PUTRAJAYA wants to strengthen the economy and empower the young and working class by removing the bankruptcy status of some 120,000 people, economists said.

The move could indirectly boost the country’s GDP, as it is a long-term plan to fix the country’s economy, they said.

In his Budget 2023 speech last week, Prime Minister and Finance Minister Anwar Ibrahim announced the relief for 120,000 people declared bankrupt nationwide.

The first tranche of applicants must have been declared bankrupt for five years with an outstanding debt of less than RM50,000. They must also not be subject to any proceedings or investigations under the Insolvency Act 1967.

Anwar, when announcing the relief, said it would be a second chance for bankrupts.

In the short term, the government will amend the Insolvency Act 1967 to include an automatic relief provision, which is expected to be brought before parliament soon.

Universiti Tun Abd Razak academic Dr Barjoyai Bardai said the government is trying to push and attract more young and working class to take up entrepreneurship.

Noting a risk of going bankrupt while in business, Barjoyai said the government is showing a positive sign by wanting the public to venture into business.

“This is a long-term plan and this move to clear people from bankruptcy status is a positive sign from the government. They want the young and working class to join business,” he said.

“There are 16.9 million workers in the country and 10 million are from the unskilled group so if this group can be persuaded to join business, the economy can expand.

“Indirectly, the economy will grow and bloom. In Malaysia the small and medium enterprises contribute some 35% to the GDP. In developed countries it can reach up to 50%. We should laud the move by the government,” he said.

The Malaysian Insight spoke to several people who expressed relief their names have finally been cleared of insolvency.

They said the label had hung over their heads and made their lives difficult.

A woman who wanted to be known as Salawati said she was declared bankrupt after being forced into a lot of debt 14 years ago when her ex-husband was unemployed.

“His unemployment forced me to take on personal loans and credit cards until I was listed as a bankrupt with a debt of RM119,000,” she said.

She admitted her life had been in turmoil after being declared a bankrupt, including having to borrow from illegal moneylenders.

“I divorced my husband, was fired from my job and had to raise two young children.”

A new life for all

Meanwhile Dr Ahmed Razman Abdul Latiff of Putra Business School said the impact would certainly be felt by individuals, who can now build a new life.

“The impact would not be so much to the country but to the individuals. They can have their own bank account, make transactions and go overseas.

“Yes they can do business which will help them economically. The impact will be huge. They are getting their lives back again. For those with a wife and children, they can enjoy a better life,” said Razman.

Data from the Credit Counselling and Debt Management Agency and almost 50,000 cases in the past five years showed failure to pay off personal loans, business hire-purchase agreements or business loans as among the main reasons why people were declared bankrupt.

Of those, two out of every five cases stemmed from personal loans. This included 4,653 cases of unpaid housing loan and 3,936 cases of credit card debt. – March 3, 2023.