家庭負債結構的改變
 

個人/家庭負債
 

如今，大多數個人以及家庭負債普遍是由于個人的貸款和信用卡而產生。一般而言，個人貸款是由住房貸款和汽車貸款組成。這是因為住房和汽車是現代社會的生活必需品也給家庭生活更為便捷。然而，信用證由于廣泛使用，成為了有用的工具，比如被用來投資或者購置類似住房，土地和其他財產物資。
 

目前，政府在經濟危機后，鼓勵居民租借房貸以刺激經濟。根據Cambell(2006),表明居民在做經濟決策時，不總是完全理性的。因此，考慮到房貸是長期貸款且需要大量資金。很有可能居民需要長期處于還貸狀態。
 

此外，信用卡是信用服務之一，它是公眾最為普遍愿意接受的一種消費方式，但卻在消極地影響居民經濟狀況。和過去相比，信用卡很容易被接受且在銀行機構內被廣泛規范化。因此，它也成為了部分家庭債務的一個財務問題。

The Changes In Household Debt
 

Individual/Household debt

 

Nowadays, most of the individual and household debt commonly arises due to personal loan and credit card. Generally, personal loan is composing by housing loan and auto loan. It is because housing and vehicle are the necessities of livelihood in present-day society and also convenience to the household. However, credit can be great tool as used wisely such as used to investment or purchase property like housing, land and others.

 

Presently, government arouse household borrowing housing loan for purpose of stimulus the economic after financial crisis. According to Campbell (2006), suggest that households are not always fully rational when making financial decisions. As a result, in term of housing loan is long term loan and including large amount of money, it may household need to burden debt in the long time period.

 

In addition, credit card is one of the credit services which is being the most popularly advocacy by public and it is gradually become influence household financial negatively. Credit card is easily to adopt and widely authorize by banking institution now compare to previous time. Therefore, it is also a financial problem as part of household debt.

 

In the end of 2008, global financial crisis occurred and Malaysia unavoidable faced financial crisis-economic recession. Currently, as Malaysia’s economic recovery gradually and interest rate is lower which government aim to encourage and stimulate household or public consumption, thus the demand of the loan is relatively increase. Nevertheless, government also announces reduction of the personal income tax and raised individual tax relief to increase the disposable income of households for support household consumption. Although, this act may bring on household debt become seriously which is highly rising.#p#分頁標題#e#

 

Regarding to the StarBizWeek published on 31 July 2010 sated that since current economic traction is positive and interest rates relatively low, retail credit bubble will be unavoidable especially to households if the industry keeps up provide retail loans. Central Bank of Malaysia examined that outstanding loan to households expanded by 12.9% annually attribute to majority of households borrowing housing and auto loans thus household loan application up to RM159.9 billion. Nevertheless, household debts in Malaysia occupy 77% of gross domestic product (GDP) which is the highest in Asia compares with 64% in 2008. However, Central Bank of Malaysia will be attempting to increase interest rates to restrain any possible retail bubble.

 

Trend of household debt

 

Source: Central Bank of Malaysia, Treasury Housing Loans Division

 

According to the figure is about annual total and growth rate (%) of household indebtedness. Figure 4 is shown that from 2001 to 2007, the total of household debt was increasingly annually which is generate above RM 430 billion. It is because financial and currency of Malaysia is sustainability and stability which is economic growing annually. However, the growth rate of household debt sometime decline and sometime raise between 2001 to 2007 which generate 27.1%, 17.6%, 13.1%, 13.7%, 15%, 10.2% and 7.9% respectively. Nevertheless, the lowest of the growth rate of household debt is at 2007 compare to the others year.

 

Source: Central Bank of Malaysia

 

According to the figure is about percentage of total loan between business and household after break down of Malaysia’s banking system loan. Generally, household debt is more come from household borrowing housing or automobile loan. Whereas, the break down of banking system which is relax the constraint of the loan lead to total household loan has expanded considerably from 2000 onwards. The growth rate of household loan generates almost 14.8%. From 2000 to 2007, the total of household loan is highest compare with total of business loan which is lower than household loan annually.

