WHEN private sector worker Rizal took out a loan from a moneylender to cover his Raya expenses two years ago, he knew it was not a prudent decision.

He found himself in need of extra cash as his employer had stopped giving bonuses in conjunction with the festival due to the weak economy.

“I was desperate to cover the high cost of celebrating Raya. We don’t have savings,” he told The Malaysian Insight recently.

“My monthly salary was only enough to cover regular expenses, like food, and car and house loans. The rising cost of goods made it impossible for us to set aside money for savings.

“So, I was forced to take out a loan. If I had not, there wouldn’t be Raya for my children.”

The loan amount went towards buying Raya clothes and food, as well as “duit raya” and “balik kampung” trips to Rizal’s hometown in Kedah and his in-laws in Johor.

Borrowing from banks or moneylenders – both licensed and unlicensed – is a common practice during festive seasons for many Malaysians.

Housing and Local Government Ministry data showed that 422,671 people borrowed from licensed moneylenders last year.

The borrowers were private sector workers (275,412), public servants (102,50), businessmen (27,544), people without permanent work (12,227) and those without employment records (4,985).

Last year, Malaysian Punjabi Licensed Moneylenders Association vice-president Amrinderjit Singh said a total of 1,500 loans for festive seasons were approved out of the 7,500 applications received, involving an estimated RM37.5 million.

A recent study by Mobylize, a start-up under Moby Fintech Sdn Bhd, suggested that 75% of Malaysians may have obtained personal loans from various financial institutions ahead of Raya.

Mobylize is a mobile app that allows users to get their credit scores evaluated by Credit Bureau Malaysia for free.

Some borrowed just RM500, and there were those who took out loans to buy brand new cars, said the study.

Amrinderjeet said his association has approved loans for new vehicle purchases to celebrate Raya.

“The usual reasons stated by loan applicants are, to resolve personal financial problems, Raya shopping and ‘balik kampung’ trips. Also, many borrow money because they need the deposit for new cars.”

He said the number of applications received is always higher in the lead-up to Raya.

Licensed Moneylender Association president R.C. Veeraseelan said applications rise by 20% to 30% during festive seasons.

“Usually, there is a significant increase in applications during the new year period, year-end, back-to-school period, when universities open, and festive seasons.”

The loan amount ranges from as high as RM5,000 to as low as RM500, he said.

“For those who borrow just RM500, we try our best to help.”

Khairy Hasan, 28, said taking out a loan for Raya is not unusual.

“I usually get to save about RM2,500 to RM3,000. I’m still single, and I spend more on myself – new clothes, new shoes. Usually, I shop only during the Raya period.

“For the family, I’d buy my parents new clothes and give them some cash. The money also covers my travel expenses for the trip back home.”

He said he has friends who would rent cars for the festival, or buy new ones.

“I have a friend who changes cars during Raya, for the ‘balik kampung’ trip. Some are willing to rent cars just for show.

“I’m not like that. The most I would do is accessorise the car.”

Spending beyond one’s means

The trend of Malaysians spending beyond their means during festive seasons is worrying, said Federation of Malaysian Consumers Association (Fomca) deputy president Mohd Yusof Abdul Rahman.

“For this festival (Raya), people are aware that they need to spend a certain amount of money, and that is why many take the easy way out by obtaining loans, and settling them slowly after the celebration has ended.”

The culture of borrowing is a way to keep up with a certain lifestyle, he said.

“In truth, they can save. Things don’t need to get replaced every year. But generally, many spend beyond their means.

“It has become normal. They have the urge to buy things for Raya. They don’t want to go against it.”

He said Fomca has dealt with many cases involving those who borrowed from illegal moneylenders, who require less documentation and can disburse cash quickly.

The problem begins when borrowers find themselves unable to repay their loans in time.

“This is why we urge moderation when celebrating Raya, and making early preparations.” – May 19, 2019.