Turning the Tide: Holistic Approaches to Reducing Overindebtedness in Malaysia

Overindebtedness impacts not only individual well-being but also the financial stability of nations. This study critically explores the current mechanisms addressing overindebtedness in Malaysia. Utilising a qualitative content analysis approach, the study meticulously examines key resources, including the Annual Reports of the Central Bank of Malaysia and the Credit Counselling and Debt Management Agency, as well as the Guidelines on Responsible Financing, alongside academic articles and media reports. The findings reveal that Malaysia employs a multifaceted approach to combat overindebtedness, striking a balance between preventive measures and post-bankruptcy remedies. These strategies include enhancing consumer financial literacy through comprehensive education programs and providing financial advisory services to consumers. The regulatory framework emphasises responsible lending, mandating assessments of borrowers’ suitability and affordability to prevent unsustainable debt accumulation. The Credit Counselling and Debt Management Agency also offer debt management programs, while the Insolvency Act 1967 provides legal recourse for financially distressed individuals, including voluntary arrangement and automatic discharge after three years. This study concludes that the Malaysian government, particularly the relevant regulators, have established numerous strategies to mitigate the adverse effects of overindebtedness, addressing pre- and post-bankruptcy scenarios.