 

Source: Central Bank of Malaysia, Treasury Housing Loans Division

 

Based on the figure, most of the household debt is due to household aim to purchase properties such as housing compare with others purpose. The total loan for housing purchases is growing at an average annual rate of 15% during the period. It is because the housing price between 2000 and 2007 is considerably stability and government encourage household to purchases as ownership. The others purpose is including personal use, purchasing transport vehicles, credit card and others purpose. Whereas, the purchase of vehicles is the second highest is because revision of the tax structure for passenger cars. Therefore, most of the household is willingness to apply loan. On the other hand, credit card only has slightly effect to the household debt compares with others purpose which is average grew by 17.8% a year.#p#分頁標題#e#

Source: Central Bank of Malaysia, Treasury Housing Loans Division

 

The figure is shown that percentage composition of credit provider to household sector which is composed of banking system, Treasury Housing Loans Division, Development Financial Institutions and Insurance companies. The banking system is the largest provider of household in Malaysia such as CIMB bank, Maybank and so on. It is because banking system has extensive branch network so easier attract household to access. The dominant of banking system is increased due to the considerable rebalancing of banking institutions’ loan portfolios into the retail segment. Furthermore, the Development Financial Institutions (DFIs) is growing annually which is increase from 1% in 2000 to 7.2% in 2007. On the other hand, the Treasury Housing Loans Division in market of lending to household is decline annually which is substitute by Development Financial Institutions (DFIs).

 

Source: Central Bank of Malaysia

 

Based on the figure, the lending rate of Malaysia’s commercial bank is remaining the same between July 2006 and October 2008. Central Bank of Malaysia (BNM) allowed the policy rate unchanged because it is still support to domestic demand. However, the lending rate on loan was decline rapidly which is a historic low of 4.83% after October 2008 due to economic financial crisis globalization. This act which is re-pricing the existing or new loan is to encourage households continuing apply loan for more consumption to stimulus the Gross Domestic Product (GDP) of Malaysia. Beside that, Central Bank of Malaysia (BNM) and the government also implemented several measures to ensure the continued flow of financing.

Source: Central Bank of Malaysia

 

According to the figure, total net financing to the private sector through Banking system loans and private debt securities (PDS) on the end of 2008 was rapidly decline due to the global of economic and financial crisis. Although, the net financing to the private sector rising after second half of 2009 which is raising about 8.6%. It is because Central Bank of Malaysia (BNM) and the government implemented several policy measures which including lower lending rates to sustaining and conducting availability financing of Malaysia.

 

 

2 Comprises household deposits held in banking system, Bank Simpanan Nasional, Bank Kerjasama Rakyat Malaysia Berhad, total assets of life insurance funds, household direct holdings of equity, Employees Provident Fund contributions and net asset value of unit trust funds

 

Source: Treasury Housing Loans Division, Securities Commission Malaysia,

 

Employees Provident Fund and internal estimates

 

According to the figure, household debt of Malaysia was increasingly annually due to housing loan. The year of 2008 shown that the household debt created about RM 467,043 million is the highest compare to years of 2004 to 2007 which is RM 316,158 million, RM 361,029 million, RM 393,758million and RM 426,800million respectively. Although, the household financial assets also increase annually from 2004 to 2007 except 2008 was decrease. Moreover, the household financial assets are more than household debt with average ratio which is contributes 249%. It means that households still have ability to repayment their debt.#p#分頁標題#e#

 

 

Figure 8 shown that inflation of Malaysia is highly increasing at 2008 compare with 2007 which is growth about 5.4%. Inflation means that interest rate is on higher position due to reduced power consumption of household. Although, household debt will continue increasing because the highest interest rate only will be a small financial issue for household depend to economic fleetly expansion.

 

Why has debt increased?

 

Housing price

 

Generally, housing prices either rising or decline is the main factor that driving household debt increasing. The housing price may influence by changing interest rate by Central Bank of Malaysia (BNM) which attributed to financial stability. Nevertheless, Borio and Lowe (2002) stated that significant growth in debt and also asset prices will bring on financial imbalances.

 

1.1 Rising in housing price

 

The boost of debt is general due to increase in housing price and high turnover in the housing market. It is because commonly household borrowing loan is aim to purchase housing which can prove on figure 3. However, the housing is the essential of livelihood for everybody thereby it is unavoidable for every household apply loan to purchase despite housing is in high price.#p#分頁標題#e#

 

Besides, higher housing prices are able to contribute debt growth for a long time. According to Valuation and Property Service Department (JPPH), the change of housing price is rising from period 2006 until 2008 (figure 9). There is significantly economic of Malaysia is under inflation which is reflect from rising in housing price.

 

On the other hand, within the higher house price which means that household must disburse a large amount of money for purchases housing bring on household must applying more loan from financial institutions. Therefore, the household debt will be increase correspondingly which need a long period to repayment.

 

Source: Central Bank of Malaysia

 

Although, the period from 2006 to 2008 also was period which is on high lending rates on loan of commercial bank (figure 5). Banks' lending policy able to influence growth of household debt due to household is increase a large proportion of their debt in financial institutions. Majority of households are preferred borrowing loan from financial institutions for purchase housing because payment in cash will be charging large amount of money by government for income-tax. Thus, household will more willing to purchase in credit. As a result, there is significantly enhancing burden on household debt which is households' gross debt will increase correspondingly for who is purchases housing on that period.

