Published by Free Malaysia Today, Business Today, New Straits Times & The Sun Daily, image from Free Malaysia Today.
The Covid-19 pandemic, which has caused many people to lose their jobs or even be unable to get jobs resulting from business disruption, has led to a rise in financial anxiety among the rakyat, mainly due to loss of income.
Simply put, most people with no jobs worry about finding the money to meet their needs.
There are various factors for this financial stress – including the pending end of the loan repayment moratorium, PTPTN loan repayments, inability to secure jobs in the current market situation, insufficient retirement savings.
Financial anxiety was among the issues that emerged during an EMIR Research focus group discussion on the 17.1% contraction in gross domestic product in the second quarter that hit various sectors.
So, the question now is, “what happens next?”
Let’s go through some of the initiatives that have been implemented to address financial anxiety.
Take the case of PTPTN loan repayments. The federal student loan institution had announced that the loan repayment abeyance would be extended until the end of the year.
The bank loan moratorium has been extended for another three months only for targeted groups such as those who had lost their jobs due to Covid-19 and remain unemployed. Monthly instalments have also been reduced for those who faced pay-cuts.
Also, the reduction in Bank Negara Malaysia’s overnight policy rate to 1.75% is helping SMEs and entrepreneurs.
As well, the short-term economic recovery plan (Penjana) announced in June included measures to address financial anxiety such as extending the wage subsidy programme, the Bantuan Prihatin Nasional payouts, hiring incentives, child care subsidies and funding facilities for businesses.
These, together with the reopening of more economic sectors during the recovery movement control order period have gradually helped in easing the country’s unemployment problem.
In June, the number of employed persons improved by 0.7% on a month-on-month basis to 14.99 million persons. Concurrently, the unemployment rate in June went down by 0.4 percentage points on a month-on-month basis from 5.3% in May to 4.9%.
As more people become employed, this could possibly help ease the financial anxiety among the rakyat. Yet, it is subject to their respective financial commitments.
Nonetheless, these measures are only short-term and again, what happens next?
Eventually, people will have to repay their loans despite the current low interest rate.
Eventually also, people will retire from their jobs and there is a need to have adequate savings as their emergency funds. Statistics show that 52% of Malaysians experienced difficulties in raising RM1,000 at any one time for an emergency.
What else is there that is long-term in nature to help people lower their financial anxieties?
Two things should be the focus.
One, people need to earn a living by getting jobs. That is where the hiring and training incentives, Penjana Kerjaya, comes in handy. However, whenever an initiative is executed, it must be monitored constantly to track its effectiveness.
Human Resources Minister M. Saravanan said over 11,000 people have been hired through Penjana Kerjaya. Between June 15 and Aug 7, a total of 8,170 employers registered for the incentive with 3,177 of them hiring 11,368 workers.
However, the 11,368 only make up 3.8% of the 300,000 job seekers who are expected to benefit from the scheme – a miniscule amount. So, hopefully more companies will take part and provide greater opportunities to more people.
What comes after that is retirement savings. Although now may not be the best time to start saving due to the difficult financial situation faced by many, Malaysians still need to be educated on basic financial knowledge to ensure financial sustainability in life.
For example, statistics from the Employees’ Provident Fund (EPF) as at Dec 31, 2019, showed there were only 7.6 million active members out of the total 14.6 million (52%). This means that close to 50% of the total members were not actively contributing for their retirement.
Other related statistics showed that only 24% of Malaysians could afford living expenses for at least another three months if they lost their main source of income, and close to half said they were not confident of having a sufficient income stream for retirement.
These worrying statistics prove that there needs to be serious consideration in educating Malaysians about financial management, starting as early as from childhood all the way to adulthood.
This can be in line with the National Strategy for Financial Literacy (2019-2023) launched last year.
Financial anxiety is one crucial issue that constantly needs to be addressed for the sake of the whole nation and to ensure sustained economic recovery.
Nur Sofea Hasmira Azahar is Research Analyst at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.
