CREDIT MANAGEMENT
FIN368
Current Issues in Credit Management:
- Bankruptcy Among Young People In Malaysia.
FACULTY OF BUSINESS ADMINISTRATION
DIPLOMA IN BUSINESS STUDIES
JBA119 5B
NAME UITM ID NO.
SITI AIDA BINTI KARIM 2018294926
NUR AIMIE NAJIHA BINTI ROSDIN 2018255668
NUR SYAHIRAH AFIQAH BINTI SIDIN 2018210726
SITI NUR FATIHAH BINTI MOHAMAD 2018294456
SYARIFAH NURSYAHIDAH SAID ZAIN 2018211826
PREPARED FOR
MADAM SHAHIRA BINTI ABD JABAR
SUBMISSION DATE
17 Th DECEMBER 2020
Table of Content
TITLE PAGES
INTRODUCTION 1
OVERVIEW 2
EXPLANATION OF THE TOPIC 3
CURRENT ISSUES 4
CONCLUSION AND RECOMMENDATION 5
REFERENCES 6
APPENDICES 7
INTRODUCTION
Bankruptcy is a legal proceeding involving a person or business that is unable
to repay their outstanding debts it owes to creditor. Nowadays, bankruptcy cases have
become a major problem in Malaysia. The bankruptcy among youth is a serious
problem because it is unusual to be declared bankrupt before 30 years old. There are
many factors that may leads them to bankruptcy at young age which are card credit,
personal loan, education, car and home. However, the main factor that leads young
people to bankruptcy is a credit card.
Credit card is a small rectangular piece of plastic or metal issued by a bank or
financial services firm that allows cardholders to borrow funds from merchant that
accept cards for purchase in order to pay for goods and services. It was invented in
1950 by Frank McNamara. Credit cards required the cardholders to pay the borrowed
money back with any applicable interest either in full by the billing date or over time.
The types of the credit card are Visa, Mastercard and many more. The main reason
why the credit card leads to bankruptcy is because the high interest rate charged and
service fees by the banker.
The other factors may lead young people to bankruptcy is education such as
PTPTN. PTPTN is Perbadanan Tabung Pendidikan Tinggi Nasional. It is an authority
responsible for giving loans for study to students pursuing tertiary education and this
agency is under Ministry of Education. Next, personal loan also can lead young
people to bankruptcy. Personal loan is an amount of money you can borrow to use for
a variety of purposes. Banks, credit unions, or online lenders may provide personal
loans. The money you borrow must be returned over time normally with interest. Any
lenders also could charge personal loan fees. According to the factors above, it will
lead the young people to the bankruptcy.
OVERVIEW
Bankruptcy as we know is a legal proceeding involving an individual or
company who is unable to pay off their outstanding debts. In this project, we will go
through the problem about the youth generation who get into bankruptcy by the lack
of credit control by using credit card or by using loans. In this study, we will also
learn how bankruptcy can affect the youth in the side of their finance.
It is deniable that credit cards really help in daily life and really have a lot of
advantages. But the advantages can be enjoyed if it is use wisely. There are a variety
of perks to getting a credit card. Besides being an easy way to make buying
purchases, credit cards are better to hold than cash and help you create a credit record
that no other tool can if you stay consistent with your purchases. This strong credit
rating would be useful if you choose to apply for a loan for some reason. It could be
helpful to use a credit card for transactions that cause the balance to be taken off
within a fair period. However, if there is no intention to pay off the balance, it will
undoubtedly begin to accumulate interest, decrease purchasing power and potentially
restrict the advantages of getting a credit card.
However, credit card also can give disadvantages for the holder. Some of the
credit card disadvantages are the possibility getting higher debt if the holder could not
pay off what have been borrowed. Credit card lenders could charge high interest rates
if you have a bad or restricted credit background which when you're at greater risk or
if the card provides some extra features. Often the interest rate will increase than 20%,
which will add up fast if you don't pay off your balance.
EXPLANATION OF THE TOPIC
There are about 84,805 Malaysians were declared bankrupt between 2015 and
2019. People below the age of 34 made up 26 per cent of the bankruptcy cases. The
reason of their bankruptcy is from their credit management. Most of their bankruptcy
cases were primarily due to the inability to sustain debt made of installment
purchases, personal loan and credit card debt. This is alarming because it reflects that
the level of financial among young Malaysians on the ground is still lacking.
For the credit card, it is the main reasons for bankruptcy among young people in
Malaysia. It is because, excessive use of credit card among young people in Malaysia.