 

Lastly, the rising of the house prices may alter household portfolio and also induce portfolio rebalancing attribute to increasing in household debt. However, households may borrow mortgage with pledge their housing to invest more in tax-deferred retirement assets.

 

1.2 Decline in housing price

 

The period from the end of 2008 to 2009 was a period of significant decline of housing price due to occurred economic and financial crisis globalization (figure 9). The significant decline of housing price will result on household indebtedness increasing because the housing becomes negative equity since its price is lower. However, the negative equity couldn’t embarrass household attribute to the banking and financial institutions are providing various type of loan presently such as mortgage and it is easier to get the loan.

 

On the other hand, household debts also will be growth accelerated when decline in hosing price due to lending rates on loan of commercial bank is lower. When Malaysia facing economic and financial crisis in the end of 2008, Central Bank of Malaysia (BNM) decide reduce the lending rate on loan which is a historical low of 4.83% (figure 5). The purpose of Central Bank of Malaysia (BNM) changing the policy is due to attract more household borrowing loan to stimulus the consumption for growth of economic.#p#分頁標題#e#

 

Consequently, some of the household will intend to purchase housing while the price is lower because worth to borrowing loan with lower lending rate. Some of the will purchase as investment which keeping until the price of housing rising then sell it out to earning the price difference of the housing sold. After that, there are also several household purchases as their own use. Despite, it will burden household debt because of economic recession lead to reduction of disposable income which means power purchasing decline.

 

Financial Innovation

 

Financial innovation defined as one mechanism such as payment system advance, risk transferring innovation, credit innovation or others which use to enhance efficiency and profits for certain parties even though it is often takes time for regulation. However, financial deregulation occurred in nearly all developed economies.

 

Despite, Malaysia’s banking system has recommended a financial innovation which is about relaxes borrowing constraints by permit more households access to credit during the financial crisis on 2009. Such innovation has made effortless for household borrowing by against their housing wealth. Thus, the increasingly of household who has the greater availability of credit will growth the household debt correspondingly.

 

Commonly, financial innovation is not mainly for the households that are able to borrow but aim to increase the debt that held by households who is already had some access to borrowing because it may reduce the cost of borrowing.

 

Indeed, the financial system has changed over the past several decades which is involves improved assessment and pricing of risk, expanded lending to households without strong collateral; and more-widespread securitization of loans, which has conceivable reducing the cost of credit.

 

According to Gerardi, Rosen, and Willen (2006), examined that financial innovation of banking will effect to the capacity of young household to purchase home that consistent with their expected income. Therefore, it will bring on increasingly of household that will burden more indebtedness.

 

Lower Interest Rates and Expected Income

 

Interest rate is defined as amount that banks charge each borrower for loans and also on their overdue repayment.

 

The figures 5 shown that the end of 2008, Central Bank of Malaysia (BNM) was lower the interest lending rate to overcome financial crisis. As decline inflation, the associated decline in nominal borrowing rates has allowed household to borrow larger amounts for a given limit on loan or others credit product. It is because lower interest rates can attract household to consumption more on credit and also encourage borrowing loans. This act is aim to boost and stimulate the economy.#p#分頁標題#e#

 

However, the lower interest rate is a mixed blessing. The benefit in lower interest rate is household may receive more services such as mortgage, housing loan and others in cheaper charging compare to normally interest rate charges. It may enable household save money, spending more and also reduction on household debt.

 

On the other hand, because of spending more on credit than previous as a result household debt will significantly accumulate more than before. It is lead to household unable to cover their debt later.

 

In additional, as interest rate is lower, it will bring on growth of income slower. Interest rate will give impact to growth of income become slower because economic recession may lead to businesses’ liquidity of financial become lower result on difficulty in increase salary to employee. Therefore, disposable income will be remaining the same on a period whereas household intend to spend more on credit. As a result, household debt will be increase afterward.

 

Government policy

 

Recently over this few year, government of Malaysia was modifying policy which is put effort to encourage household has their home ownership with required banking or financial institutions to offer housing loan to the low income household.

 

Nevertheless, the government has introduced a series of liberalization measures and fiscal incentives for the property market. For the sake of successfully implemented this scheme, government has sponsor a lending institution which is Cagamas Berhad by issue funding in the housing market for helping household in purchasing housing.

 

The role of Cagamas Berhad is purchases or refinances mortgage loans from banking or financial institutions to provide household long-term funding. Moreover, government also offered reducing duties of the car who intent to stimulus the demand for household borrowing auto loan to purchase which may lead to household debt increasingly.

