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Tag: Debt

  • Young Malaysians Ensnared in Debt: The Rising Peril of ‘Buy Now, Pay Later’ Services

    Young Malaysians Ensnared in Debt: The Rising Peril of ‘Buy Now, Pay Later’ Services

    More young Malaysians are finding themselves caught in the cycle of debt as the burden of financial obligations – largely from credit card loans – weighs heavy on their incomes. Among them is 29-year-old Chan Jun Hong, who spends almost MYR3,000 (US$763) each month to service his debts, accounting for over 60% of his salary.

    The Debt Trap

    Chan Jun Hong shares that a significant portion of his income is allocated to repay personal loans he took out a year or two ago. It was a decision made out of convenience, as he was offered the loans, and used them to spend recklessly. Today, he regrets this decision. He also admits to having a sizable amount of debt from the use of “Buy Now, Pay Later” services and credit cards for everyday necessities. His situation deteriorated to the point where he sought help from a debt consolidation service provider, who advised him to take a single extensive loan to pay off all his various debts simultaneously.

    His predicament is not unique. Many young Malaysians are grappling with debts, primarily due to a lack of financial literacy in the face of a surge of credit services targeted at the youth. In Malaysia, about 40% of “Buy Now, Pay Later” transactions are made by those aged 30 and below. This statistic highlights an alarming trend of younger consumers becoming overly dependent on credit for daily expenses.

    Rise of “Buy Now, Pay Later” Services

    “Buy Now, Pay Later” is a financial service that allows consumers to purchase products either interest-free or with a certain percentage of interest, with payment due the following month. A survey involving over 21,000 active “Buy Now, Pay Later” users in 2024 revealed that 69% of users solely depend on this financial tool for their financial support.

    However, this reliance on credit purchases for daily needs has consequences, which many young Malaysians are now realizing. One 29-year-old, using the pseudonym Nixie, revealed that he typically starts the month with no more than MYR1,000 in his bank account, as most of his income goes towards debt repayment. Nixie often resorts to “Buy Now, Pay Later” services due to his tendency to make impulsive purchases of non-essential items, such as collectibles, when they are on sale.

    As an electrical engineer, Nixie can only afford to make minimum monthly payments of between MYR500 and MYR900 on his credit card debt. His outstanding balance has remained at around 90% of its limit for nearly a year, accruing more interest. Nixie shares his growing unease about his financial future, fearing he may be stuck paying the debt for years due to the increasing credit card interest.

    The Hidden Risks

    Financial analysts point out that while bank loans come with clearly documented commitments, the risks of a “Buy Now, Pay Later” scheme aren’t always apparent at the start.

    The number of “Buy Now, Pay Later” users rose from 2.6 million in 2023 to 7.5 million last year. This trend could be risky as financial obligations can often accumulate quietly. Alvin Tan Chin Cherng, Financial Planning Association of Malaysia president, mentioned that such collective repayments could consume a disproportionate share of one’s monthly income, and most people don’t see it coming.

    Many young Malaysians remain ignorant of their credit scores, and missed or late “Buy Now, Pay Later” payments could affect a person’s ability to secure a housing loan or car financing in the future.

    Easy Spending and Consequences

    Financial planner Gunaseelan Kannan also expressed concern over the rise of these services, citing its easy-spending design, which for many youths feels less like borrowing and more like delaying payment.

    The simple approval process, minimal checks, and the seemingly small installments make it very attractive. However, those small installments can quickly add up and affect monthly cash flow. Many young people are still building their financial habits, so without proper budgeting or financial literacy, it can slowly turn into a debt cycle.

    A 29-year-old customer service worker known as Chan admitted that he had never heard of financial strategies. He struggles to manage his spending habits which are affecting his financial stability. He is now juggling his finances while repaying a personal loan taken to settle previous debts.

    Questions & Answers

    What are the causes of the increasing debt among young Malaysians?
    The rise in debt among young Malaysians is mainly attributed to the ease of access to credit services, particularly “Buy Now, Pay Later” schemes, and a lack of financial literacy.

    What are the consequences of the growing reliance on “Buy Now, Pay Later” services?
    The consequences include the accumulation of debts that can consume a significant proportion of one’s income, causing financial instability. Missed or late payments can also negatively impact credit scores, which could affect a person’s ability to secure future loans.

    What is the solution to this growing problem?
    Better financial education is one solution to tackle this issue. Young people need to understand the importance of budgeting, managing their spending habits, and the implications of credit scores. It’s also important to consider the regulation of credit services to ensure they don’t exploit the lack of financial literacy among young people.

