Pawnshop rush shows B40 folk need more help

THE long lines outside pawnshops in the Klang Valley on the first day of the conditional movement-control order (CMCO) on May 4 and a few days after that – scenes that have gone viral on social media – are a vivid reminder that more assistance is needed for B40, and even M40, households.

According to media reports, the crowds were at the pawnshops to reclaim their valuables, put up more items as collateral, pay interest or extend the repayment period.

Economists and analysts think that the phenomenon shows that more measures are needed to mitigate the effects of a reduced income, or the loss of it altogether. The situation is especially acute for the self-employed or those who rely on daily wages, such as traders, hawkers, taxi drivers, cleaners, labourers and sub-contractors.

Not only that; inflation is now a major concern as the MCO has disrupted and fragmented the supply chain, resulting in shortages of certain goods, exacerbated by panic-buying and stockpiling.

As a country that is heavily reliant on food imports, we are vulnerable to global supply and demand shocks as a result of similar containment measures overseas. The result is a spike in the prices of essential food items. For example, the price of cabbage was RM6.50 late last month, a whopping 62.5% increase, while cucumber was up 300% from RM1 to RM3.

In its second study on the economic impact of Covid-19, released in a press statement on March 24, the Malaysian Institute of Economic Research made the following projections:

– Malaysia’s real GDP may shrink 6.9% relative to the 2020 baseline. This translates into a 2.9% real GDP growth for 2020, relative to 2019;

– The number of job losses (presumed to be mainly non-salaried jobs) could be in the region of 2.4 million, 67% of whom are unskilled workers;

– Household income is projected to fall by 12% relative to the baseline, which amounts to RM95 billion; and,

– Such a fall is manifested in a sharp decline in consumer spending by 11%, despite the drop in general consumer price levels by 4.4%.

On the same day the Prihatin 1.0 stimulus package was announced, a Khazanah Research Institute opinion piece, titled “The Impact of Covid-19 on the Urban Poor: Three Major Threats – Money, Food and Living Conditions”, was published. It highlights a Bank Negara Malaysia study that estimated the following:

– A single adult living in the Klang Valley needs to earn a minimum of RM2,700 a month to live adequately; and,

– Married couples with two children require RM65,002 to “survive”.

The article also mentioned that data from the National Housing Department showed that 65.8% of breadwinners of households in People’s Housing Projects (PPR) earn below RM2,000 on average.

And, the average monthly income of households in PPRs remains bound to the range of RM2,000 in more-developed states. The figures are RM2,039.40 for Selangor and RM1,994.40 for Kuala Lumpur.

The analysts concluded that “these households are probably already struggling to make ends meet, and the repercussions from the (Covid-19) outbreak will create a huge dent in their finances”.

Shrinking purchasing power, loss of employment, lower wages, rising poverty (as measured by the poverty line income, which is officially RM980 per month in the peninsula, RM1,180 in Sabah and RM1,020 in Sarawak), higher cost of living, and a safety net on the back of limited fiscal capacity make for grim reading of our socioeconomic future.

On the long queues outside pawnshops, Universiti Kebangsaan Malaysia’s Professor Denison Jayasooria, who is also a prominent social activist, sees them as a phenomenon of the “poor man’s bank”.

In view of this, the government should implement the following measures to help those who rely on pawnshops to raise emergency cash:

– The Housing and Local Government Ministry, which is responsible for the licensing of pawnbrokers under the Moneylenders Act 1951, should set up a one-stop centre to advise and guide borrowers on legitimate pawnbrokers; and,

– In the medium term, the government should have a comprehensive consumer credit law to ensure a healthy market and enhance protection of borrower’s rights and interests.

It is conceded that it is common in Malaysia for people, irrespective of ethnicity, to see pawnshops as a source of borrowing. This is especially so when festive seasons are around the corner.

Indeed, in the Covid-19 scenario, long queues outside pawnshops may well be a new normal, at least for some time. – May 12, 2020.

* Jason Loh Seong Wei is head of social, law and human rights at Emir Research.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight.

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