Article search by : Pn. Nor Anidah Rosli (Penolong Akauntan)

Author : Sim Why Jean, Berita Harian

 

Crisis COVID-19 is acknowledged to change the attitude of the community in the aspect of financial management due to the annoyance of facing unforeseen situations due to reduced savings.

The pandemic has become a lesson for us to emphasise the importance of building an inclusive financial ecosystem by complementing every individual financial literacy towards producing a financially literate society.

In reality, no term is too early or too late in the context of financial literacy. In the face of digitalization, the rapid pace of financial technology is driving most of the daily business to be done at your fingertips, including virtual payment methods.

As the modus operandi of online scams such as get-rich-quick schemes and Macau Scams intensifies every day, financial knowledge can prevent people from being fooled and not falling victim to scams until the savings disappear.

Financial planning is able to help individuals become more aware in the personal finance chapter which includes aspects of financial risk management, practical financial skills as well as building an emergency fund.

The 'Buy First, Pay Later' Phenomenon

As a step forward post-pandemic, the kingdom must take pragmatic intervention steps to foster financial resilience, especially increasing the purchasing power of vulnerable groups who are impressed by the impact of the pandemic.

In recent times, the 'Buy First, Pay Later' (BNPL) phenomenon is increasingly stealing the spotlight. In 2021, the number of BNPL transactions in the local market was found to have recorded a significant increase of RM1.49 billion compared to RM55 million in the previous year.

This mobile facility is seen as being able to boost consumer spending by encouraging cashless transactions, as well as providing space to plan payments through the gradual breakdown of bills according to the payment cycle.

However, like a 'double-edged sword', this trend can increase spending and inpulsive buying tendencies, thus increasing the burden of spending if not tightly controlled.

Hence, in order to protect the consumer credit space, the regulatory framework of the Consumer Credit Act (CCA) must include the BNPL element.

This way, users can be exposed to hidden costs as well as understand BNPL risks by creating periodic reminders to monitor expenses.

At the same time, it is important to prevent unnecessary debts so that they do not get entangled in debt. In the first five months of 2022, an estimated 18 people went bankrupt every day.

As a result of credit card, personal and vehicle commitments, bankruptcy cases involving those in the 25- to 44-year-old age range account for almost 60 per cent since 2018.

In this regard, the Credit Counseling and Management Agency (AKPK) should play an important role in helping youths to restructure the loan scheme. As of last June, about 41 percent of young participants participated in the AKPK Debt Management Program.

Bankruptcy should be the last resort for existing financial institutions and bankruptcy legislation should be reviewed from time to time following the increase in the bankruptcy threshold from RM50,000 to RM100,000 by the Department of Insolvency.

Taking into account the prospect of a surge in housing prices, access to affordable housing should also be given priority, especially in dealing with the issue of difficulty in obtaining financing for low-income homes and first-class home buyers.

For example, the government's action to reactivate the Home Ownership Campaign under the National Economic Regeneration Plan Package (PENJANA) during the pandemic is a reasonable measure with special incentives such as stamp duty exemption.

Through the cooperation of Bank Negara Malaysia (BNM) and banking institutions, a model of able-to-belong housing financing whether a continuous purchase or rent-to-property can be developed, in addition to offering courses helping first home buyers regarding home purchase procedures.

According to the Financial Education Network (FEN) survey, one-third of Malaysians are found to still have low confidence in literacy and financial management, besides not having enough emergency funds.

Hence, the periodic review of the financial planning plan is one of the key elements of long-term systematic financial management.

Through a two-pronged approach, which is mastery of financial literacy as well as inculcating financial habits from a young age, targeted interventions can be implemented by age group taking into account the level of literacy of different individuals.

In this regard, the empowerment of financial literacy through education should be given special emphasis, including expanding the financial education element in the school curriculum.

Parents also need to play a role in fostering the practice of saving among their children from an early age.

With a culture of financial literacy, individuals can not only spend prudently by differentiating needs and wants, but can make wise financial decisions based on the '50-30-20' formula for expenses, needs and savings.

 

Create a one-stop center for financial literacy

To strengthen efforts to promote financial literacy among the community, the existence of a one-stop financial center hub can be a catalyst with the involvement of all stakeholders including government entities, financial institutions, and education.

Support for the corporate, banking and community sectors under corporate social responsibility, awareness campaigns and financial education programs should be intensified to improve access to financial literacy.

In addition to offering free consultation services by certified financial planners, individuals can also be given exposure on the investment base.

Advisory services on retirement plans and insurance and takaful coverage can help individuals rebuild their retirement funds to ensure that old age protection is in line with their retirement goals.

The synergies and joint ventures of all parties are believed to be successful in shaping a financially literate society and thus contribute to sustainable economic growth.

Date of Input: 21/02/2023 | Updated: 23/02/2023 | muhammad.isam