Is there really ‘Post-Raya Debt’?

“It’s proven that because of Raya, Malaysians spend three times more,” said Noorhaliza Abu Bakar (Liz), Head of Content Development in the Financial Education Department of AKPK - ‘Agensi Kaunseling dan Pengurusan Kredit’ (Credit Counselling and Debt Management Agency).

Liz argued that though debts do not “recognize seasons, age or occupation”, people do spend more during festive seasons.

“For example, Malaysia has four sales such as Year End Sale,” she continued.

Liz also pointed out that this year, both the school term and Raya were in March. So, people needed to spend more in a month than usual.

The employee of 17 years at AKPK revealed the enrollment statistics of their Debt Management Programme from their inception in 2006 till January 2023: 41.8 percent were aged 30 to 40; 28.3 percent were aged 40 to 50; 13.3 percent were aged 20 to 30; 12.9 percent were aged 50 to 60; and 3.7 percent were aged above 60.

Liz explained that the age 30 to 40 is when there are more financial commitments, such as a bigger household

In respect of big purchases during Raya, Hidayah Basirah, a Taylor’s student said, “There are relatives who want to show their social status and that they have succeeded because they moved away to work in a more urban area.”

The 21-year-old had a budget of RM 300 and managed to spend accordingly every Raya because she “does not really have more to spend.”

Hidayah spent her budget on Raya clothing and accessories

“I have heard of post-Raya debt from my parents, but not from educational institutions.”

She explained that her parents are very aware of such issues and take proactive measures to avoid them; the family of seven is very mindful of their expenditures.

Yet, according to Free Malaysia Today, some families felt financial strain ahead of Raya.

Nightline on Buletin TV3 reported that there are still people who would go overboard for preparations despite the increased cost of living. A housewife mentioned she spent over RM 5,000 on clothes because she has many children.

Nur Asyikin Aminuddin, Deputy Secretary-General of the Federal of Malaysian Consumers Associations encouraged the public to re-use existing items or create homemade decorations and clothing. The money saved could be used for other needs such as the cost of transportation back to hometown.

She suggested that people use money that they do not have by taking on debts with personal loans, credit cards, or ‘buy now pay later’ schemes.

“It’s just for a week…we have to bear all the debts for a few months, and even for a year.” emphasized.

Iskandar Wafa, Vice President of Business Planning and Analysis at CIMB said that he has seen and heard quite a number of such cases from low-income or single-parent households.

“We tend to actually buy a new car just to impress our parents back home,” he explained on the standards to sort of flaunt to others. Perhaps, this further justifies Hidayah’s relatives who were aforementioned.

“I don’t see the point … but it does happen unfortunately.”

He emphasized that some do not understand the consequences. “In order for them to, they have to finance their needs such as going to the bank or other institutions.”

Liz added, “Sometimes, a lender misunderstands the meaning behind financial terms in a loan agreement.”

In addition to overspending during Raya, the unpreparedness of emergency funds and investing in get-rich-quick schemes can cause post-Raya debts.

Iskandar observed that credit card debts are the top bankruptcy issue in Malaysia, especially among youths. The Central Bank of Malaysia which released that the age group below 30 leads the statistics.

The former analyst of seven years at Deloitte found that marketing campaigns tend to target the youth because they are more prone to participate in social trends due to FoMO, causing them to overspend.

Iskandar spoke with his former employer’s tee

Liz added that some youths are not looking at their affordability. “If you go through the Statement of Malaysian Department of Insolvency, the indebtedness faced by them starts at the age of 21.”

In this regard, Hidayah acknowledged peer pressure and desire to conform to societal expectations.

She thinks that it is crucial to make informed decisions based on one’s expenditure, especially during Raya.

Iskandar agreed saying, “Banks do assist them in consolidating debts, but it comes down to the discipline of consumers.”

Liz shared that AKPK has embedded financial education modules into co-curricular activities of universities “aligned with government policies to ensure that bankruptcy among youths who face legal actions reduces” in general.