 

The Consequences of Higher Household Debt

 

Based on household debt of Malaysia increasing and default also increase considerably at presently, it will bring on several negative impacts for higher household debt such as below:

 

Households are more impressible to Economic impact

 

Below is about several ways attribute to households are more impressible to economic shock:

 

Income

 

The income of household is important as it is instrument to determinant and measure power consumption and ability repayment of household. Thus, the reduction in income while economic recession may lead to income disposable reduces proportionately which mean cash flow will be reducing. Besides, it has significant effect on household power spending and aggregate demand.#p#分頁標題#e#

 

As evidenced, based on StarBizWeek published on 19 August 2010 stated that economists at Malaysian Rating Corp Bhd (MARC) implied that disposable incomes of Malaysians will be influence by the issue of food inflation.

 

Interest rates

 

Higher household debt may result on household will impressible to alter interest rate. The changing of interest rate will influence the term of new loan. While household debt is significant related to income, the change of interest rate will reflect on credit service cause effect on cash flow available. Therefore, higher interest rate may lead to household unable to cover the debts in future.

 

Asset prices

 

In addition, higher debt of household also indirectly vulnerable to shocks to asset prices. Equity and housing prices are significant influence household debt. As a result, decrease of equity and housing prices able to enhance burden debt of household.

 

Expectations

 

Sometimes, some of the household will unreasonable expected their future income may lead to household over taking credit on consumption which is exceed their income due to greater ability of credit with more and easily.

 

Inadequacy of Retirement Savings

 

Higher debt of household will discover inadequacy of retirement savings while they are retire due to insufficient saving. According to Frank A. Fernandez and Kyle L Brandon (2006), who are founded that most of the households were not saving at all compare with households were saving enough to maintain their standard living when retirement.

 

Generally, household occur inadequacy of retirement saving when retirement is because household need to distribute more from income due to repayment the higher household debt before. It means that household using a part of money saving for purpose repayment household debt.

 

Furthermore, household will bank less out of current income since asset price rising boosts their net worth. Asset price increase means that household need more income or more loans to purchase the asset while their income remaining the same. Thereby, saving of household will be reduction and insufficiency.

 

Bankruptcy

 

The most seriously issue facing by higher household debt is when households are default which is unable to make repayment for creditor for a specific period, creditor have the right to imposed household bankruptcy.

 

Malaysia’s bankruptcy law is according to English law and it is under the Bankruptcy Act 1967. A bankrupt is someone who has officially declared that he cannot pay what he owes. In Malaysia, the minimum amount of outstanding debt amount to initiate bankruptcy is RM30, 000. (Source: Law of Malaysia)#p#分頁標題#e#

 

The bankruptcy proceeding is allow household free from the excessive debts. After that, assets belong to household are shared out in order to repay the creditors as well as travelling overseas and holding the post of company director also will be restrict. Besides, household will contribute to the bankruptcy area and will only be release while the repayment is resolve.

 

Regarding to the StarBizWeek published on 05 June 2010 comment by Tay Han Chong pointed out that spending suppose to be moderated which is should never spend on future income. Immoderate debt will potentially lead to bankruptcy and seizure of assets since income of household unable to cover repayment of loan.

 

As evidenced, based on The Star, August 1, 2010 published that Insolvency Department director-general Datuk Abdul Karim Abdul Jalil said that there are over 9,000 Malaysians who accumulating bad debts up to RM12.4 billion have been declared bankrupt between January and the end of June 2010. However, the people who are bankruptcy attribute to defaulted on credit card payments or vehicle, housing, personal and business loans.

 

Furthermore, according to the news published on The Star, 22 August 2010 stated that there are at least 500 people who adopt hire-purchase loans especially for vehicles are declared bankrupt every month in Malaysia due to inability to repayment loans. It is topped the list of bankruptcy cases in Malaysia which is about 24% of the total 80,370 cases between 2005 and 2010. Nevertheless, personal loan borrowers accounted for 12% of the total number of bankruptcy cases within the same period.

 

Social problem

 

Higher debt society unavoidable will raise social problem which is criminal occur such as robbery, larceny, kidnap and others. The higher household debt lead to somebody unable to settle their debt thereby participates in criminal to earning easy money.

 

Presently, offence occur in Malaysia is rapidly increasing. As a result, the public securities is unsafe lead to household less consumption bring on growing slowly on GDP.

 

As example, based on The Star published that Johor Bahru is occurred a kidnap two loan sharks case on 29th July 2010. There are 9 victims who are burden debt to the loan sharks are kidnapped two loan sharks and demanded their father about RM30, 000 as ransom. However, 7 suspects were detained by police afterward and recovered RM6, 500 of the ransom money. Thus, they were charged at magistrate's court with facing two charges of kidnapping under Section 3 of the Kidnapping Act, which carries the death sentence or life imprisonment if convicted.#p#分頁標題#e#

 

Nevertheless, Kuala Lumpur was occurred a terrify case on 21th July 2010 which is loan sharks have terrorize the family of a man whose brother couldn’t repayment debts amounting to thousands of ringgit. The loan sharks are also splashed Red paint to man house as warning man to repayment his brother’s debt.