THE rush at pawnshops in the past two days after the easing of the movement-control order (MCO) only shows how badly the poor have been hit by the Covid-19 pandemic, said experts.

Pawnshops and moneylenders have always been the poor man’s banks, they told The Malaysian Insight.

Michael Tay, an MCA politician who helps mediate in loan-shark cases, also expects a spike in the number of people going to illegal moneylenders for emergency cash to make ends meet.  

The crowds outside pawnshops also reflect how government aid through the bantuan prihatin nasional schemes is insufficient and inaccessible to the hundreds of thousands of people in the informal sector, the experts said.

These are the self-employed as petty traders, food hawkers, taxi drivers and labourers who could not earn a daily wage when most of the economy was shut down during the MCO.

They said the Perikatan Nasional administration must craft a wide-ranging short- and medium-term plan to create jobs and income opportunities in the post-MCO landscape.

In the long term, Putrajaya must also offer social safety net for the informal sector and set up small-scale lending institutions they can access so that they don’t have to rely on illegal moneylenders.

“The aid in the stimulus package does not last long and economic activities will take time to resume, so people will be in survival mode,” said Tay, who heads the Johor Baru MCA public complaints bureau.

“People need to put food on the table but they also need to pay their utility bills and rent, and landlords need to pay their banks. So out of desperation, they go to pawnshops,” Tay told The Malaysian Insight.

The Malaysian Insight found that pawnshops were still crowded with those either servicing the interest on their loans or pawning new valuables yesterday, two days after the easing of the MCO.

Tay, who has handled countless loan-shark cases in the past 10 years, said he anticipates a spike in people going to illegal moneylenders as well because the latter gives out easier loans but at cut-throat interest rates.

“I have repeatedly warned the public against borrowing from the Ah Long (loan shark). I even had to resolve two to three loan-shark cases during the MCO.

“But in these difficult economic times when businesses are down, the economy is at a standstill, people are desperate. Who can blame them? These are not middle class or rich people with savings.

“They are people who live from month to month and their incomes have disappeared. When they are down to their last ringgit and they have nothing to pawn, who can they turn to?”

Slipping through system

Pawnshops and moneylenders, both legal and illegal, are the poor man’s bank, said Prof Denison Jayasooria of Universiti Kebangsaan Malaysia.

Unlike typical commercial banks, they give out easy cash with minimum collateral and red tape, said Denison, a sociologist who specialises in poverty issues.

They are still a big source of micro loans of the average between RM500 and RM1,000, despite the fact that the government has set up similar institutions for the poor and people in the informal sector such as Amanah Ikhtiar and Tekun Nasional, he said.

“The people who go to moneylenders are your burger sellers, nasi lemak sellers and taxi drivers, who need a few hundred or a few thousand to pay rentals and bills,” said Denison.

Aid under the BPN stimulus package, such as RM1,600 for households earning below RM4,000, is not enough to replace the loss of income felt by these workers.

Putrajaya said it has disbursed almost 95% of aid under the BPN package at RM260 billion.

It is estimated that about one in 10 or 10.6% of Malaysia’s 14 million workers are in the informal sector, according to government think-tank Khazanah Research Institute (KRI).

Informal-sector jobs are often considered precarious as they don’t have legally mandated labour protections, such as sick and paid leave, social security and retirement funds.

A straw poll by The Malaysian Insight among BPN recipients during the MCO found that five out of the 10 households have income earners in the informal sector.

The MCO, which was to break the chain of Covid-19 infections, hit those in the informal sector harder than other workers because unlike the formal sector, they don’t have social safety nets, such as retirement savings or unemployment insurance, said Denison.

Malaysia has so far recorded 6,386 coronavirus cases and 106 deaths. 

Paul Selvaraj of a consumer affairs’ watchdog group, said informal workers also tend to be outside the government system, which makes it harder for them to access aid like BPN.

“So, people outside the system, whose businesses are not registered, and have no assets to pawn off, are more likely to go to loan sharks for help,” said Selvaraj, who is secretary-general of the Federation of Malaysian Consumers’ Associations (Fomca).

Micro loans

This is why in the post-MCO stage, as the government aims to restart the economy, it must lay out a six- to 12-month plan on how it is going to get people working and earning incomes, said Selvaraj.

“What is worrying is that we will see more desperate people going to moneylenders if businesses start shedding workers. The government must work harder with SMEs to stem job losses.”

Putrajaya unveiled a wage-subsidy programme to help companies pay their employees during the MCO on condition they did not lay off their staff.

But in a survey among Malaysian small- and medium-sized entrepreneurs, who employ two-thirds of the Malaysian workforce, 39% said they are planning lay-offs.

Union federation boss Mohamad Shafie B.P Mammal told The Malaysian Insight what is especially worrying to workers during an impending recession is the loss of seniority and the benefits that come with losing a job.

“Even if a jobless person finds work again, the pay is not going to be the same and this will also strain a family’s finances because they may have taken loans based on the income they used to earn.”

In the medium to long term, Malaysia must set up smaller, sustainable micro-lending schemes to cater to the newly unemployed and informal sector workers, said Denison.

“There should be a stronger regulatory framework to ensure these outfits do not become exploitative and accessible to the poor. If not, people will keep going to moneylenders.” – May 6, 2020.