Instilling Financial Prudence


Article from The Star dated 15 May 2012 by Joy Lee.


JEREMY (name changed for privacy) applied for a RM10,000 loan to help finance a purchase. Upon verifying his earnings capacity and financial track record, a bank granted Jeremy a RM40,000 loan.


Jeremy took up the RM40,000 loan and armed with more cash in hand, bought more than he had planned.


When the time came to repay his loan, Jeremy found it tough to service his debt.


He ended up at the doorstep of Agensi Kaunseling dan Pengurusan Kredit (AKPK) seeking help to restructure his loan.


Stories like Jeremy’s are not uncommon and Koid Swee Lian, chief executive officer of AKPK, recalls many similar cases of individuals being in tight financial situations.


“Malaysia is well known for its easy access to funding. Because funding is so easily available, people don’t think much about their spending,” Koid said.


AKPK is a wholly owned subsidiary of Bank Negara Malaysia (BNM).


The agency was set up in 2006 to proactively ensure the financial resilience of households by providing an avenue for individual borrowers and potential borrowers to seek advice and assistance in managing their finances and debts.


AKPK’s main services include providing counselling on financial management, a debt management programme to assist financially distressed consumers regain control of budgets and financial education.


Interestingly, Koid noted that after six years in operation, only 14% of the population is aware of the existence of AKPK and its role.


As at March 2012, there have been 181,175 individuals who have attended AKPK’s counselling sessions, and 73,744 customers enrolled in its Debt Management Programme. Out of the 73,744 cases, 1,618 have successfully exited the programme.


Of the cases that have come to AKPK for assistance, Koid said 24% had difficulty servicing their debt due to poor financial planning while another 24% was due to high medical expenses.


About 15% of cases were indebted due to failure in businesses and 14% lost control of their credit cards usage.


The majority of these cases are above the age of 30.


Koid observed that about 77% of their cases involve married individuals. Being indebted is no laughing matter to Koid.


Statistics obtained from BNM show that total household loans rose 13.1% year-on-year to RM553.2bil as at end-2011.


This constitutes about 55.1% of loans totalling RM1 trillion given out last year.


Meanwhile, bankruptcy cases have been rising steadily over the years.


In 2010, the number of individual bankruptcy cases rose 11.2% to 18,053 cases from the year before and increased 6.2% to 19,167 cases in 2011.


This year, in the first three months alone, 2,870 cases have already been recorded by the central bank.


However, not many people come forward to seek AKPK’s assistance to manage their finances and restructure their loans, Koid says.


“There is a stigma surrounding people who come to AKPK and because of that, people are reluctant to come and seek help,” she said.


However, she said people should not be embarrassed to seek proper help instead of suffering in silence or worse still, seek help in all the wrong places.


“People need to know they are not alone when it comes to dealing with these issues,” she says.


AKPK is looking at providing online application forms so that consumers can fill them up in the privacy of their own homes.


Koid, who was previously with BNM, firmly believes that prevention is better than cure.


Thus, AKPK has big plans for its efforts in financial education to instil proper financial habits in consumers.


“We don’t just want people who are burdened by debt to come here. Ultimately, we want to take a pre-emptive approach and provide people with financial education so that they can make informed decisions.


“We prefer that in future, people come to seek financial advice before making any decisions that can lead to being over-indebted,” she said.


Koid notes that the first Financial Master Plan drawn up by the central bank had already included elements of consumer protection goals.


These include educating consumers to empower them to make sound financial decisions and ensuring that financial institutions display disclosures and charges so that consumers can make informed decisions. For example, ATM machines now run notices to inform consumers that RM1 will be charged for every transaction carried out using the Malaysian Electronic Payment System (MEPS).


Nirmala Supramaniam, senior executive of AKPK’s financial education department, said consumers need to know the financial products available in the market and to shop around for the best available product that can meet their needs.


“There are different types of loans available, some with rates charged on a flat amount and others onreducing rates that are charged on the loan balance.


“So consumers need to be proactive to find out all this information before they decide on a loan instead of just taking the first loan that is shoved at them.


“We are also doing our part to ensure this information is available to them,” she said.


Additionally, consumers need to learn how to be prudent in their spending.


Nirmala said budgeting is crucial in every occasion to ensure that you stretch every ringgit that is available to you.


“Know your priorities and involve the family when you are drawing up your family budget,” she said.


She adds that AKPK is trying to find the right way to educate people on prudent financial management.


The agency has set up a new website to offer consumers financial advice.


“We have links there to direct them to other related sites. There are also financial calculators and tutorials on financial management. So the site is really useful for everyone,” she says.


Koid said most of their educational efforts are targeted at young working adults as these are the people who will be potential borrowers. However, she adds that it is never too early to be educated in the matters of financial planning.


“Financial education is not something that we can achieve overnight. If we are exposed to financial education from a young age, it would help. We need to train our children from young to understand the basics of financial management,” she said.


For more information on financial management, visit