, the quality of the person’s life starts degenerating rapidly. Of course we have tycoons who owe banks in the millions, and billions, but are instead able to have the banks at their mercy. Banks apply great pressure on the defaulter with threats of blacklisting and bankruptcy, often hiring debt collecters to harass him or her. If family or friends are unable to help, the cornered individual has to turn towards the “Ah Longs” only. From the frying pan to the fire they go!! The present level of household debt in Malaysia forecasts misery for tens or hundreds of thousands of families.

I feel much pain, though, when I think of those who borrow from money lenders. (As I, like most of my generation, was brought up in a humble surrounding, I still remember what my parents went through to bring my siblings and me up. These borrowers are, for whatever reason, unable to borrow from the financial institutions. They have now fallen victim to predatory lending practices as lending money to unqualified persons at a very high interest rate is surely a recipe for ruining the borrowers’ lives. Business must be good for the money lenders as we can see their advertisements posted all over the place, with calling cards being  left on the windscreens of cars and gates of houses everywhere.

What have the authorities done to help those in the clutches of their creditors? Has the government carried out any serious study to find out the extent predatory lending pervades our lives, and the risks it poses to our economy and society? Wait! Do our leaders have the time to understand and acknowledge that a problem exists?