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AS of the end of December 2024, Malaysia’s total household debt stood at RM1.63 trillion, which equates to 84.2% of the country’s Gross Domestic Product (GDP).
Despite this substantial figure, the Finance Ministry (MoF) has assured that household financial assets remain significantly higher, totaling RM3.4 trillion, or 178.2% of GDP, highlighting a healthier balance between debt and financial resources within Malaysian households.
In a written statement released on Wednesday via the official Parliament website, the MoF said the country’s household debt levels, while noteworthy, are manageable when considered in the context of financial assets.
This statement responded to concerns raised by Datuk Dr. Nik Muhammad Zawawi Salleh, the Member of Parliament for Pasir Puteh (PN-Pasir Puteh), regarding households facing vulnerabilities related to high debt service ratios (DSR).
Bernama cited the MoF highlighting Malaysia’s banking sector continues to maintain responsible lending practices, largely due to the Policy Document on Responsible Financing, which has been in place since 2012. These prudent lending standards are integral to ensuring that household debt remains manageable and within the repayment capacity of borrowers.
“Responsible lending practices enforced by banks, in line with the Policy Document on Responsible Financing, continue to play a critical role in ensuring that household debt remains sustainable, in relation to the capacity for repayment,” the ministry said in its statement.
This response was provided in relation to a question about one-third of Malaysian households that have debt service ratios exceeding 60%.
These households are considered vulnerable to potential bankruptcy risks in the event of an interest rate hike, job loss, or inflation.
The MoF assured that the current policy framework is designed to protect these households and mitigate such risks.
According to the ministry, the median DSR for outstanding loans stood at 34% at the end of 2024, while newly approved loans had a slightly higher median DSR of 41%.
These figures suggest that despite concerns, the overall debt service ratios remain within a prudent and manageable range.
In its statement, the MoF emphasized that both the government and Bank Negara Malaysia continue to adopt a cautious approach to managing household debt risks, aiming to preserve household financial resilience while safeguarding the stability of Malaysia’s financial system as a whole.
“To complement these measures, efforts have also been made to enhance financial literacy through initiatives like the Financial Education Network and Financial Literacy Month.
Additionally, the government has collaborated with financial institutions and the Credit Counseling and Debt Management Agency (AKPK) to provide loan repayment assistance, particularly to borrowers facing high DSRs,” the ministry explained.
To curb the growth of household debt, the government has focused on policies that help ensure housing remains affordable for the general population.
Programmes such as the People’s Housing Programme and PR1MA are central to these efforts.
Furthermore, there is a concerted push to enhance the efficiency and accessibility of public transportation, aiming to reduce living costs and prevent further financial strain on households.
These measures reflect a comprehensive strategy to manage household debt and ensure the financial stability of Malaysian families, even as the country navigates economic challenges. - February 27, 2025
