A RECENT survey has revealed that 73% of Malaysian youth were in debt and do not have sufficient capital for financial commitments.

The survey by UCSI University poll research centre, which was published today, highlighted several main reasons for youngsters to take up loans – financial constraints, inflation and adopting luxurious lifestyles.

UCSI academic Dr Hassanudin Mohd Thas Thaker said the study also found that most of the loans taken to purchase vehicles, for education as well as home loans.

Out of the 1,077 youngsters in the study, 73% have taken loans. This indicates that about three-quarters of Malaysian youngsters do not have sufficient capital for financial commitments. 

Although the number of borrowers among the youngsters is worrying, 83% of them could pay their loans on time.

“Vehicles and education are the main factors causing youngsters to apply for loans. It is alarming to have vehicle loans on top of the pyramid as according to the Insolvency Department, vehicle loans (14.39%) have been the second factor of bankruptcy rate after personal loan (42.24%) in 2022,” said Hassanudin, who is the Head of Research and Postgraduate Studies, Faculty of Business and Management, UCSI University.

He said most of the respondents were aware of the consequences of taking loans, indicating Malaysian youngsters do not apply for loans blindly.

“According to the findings, the growth in the cost of living and insufficient savings (27%) are the primary causes of financial constraints, while a change in lifestyle is the third primary cause of financial constraints.

“The change in lifestyle may have been necessary to some of the youngsters because a lot of things have changed during the pandemic.

“One of the examples are university students; the transition from physical to online classes required each student to have their own laptop and home wi-fi for them to join online classes, which indirectly affected their daily financial wellbeing,” said Hassanudin.

Hassanudin said the Covid-19 pandemic played a major role in greater financial constraints for youth.

He added youngsters do not have enough savings to begin a new chapter in their life, which later causes them to apply for loans.

“With the current financial crisis period, inflation has also contributed to the number of borrowers among youngsters in Malaysia.

“In addition, there is always a mismatch between demand and supply, which leads to continuous problems,” said the academic.

A total of 1,077 youngsters, between the ages of 18 and 40, were polled, with 48% of the respondents being Chinese, 38% Malays and 14% Indians. – January 31, 2023.