Report: More Malaysians May Go Bankrupt As Loan Moratorium Ends, Economists Say | Malaysia
KUALA LUMPUR, Aug 8 – The number of Malaysians going bankrupt and the number of businesses closing or liquidating could increase when the current moratorium on bank lending ends, two economists said.
Sunway University economics professor Yeah Kim Leng said the loan moratorium helps financially distressed borrowers avoid bankruptcy by postponing loan repayments, but said that would mean that there could be more bankruptcies once the moratorium period ends, The sunday star reported today.
“However, the moratorium also masks the true extent of the financial difficulties faced by borrowers.
“A peak in bankruptcies could therefore occur at the end of the period, especially if borrowers experience permanent losses of employment or business income,” Yeah said.
The edge recently reported a decrease in bankruptcies over the past five years. In 2016, there were 19,588 cases; this came down to 18,227 cases (2017), 16,482 (2018), 12,051 (2019) and 8,351 in 2020. This year the number also decreased to 2,954 between January and April.
News reports have indicated that a possible reason for the decline in the 2020 figure despite the economic impact of the Covid-19 pandemic is that the government in 2020 had increased the minimum debt level from RM50,000 to RM100. 000 RM before bankruptcy proceedings can be initiated through filing for bankruptcy. . This is applicable until August 31 The edge had said.
Yeah suggested the reduced number of bankruptcies filed last year may be due to the delayed effect of financial distress.
“Typically, creditors would seek to exhaust all means of collecting the borrower’s debt before resorting to filing for bankruptcy,” he said.
AmBank Group Chief Economist Anthony Dass noted that the decline in bankruptcies in Malaysia since 2018 has occurred despite the economy’s worst contraction in 2020 to -5.7% since the 1997 Asian financial crisis. .
According to Dass, the closure of courts and insolvency offices in 2020 due to movement control orders (MCOs) also slowed bankruptcy filings.
He pointed out that liquidation of companies could resume in the future, especially when the moratorium on loans ends, as courts and insolvency offices would have resumed their usual activities and the recovery processes by financial institutions would have to resume. to resume.
He also pointed out that the loan moratorium introduced in July this year for individuals and businesses is not available to borrowers who had already not paid for more than 90 days or three months or those who are facing bankruptcy or liquidation proceedings.
“What may happen in the future is that those who are not eligible for the moratorium are likely to fall under the category of bankruptcy if their outstanding balance exceeds RM 100,000,” Dass said, quoted by The sunday star.
Dass also said that borrowers who have unpaid debts below the RM 100,000 figure would not be bankrupt, but would be blacklisted, with The star further noting that they would have difficulty finding loans and could possibly borrow from pawn shops.
The edge had also previously reported that the number of companies subject to compulsory liquidation requests increased from 1,157 in 2017 to 1,419 in 2018, 1,966 (2019), before dropping to 1,190 (2020) and 192 from January to April 2021.
Outside of liquidation cases, Yeah said The sunday star that non-performing loans could also be used to measure financial distress, referring to bank loans with late repayments or for which a borrower is unlikely to repay in full.
Yeah noted that the gradual upward trend in the value of non-performing loans, with the June 2021 figure being RM30.2 billion, an increase of 16.2% from June 2020 “is a sign of heightened financial distress, especially when the extended moratorium on loans ends. ”.
Yeah said companies would have less hope of recovering if the lockdowns continued for longer due to the depletion of their working capital and reserves and the fact that core staff could be made redundant.
“Even when the pandemic subsides to allow more businesses to reopen, businesses may not have sufficient working capital to resume operations unless they have access to new equity or new borrowings.
“So we could see an increase in liquidations, foreclosures and bankruptcies of companies,” said Yeah, quoted by The sunday star.
Yeah suggested that the government take steps to help affected businesses recover, including channeling more resources into the debt recovery unit coordinated by Bank Negara Malaysia to rescue businesses with strong recovery prospects.
Dass suggested that the government help businesses find working capital to support their operations to avoid liquidation, and that this would also help save jobs for Malaysians.