Highlight of Consumer Credit Law at National Strategy for Financial Literacy Launch
(Image credit – www.theedgemarkets.com)
In line with the Government’s effort to uplift the financial literacy amongst Malaysians, Prime Minister Tun Dr. Mahathir Mohamad launched the National Strategy for Financial Literacy 2019-2023 which sets out priorities and actionable plans to equip Malaysians with the knowledge to make informed financial decisions and to nurture healthy attitudes in financial management.
He said in his speech that financial literacy is needed within the workplace and companies can collaborate with independent financial planners and associations such as the Financial Planning Association of Malaysia to develop various financial education programs for employees.
The Financial Education Network (FENetwork), an inter-agency group co-chaired by Bank Negara Malaysia and the Securities Commission Malaysia had a pivotal role in crafting up this strategy. Its founding members consist of the Ministry of Education, Malaysia Deposit Insurance Corp (PIDM), Employees Provident Fund, Credit Counselling and Debt Management Agency (AKPK) and Permodalan Nasional Bhd.
In a statement, FENetwork said it would be collaborating with individuals and organizations in the public and private sectors to deliver the strategy’s inclusive and sustainable measures. These measures will focus on empowering individuals to manage their money wisely, to plan ahead and invest for their future, and protect themselves from financial fraud and abuse.
Meanwhile, Tun Mahathir stressed that efforts to build human capital for financial literacy have been implemented since 2014, such as exposure provided to teachers, and he urges more such initiatives, in which the private sector collaborates with Ministry of Education to diversify these approaches.
Among the activities planned under the strategy, he noted collaborative programs such as financial carnivals, ‘Management of Personal Finance’ program for civil servants (offered through the e-learning portal), and more.
The National Strategy for Financial Literacy 2019-2023 has five strategic priorities:
Strategic Priority 1: Nurture values from young
- Expand financial education fundamentals into the curriculum for pre-school, primary and secondary schools;
- Reinforce financial education through co-curriculum activities;
- Introduce capacity development and support for teachers; and
- Encourage financial education advocates among students, parental groups and the community.
Strategic Priority 2: Increase access to financial management information, tools, and resources
- Make basic financial education information easily understood, available and accessible to all;and
- Heighten awareness and intensify financial education initiatives through national outreach campaigns.
Strategic Priority 3: Inculcate positive behavior among targeted groups
- Impart financial knowledge to promote positive financial behavior among the youth;
- Encourage financial education at the workplace to promote financial resilience, which will have a positive impact on employees’ productivity;
- Foster good money management practices through community-based financial education;and
- Equip the self-employed with financial knowledge to encourage self and business sustainability.
Strategic Priority 4: Boost long term financial and retirement planning
- Promote the use of innovative guides and tools to improve long-term financial planning;
- Create awareness and promote the benefits of seeking professional advice on financial planning;
- Promote voluntary savings channels and platforms to encourage income diversification;and
- Educate Malaysians to make long-term financial plans for retirement.
Strategic Priority 5: Building and safeguarding wealth
- Promote a better understanding of risks and returns to build wealth;
- Improve awareness on the innovation of financial products and services and its implications;
- Raise awareness of financial scams and fraud; and
- Develop and publish materials relating to sophisticated financial products and services.
Creating consumer credit law to protect borrowers
One of the main highlights during the launch of the National Strategy for Financial Literacy was the Governments intend to expedite the creation of the Consumer Credit Act to protect consumers and encourage a healthy credit market.
According to Tun Mahathir, the Act was pivotal as household debt now stood at 82.1% of the country’s gross domestic product (GDP).
“This is higher than other countries that have higher income per capita like Italy, which is 40.3% of its GDP, Japan (58.1%), and the United States (76.3%). Although the risk of household debt on the domestic finance is under control, there are signs of difficulty in repaying loans, especially among those earning less than RM5,000 monthly and are living in urban areas,” he said.
He went on to say that 80% of the participants in these programs were too optimistic about their ability to repay their debts and bear with the cost of living when they decided to borrow (take loans).
“Some did not even think of repaying these debts when borrowing. Therefore, it is important to increase financial literacy among the people and the formation of the new Consumer Credit law will strengthen the protection framework for credit consumers in the country,” said Dr. Mahathir.
Furthermore, the ability to make sound and wise financial decisions was not only relevant when wanting to purchase financial products or borrowings but purchasing insurance, investment and managing their income would definitely help consumers to lead a life free of financial burdens.
Dr. Mahathir said it was important for consumers to protect themselves from unfair market practices or manipulation as we lived in an era of the complex and challenging financial environment. The Act is important because its intention is to ensure that credit consumers receive a fair service when dealing with creditors.
He added that it was vital for consumers to be aware of the modus operandi in financial crimes. He also advised consumers to be wary of financial services offered in the cyber world so they would not be exposed to cybercrimes.
Here is a brief clip during the event.
(Video source: The Edge TV Youtube Channel)www.fenetwork.my
Related article: Deep Dive Into National Strategy for Financial Literacy 2019-2023