Sunday, 9 February 2014

Interesting Facts About Debt in Malaysia

A few weeks ago, a Facebook friend of mine shared a few interesting presentation slides from AKPK on debt problems in Malaysia. While I believe many of the readers here at Invest Made Easy are free of bad debt, there's no harm being aware of what are the causes of debt problems in Malaysia.

Before I proceed with the slides, here's a short description about AKPK (for those whom have not heard of them before):

The Credit Counselling and Debt Management Agency, or commonly known as Agensi Kaunseling dan Pengurusan Kredit (AKPK), is an agency set up by Bank Negara Malaysia in April 2006 to help individuals take control of their financial situation and gain peace of mind that comes from the wise use of credit.

AKPK offers the following services to individuals, free of charge:
  • Financial education on the responsible use of money and credit management skills
  • Counselling and advice on financial management
  • Debt management programme to assist consumers to regain financial control.
Now to awareness....

Awareness 1 : Number of Malaysian Undergoing Counseling and Debt Management with AKPK

According to the figures from AKPK, approximately 349,362 Malaysians are undergoing Credit Counseling and Debt Management Program with AKPK. If you compare these figure with the total population of Malaysia of 29.24 million (as of 2012), about 1.19% of Malaysian have debt problems and have decided to seek help with AKPK. Imagine how many more whom have not?

Awareness 2 : Reason for Default

These are interesting facts that we as Malaysians should be aware off. Looking at the top 2, we find that "Poor Financial Planning" is the main culprit at 25%. The next closes is "High Medical Expenses" which takes up 22%. Both reason could in fact be avoided if we are aware off it as early as possible. 

Take for instance High Medical Expenses. Could this problem of unable to pay your medical bill be avoided in you have yourself an insurance medical card? The chances are Yes in my opinion. Apart from just having a medical card, one should also check if the coverage is sufficient for later life by factoring in inflation. If you've bought your medical card say 10 years ago, chances are the coverage might not be enough. Do seek advise from your trusted insurance consultant or with a financial consultant if you see the need to update your medical card coverage.

The other cause which is "Poor Financial Planning" could also be averted if one is able to start planning at an early stage. Try reading this post for basic guidance.

Awareness 3 : Debt To Income Ratio

Ever wondered how deeply indebted you are? AKPK's slide on calculating Debt To Income Ratio recommends that we should try and maintain our debt to income ratio at below 40%

If one has a high debt to income ratio, one is then forced to allocate a bigger portion of one's income towards servicing the debt. The table below taken from an article by Kinibiz indicates that Malaysians in general are saving less then 15% of their take home income!

Another point from the above table shows that those with income above RM5000 tend to take up more/bigger debts as compare to lower income group. A scary fact indeed especially when many of us hope to reduce our debt level by increasing our take home income. 

Awareness 4 : Risk of Guarantor

When I first started working, one of the first advice my mother gave me was "Never ever ever become a guarantor". This wisdom have served me well and I hope that you too would do the same.

Cheers and Happy Investing!

P.s : Special thanks to Desmond Chong from AKPK for allowing me to share these slides.

P.p.s : If you need assistance from AKPK, feel free to contact:

And finally if you wish to know more about investing, feel free to drop me an email at

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