Credit card uses need to pay it monthly and they will receive the statement or record
every month. They need to make payment in a timely manner and if it a possible to
pay off the entirely of your balance each month to avoid paying interest. The impact
of missed payment of credit card is firstly, they will charged with payment fees. Most
credit card agreements have specific fees that will be charged when you are late
paying your monthly statement. It also impact to your credit card report and credit
score.
Everyone can make loan such as personal loan and housing loan. Most of young
Malaysians will make housing loan to buy their own house. Home is their need, so
everyone needs to make housing to fulfil their needs. Some of them buy their dream
house without thinking for their future which is they can pay monthly without any
deferred payment.
Poor in financial planning can lead them to bankruptcy. As young generation,
they need to concern about their financial planning for their future. The cost of living
will increase according to growth of economy. Many young generations has no
regards for their own financial status and from that they will make a loan to buy a car.
They will make a loan to buy their dream car without any financial planning. They
can buy their assets for future such as home and car but without financial planning it
will lead them to be bankruptcy. It is because of lack in paying monthly payment of
the assets. Most of them have a short-term focused in their financial planning.
CURRENT ISSUES
Bankruptcy Among Youth Had Great Impacts of Country Economy.
With regards to the growing case of bankruptcy based on current statistics that
we can see from year to year, especially those involving young people, it is due to a
number of factors we can see through the contents that have been made in this report
before. This, thus raised concerns for various parties. It is, due to being able to
provide a negative impact not only on the individual itself, but also involves a greater
scope, such as the country's economy.
When personal loans made by youth citizens, have added burden and
commitment to them, which is not in line with the financial affordability they have,
which led them to take the initiative by reducing personal consumption purchases. As
a result, the growth rate of private consumption has grown slowly, and if it continues
over a long period of time can lead to a can-be hit country growth rate.
This can be further proved by the understanding of the fundamental concept
on the economy that can explain this, for example, less spending means less demand,
which drives businesses to stop workers and reduce further. Workers who don't work
mean fewer consumer spending and the rest of the economy are becoming sour, with
no clear solutions other than government intervention and economic stimulus,
according to the Keynes people.
Based on search data on the latest status from authentic sources such as S&P,
which shows the Standard & Poor's 500 Index, shows that Malaysia has the highest
debt among individual among others 14 Asian countries, with a jump to 88 per cent of
gross domestic product from around 60 per cent on in 2008. The Department of
Insolvency Malaysia said that 5,547 individuals under the age of 35 were declared
bankrupt last year, more than doubled in 2005, the first year in which it had published
the data. Last year's total under the age of 25 was 635, three times that of the previous
year.
CONCLUSION AND RECOMMENDATIONS.
To sum it up, bankruptcy among young people occur because they do not
know how to manage their finance as well as their expenses. The usage of credit card
which exceeds their earning capabilities and the amount of unpaid loan without they
realize that it could lead them to bankruptcy. Thus, it is vital for young generation to
learn and improve their knowledge on how to manage their money effectively.
They should cultivate the attitude of savings and do not spend according to lust, so
that what is spent has not exceed the ability. Currently, younger generation nowadays
did not know how to manage their financial budget because they often bought
unnecessary items to follow the trend so that they do not seem to be left behind until
they did not realize that they spend the money beyond their earning capabilities.
As we know, savings is an important element that can act as an emergency
fund to cover any unavoidable expenses when unfortunate situations happened. For
young generation, it is essential to recognizing the importance of being financially
literate and learning the skills required to manage financial resources. As a beginning,
it is crucial to practice the 2B’s which is indicates budgeting and balancing.
Essentially, budgeting determines how much money comes in each month which is
refer to salaries or income and how much money goes out each month which is refer
to expenses. In addition, balancing ensures that overall expenditure do not surpass the
sum of income every month. Malaysian youth will begin to use various initiative
launched by Malaysia’s government and independent bodies, including
“Belanjawanku”, a guideline on spending for Malaysia individuals and families to
wisely handle their personal finances.
At the same time, the Insolvency Department, the Malaysian Council
(MFPC) and the Credit Counselling and Debt Management Agency (AFPK) have
coordinated various outreach initiatives to introduce young people to basic financial
management and skills and raise awareness of the ripple effects and risks of being
indebted and declared bankrupt at an early age. It may seem challenging to have
financial literacy because there is no manual or textbook on how to do it, but it is
important for young generation to learn and develop the essential skills and
information from a young age in order to make the best choices in future debt
management and financial planning. Last but not least, our generation, it is hoped,
will be more robust and prepared to face the unpredictable crisis in the future.
REFERENCES
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articleid=10923&title=experts-more-young-malaysians-going-bankrupt-because-of-five-series-
loans
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due-excessive-credit-card-usage-among-youth-still-low-finance
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APPENDICES.
