M'sia making great strides in reducing income inequality: iMoney

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KUALA LUMPUR: iMoney, a financial comparison website, is of the opinion that Malaysia has been making great strides in reducing inequality in the country and this can be seen in the country’s GINI-coefficient, which fell from 0.46 in 2002 to 0.401 in 2014.

iMoney co-founder and group CEO Lee Ching Wei further said, in the same period, average monthly household income also grew from RM3,011 to RM6,141.

On the back of the recently-announced gross domestic product (GDP) first quarter results by Bank Negara Malaysia, Lee welcomed the government and Bank Negara’s move in continuing their effort to address income disparity and financial literacy in the country.

"The gap in income equality becomes smaller when the average household income of the bottom 40% grew considerably faster than for the top 20% between 2012 and 2014.

"However, despite the data, those in the bottom 40% group are still deemed acutely and increasingly in need of assistance. This is shown in the increased of BR1M over the years and other housing benefits provided by the government," he told NST Business yesterday when asked to comment on the gross domestic product (GDP) first quarter announcement by Bank Negara Malaysia yesterday.

Lee further said on top of the handouts and financial assistance, a longer-term solution to tackle income inequality would be to improve financial literacy among those in the middle 40% and bottom 40%.

"This can be done by encouraging the people to attend courses or education campaigns done by the Credit Counselling and Debt Management Agency or Securities Commission. The education can also be done through different platforms to send the message to different segments of the society, especially through the Internet."

Further, Lee pointed out that financial education should include not just basic saving tips, but also on how to grow one’s funds through legitimate investment products.

Financial education, especially on investment, will also reduce the number of people falling for get-rich-quick schemes.

"Our recent Millennial Survey found that those in the lower income group (earning below RM1,500) spend close to half of their income on food, and if we break it down to the monetary value, it is close to the amount that those in the high income group are spending.

"Efforts should be put into making financial education and planning a breeze. This can be done by attracting more players in the fintech industry, and offering more assistance to the private sector to encourage innovation in the industry," he said.

iMoney also lauded the various programmes and schemes launched by the government to address the issue of housing affordability in the past few years.

However, on top of the 110% loan to those who are unable to save to purchase their first home, or launching rent-to-own schemes for those who are unable to secure a mortgage, financial education on property ownership should be the core of all these implementations.

"Without proper management of your debts, property ownership will not be a sustainable goal because it is a long-term financial commitment. Without proper planning, one wrong financial move may result in you losing your home," he added.

Lee said there are many quick wins implemented over the years but the core of the issue is the lack of financial understanding among Malaysians.

This would be the best way to close the income gap, he said.

- NST | 23 May 2017