The government needs financial literacy, too

TK Chua, Free Malaysia Today

Much has been said about financial literacy and planning lately. As a nation, many are concerned about high household debt and people being unable to make ends meet.

No doubt individuals need financial literacy to better manage their finances. But in this country, I think the government too needs economic and financial literacy.

Sometimes, government policies do not make sense and, in the end, the people are being blamed for their incompetence and lack of financial literacy.

Let me illustrate two examples of “government financial illiteracy” which have caused so much problems to Malaysians, especially the younger generation.

Good luck to those wanting the voting age reduced. I think both the government and the opposition are unaware of the pent-up frustration among our youth.

First are the National Higher Education Fund Corporation (PTPTN) loans. We made these loans almost universal but the purpose really was to help universities and colleges with their student intake rather than helping the students with their financial needs.

Many went to universities because loans were readily available. We hardly cared for the quality and relevance of courses being pursued. Similarly, we didn’t care much about the students’ suitability and aptitude to pursue a university degree.

If we want to make university education universal, then we shouldn’t ask these students to pay for their education. If students need to pay, then strict loan criteria and cost-benefit analysis must come in.

If PTPTN loans were given freely to support universities and colleges producing irrelevant and weak degrees, how do we expect the graduates to be able to earn enough to pay back the loans?

Is this not the situation faced by most graduates today? They are either unemployed or unable to earn enough to sustain themselves and to pay back the loans.

We are foolishly obsessed with more Malaysians holding university degrees for prestige reasons. We overlook the economic and sustainability aspects of university education.

Second are housing loans. We keep flogging the same dead horse —urging banks to lend more for people to own homes. Before this, we waived the down payment requirements or extended the repayment period to ridiculous lengths.

Seriously, were these policies aimed at helping the house buyers or the developers?

Waiving the down payment and extending the repayment period only helps to sustain and increase property prices. We “artificially” made the loans affordable to borrowers when in fact many were not able to borrow based on their income levels and prices of properties.

Due to easy loans and the long repayment period, prices of homes have completely decoupled from the incomes of the average Malaysians, not just those in the B40 low-income group.

Soon, even the rental market too may be out of their reach. Extending bigger loans with longer repayment periods will only aggravate the situation going forward. We are just indulging in wishful thinking that future incomes will outgrow what we borrow today.

If we want to help people to own their own homes or to rent a decent place to live in, three things must happen — the incomes of people must go up, the prices of properties must come down, or both.

Other measures only help the banks and housing developers.

I have observed for a long time the singular direction of property prices — up and up. I think it is payback time now.