HALIM Abas knew he would struggle to pay back RM70,000 in personal loans but he took them anyway because he felt he did not have a choice.

The 29-year-old civil servant and father of two took out two personal bank loans because he could not sufficiently provide for his family.

He later took a third loan, this time from the government to buy a house.

Today, Halim is one of the nearly 100,000 civil servants that Cuepacs, the umbrella body of public sector unions, estimates are at risk of bankruptcy.

Statistics from the Insolvency Department show that 3,276 civil servants were declared bankrupt from 2013 to 2016, and the number is rising every year.

Cuepacs president Azih Muda said low- and mid-ranking government employees took out personal loans, thinking it could help them meet rising daily expenses.

He said in many cases, these debtors also did not know how to manage their finances, spent beyond their means and borrowed beyond their ability to repay .

“Many of them have small salaries to begin with, but they spend more than they earn.”

He said Cuepacs’ estimate of 100,000 civil servants currently near bankruptcy is “something that is really happening”. 

“The number is to highlight the problems they face. It’s a reminder to the public of the issue and a reminder to others civil servants.”

Necessary loans

Halim took his first personal loan in 2010 when he first started work. The RM50,000 was to be repaid over 20 years and he spent it on his wedding, a motorcycle, a used car and furniture.

The second loan of RM20,000 in 2013 was so that his wife could open a small sundry shop.

The repayments for the two loans total RM600 a month.

The third loan of RM198,000 was from the government for a house in 2015. The monthly repayment is RM985 for 30 years.

In total, the repayments for the loans take up more than 60% of his RM2,100 monthly salary. He is left with RM500  each month for his two kids.

“My wife helps me out with the money she makes from the store. I had to take out these loans because my salary was not enough to meet the rising cost of living and the high cost of housing.”

The government has set a limit on the amount that can be  automatically deducted from the civil servants’ salaries for loan repayment.

Since banks can tell whether a civil servant had too many loans just by looking at their salary slips, this helps curb runaway debt among civil servants.

Currently, civil servants are allowed to have a maximum 60% of their salary deducted for loan repayments, said Minister in the Prime Minister’s Department Azalina Othman Said.

But the limit somehow did not stop the government from approving Halim’s housing loan.

Saving nothing because that’s all that’s left 

A Bank Negara Malaysia survey shows that three out of four Malaysians would have trouble raising RM1,000 in an emergency. This indicates they are not saving their money, for a rainy day or for retirement.

Malissa Salehuddin, 32, is another government employee who is struggling to repay a personal loan. Like Halim, she said she needed the money.

She took out a RM20,000 personal loan six years ago when she and her husband were transferred to Kuala Lumpur from Perak. The couple needed furniture and appliances when they moved into government quarters.

When they divorced, Malissa sent her three children to live with her mother in the kampung in Perak, where expenses are a little lower.

Each month she pays RM700 for a car loan and RM350 for the personal loan. After deducting RM300 for rent, RM600 for her mother and RM700 for food, there is nothing left of Malissa’s RM2,400
salary.

She tries to supplement her monthly income by selling fruits online.

“I got worried after reading the Cuepacs statement. I don’t want to be one of those people who have to take out another personal loan just to make ends meet,” Malissa told The Malaysian Insight.

“I do regret taking that personal loan because now I am burdened with the repayment. But I needed the money at the time, my pay was too low to buy what we needed for the house.”

Malissa is now planning to get a transfer back to Perak so that she can live in the kampung with her kids.

“I can’t continue to live in the city where everything is so expensive. I am worried that I might need to take out another personal loan.”

In response to Cuepacs’ statement, Credit Management and Counseling Agency general manager Nor Fazleen Zakaria urged civil servants with debt problems to seek help from the agency.

Of the 554,011 clients the agency has had from 2006 to March, 178,845 have managed to get their finances under control through its credit management programme.

About half of this group admitted to having problems managing their finances. – May 8, 2017.