MALAYSIANS love buying on credit – and that is no understatement given how household debt has grown over the decades.
But as credit permeated through various conduits of the economy, there have been credit instruments that have been left by the wayside primarily for the predatory aspects of such financing schemes.
The “kutu” scheme, where money is pooled and collected on rotation among a group of people for a large payoff, has been outlawed.
So have developer interest bearing schemes when it came to buying homes. Gone also are the generational housing loans where parents and their children share the burden of home ownership.
But there is another financing scheme that serves very little purpose and should maybe be banned yet is popular among Internet shoppers and the young. That is Buy Now Pay Later (BNPL).
The concept of people needing to pay for groceries in instalments is preposterous. Imagine signing up to a BNPL programme and buying a tray of eggs.
We have descended into financial dystopia and such schemes unfortunately are now growing rapidly among the young in Malaysia. People do spend on more than eggs but the ticket size for transactions are quite small.
Household debt is now almost 85% of GDP and the rapid pace of the growth of household debt took place after the Asian Financial Crisis. Before that, household debt as a percentage of GDP was 43%.
Household debt grew as a result of better access to financing, rising incomes among Malaysians, a growing property market and Malaysians buying more cars.
As household debt rose rapidly, so did its absolute amount. According to estimates, household debt has grown from US$64bil at end-2002 to US$420bil by 2025.
Household debt has certainly outpaced wage growth during that time.
Mean wages from 2010 to 2025 saw growth that was less than 100%. In 2023, households saved just around 1% of their disposable income.
This is a worrying trend for a variety of reasons.
According to reports, BNPL transactions surged 23.9% to 173.9 million in the first half of 2026 (1H26), compared with 140.4 million in 2H25.
That rise makes it the fastest growing credit segment in Malaysia. By value, BNPL transactions rose by 22.5% to RM14.7bil from RM12bil in 2H25.
The rise in number of transactions and value have commensurated with the 22.7% surge in the number of BNPL users in the country – 9.2 million as of June 30, 2026.
Although the amount of outstanding balances was RM6.6bil, peanuts in comparison to more established loans elsewhere, the amount of loans in arrears by percentage at 3.3% is the largest in the country.
The percentage of loans in arrears in the banking sector is about 1.4% on average and housing loans have an arrear percentage of around 1.1% to 1.2%. The defaulting loan percentage for car loans is less than 1%.
Another red flag when it came to BNPL is how youth-centric it is and its prevalence among the B40.
It’s a generalisation to say that the youth of today have fewer means of owning a house, hence will look at consumption rather than investments as a preferred outcome.
Some 40% of the youth account for all BNPL transactions and low income groups made up 70% of active BNPL users.
According to reports, BNPL purchasers are generally for everyday goods and services with average transaction value often under RM100.
For a country that ranks high in global access to finance, the proliferation of BNPL, and especially its growth among the country’s poor, needs to be examined.
Financial literacy courses have been spoken of in terms of consumer education but we have all heard that tune for years.
Where is that push towards educating people on the dangers of too much indebtedness?
There are supposed to be checks and balances instituted under the Consumer Credit Act 2025 with BNPL providers to ensure the most vulnerable get some sort of educational and credit assessment worthiness checks.
With default percentages so much higher than more expensive loans, one wonders if safety procedures are being followed through.
There was no hue and cry before by the public in asking for more means to spend money.
Prior to the BNPL schemes, Malaysians had no issue spending money, going by how household debt had gone up prior to such spending programmes.
But encouraging more spending, especially among the young and the least well off, just puts those groups in a larger bind.
Already, insolvency limits had to be changed to not only keep up with the times but to protect the young who are vulnerable to excessive spending that could put them in trouble when it comes to bankruptcy.
The last thing regulators should do is to allow more products that will get Malaysians to spend more instead of saving for a better future in their later years.