PUTRAJAYA (March 23): Consumers’ ability to repay debt from 'buy now, pay later' (BNPL) facilities is increasingly a concern, especially with the significant growth in BNPL transactions in Malaysia, thus raising concerns about the risks of high indebtedness and the importance of financial literacy.

According to Finance Minister II Datuk Seri Amir Hamzah Azizan, BNPL transactions in Malaysia increased to RM7.1 billion in the second half of 2024 compared to RM4.9 billion in the first half of the same year.

As of December 2024, there were 5.1 million active BNPL users, the majority aged between 21 and 45 with an income of less than RM5,000 per month.

Commenting on the issue, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the trend reflected consumer spending levels as well as broader financial developments.

"A person can only repay a debt if they have an income, which shows that they have a job.

“So, overall, the increase in BNPL usage reflects better access to credit and reaching groups that may have previously found it difficult to obtain financing through the traditional banking system,” he told Bernama.

However, Mohd Afzanizam stressed that uncontrolled use of BNPL could lead to the risk of excessive indebtedness and the possibility of predatory lending.

"The main issue here is whether this facility is abused or overused. When consumers spend more than they can afford, it can lead to serious indebtedness problems, including bankruptcy," he said.

He also linked the increase in BNPL use to the 'Fear of missing out' (Fomo) phenomenon among consumers, driven by the strong influence of social media.

In this regard, Mohd Afzanizam stressed the importance of financial literacy to ensure consumers understand the risks and responsibilities in using BNPL.

"If someone knows their monthly budget limit and uses BNPL strategically, it can be beneficial... but they need to be disciplined, pay within the specified period to avoid high-interest charges," he said.

Mohd Afzanizam also shared his Islamic view on debt, which is a responsibility that must be resolved and cannot be taken lightly.

"The hadith of Prophet Muhammad as narrated by Imam Al-Baihaqi says: Be careful with debt. Be careful because during the day it (debt) becomes a humiliation, at night it becomes anxiety.

"This hadith emphasises that debt not only causes financial pressure but can also affect a person's well-being if not managed well," Mohd Afzanizam said.

To address this issue, the government is finalising the Consumer Credit Bill 2025 which aims to regulate the credit industry in Malaysia, including the BNPL scheme.

Bank Negara Malaysia assistant governor Abu Hassan Alshari Yahaya on Friday said that the Consumer Credit Oversight Board (CCOB) task force aims to have the Consumer Credit Bill 2025 gazetted by the end of this year.

The bill was tabled for its first reading in Dewan Rakyat by Deputy Finance Minister Lim Hui Ying on March 4 as part of the government’s effort to enhance consumer protection in the credit sector.

Abu Hassan Alshari, who heads the CCOB task force, said the second reading of the bill is scheduled for the next June-August parliamentary session.

“We hope to finalise the bill in the fourth quarter and, hopefully, gazette it by the end of the year to set the act’s effective date,” he said during a media briefing recently.

As of December 2024, there were 12 BNPL providers, including four Shariah-compliant ones.

Three major BNPL providers Shopee (SPayLater), Grab (PayLater by Grab) and Atome have a market share of more than 95 % in terms of active BNPL account holders, volume and value of BNPL transactions.

Meanwhile, the Credit Counselling and Management Agency has advised the public to be careful with BNPL facilities, especially ahead of the festive season.

According to the head of Household Sector Financial Education Nirmala Supramaniam, BNPL, although facilitating short-term spending, can bring long-term financial risks if not controlled.

“We have to understand that BNPL is a type of loan. So, limit the use of BNPL and make sure we only use it for purchases that are really necessary. Don’t rely too much on BNPL if you don't have the ability to repay within the specified period.

“Therefore, avoid impulsive purchases through BNPL. Before using the BNPL facility, ask yourself: ‘Do I really need this item? Can I pay in full within the stipulated time?’

“And before using BNPL, make sure you understand the terms of the BNPL, including hidden charges or interest charged if payment is late,” she said.

Commenting on the long-term impact of using BNPL, she said the facility can support consumer spending in the short term but has the potential to slow economic growth if the debt ratio becomes too high.

Nirmala said if consumers rely too much on BNPL, their ability to obtain other loans will be affected and this can lead to a decline in overall consumption, thus impacting the economy.

However, she also sees the competition created by BNPL as a catalyst for the banking industry to offer more competitive products.

"Banking institutions now need to adapt their products to remain relevant, including offering lower interest rates or other incentives. This can ultimately benefit consumers,” she said.

Aidilfitri should be celebrated with joy, not with worries due to debt that can cripple finances. With smart and prudent planning, consumers can enjoy the festive atmosphere with peace of mind without having to face financial burdens afterwards.

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Mandatory reporting of BNPL borrowing data to credit agencies under new bill

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