  • Singapore’s Naiise all but collapses under debts

    Singapore’s Naiise all but collapses under debts

    Singapore gift and homewares chain Naiise has closed its last store – the Iconic at Jewel Changi Airport – suggesting the end of the eight-year-old brand.

    Multiple sources say Naiise has collapsed due to its inability to paying debts to suppliers, and weak sales in the wake of the Covid-19 pandemic. Opened in May 2019, Naiise Iconic at Jewel Changi was considered one of the company’s biggest investments, unknowingly made at the wrong time – just before Covid hit.

    Last year, the retailer fielded multiple complaints from vendors accusing of defaulting payments. At the same time, Naiise’s co-founder Amanda Eng reportedly quit her role in the company.

    According to Today, Naiise owes up to US$7500 to vendors, many of whom have ended their relationship with Naiise and given up claims on the grounds the legal process is too costly and time-consuming.

    “My game-publishing studio has been a vendor of Naiise since 2015 and we have been owed money since 2018,” said Lye Wen Song Xeo, co-founder of Capital Gains Studio wrote on Facebook. “Promises made to repay have all been broken again and again and we had no choice but to pull our games out early last year.”

    “Covid-19 has been very hard on many of our distributors and I appreciate those distributors that came clean with us and honestly shared with us their problems and what their plans [were] if they are unable to pay us. However, shirking responsibilities and not coming clean with your vendors is honestly… not Naiise,” said Xeo.

    Despite its physical stores closing, Naiise continues to trade online and at a Kuala Lumpur outlet. Founded in 2013, Naiise had six stores in Singapore and Malaysia.

  • Forever 21 may seek bankruptcy protection in court

    Forever 21 may seek bankruptcy protection in court

    Californian fast-fashion retailer Forever 21 is reportedly preparing to file for bankruptcy protection after failing to reach a deal to refinance its heavy debt load.

    Citing people with knowledge of the plans, Bloomberg has reported that the company has been in talks for additional financing and working with a team of advisers to help it restructure its debt, but negotiations with possible lenders have so far stalled.

    There are reports that a major barrier to any deal being reached is the unwillingness of co-founder Do Won Chang to accept less than a controlling interest in the business in return for investment which could place the retailer on a firmer financial footing.

    Now the company is believed to be looking to secure a so-called ‘debtor-in-possession loan’ which would allow it to file for Chapter 11 bankruptcy protection.

    With more than 800 stores in the Americas, Asia and Europe Forever 21 grew from a single store in Los Angeles in 1984 opened by Chang and his daughter Jin Sook. While its international growth trajectory was rapid in the 2000s, in later years it has failed to keep pace with European rivals H&M and Zara and Japan’s Uniqlo, leading it to shutter flagship stores like the giant, three-story space in Hong Kong’s Causeway Bay.

    It no longer has a store in Hong Kong, but sells online there. In Asia, its network covers the Philippines, South Korea, Japan, Malaysia, Singapore, Indonesia, and India.

    Like a raft of other troubled US retailers entering Chapter 11 protection, Forever 21 would have the ability to close unprofitable stores, reduce its payroll and recapitalize the business.

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  • Citibank Singapore to Instantly Approve Debt Consolidation Plan

    Citibank Singapore to Instantly Approve Debt Consolidation Plan

    Citibank Singapore announced that it is the first bank in Singapore to introduce instant in-principle approval for debt consolidation plans. Customers applying online for Citibank Singapore’s debt consolidation plan will receive an immediate indication of their application status, as the bank is the first in Singapore to offer eligible customers instant in-principle approval.

    «The ability to grant instant in-principle approval resolves a key customer pain point by giving customers a better sense of their application’s eventual outcome, even before they go through the effort of gathering their financial documents and sending them to the bank,» said Vikas Kumar, Head of Cards and Personal Loans at Citibank Singapore, in a media statement.

    This new capability, which will be launched on Tuesday, enhances convenience for prospective customers who previously had to wait for up to three days for a decision after the bank receives their applications through email or post.

    Upon receiving a debt consolidation application, the bank will access the customer’s credit report through its API integration with Credit Bureau Singapore. The customer’s credit situation is assessed through a fully automated process, enabling the bank to grant instant in-principle approval for eligible individuals.

    Customers can then submit their supporting documents – which are required by industry regulations – consisting of their various credit statements from different financial institutions, income records, and proofs of identification. The bank will also proactively reach out to customers should they need assistance after receiving their in-principle approval.

    Debt consolidation plans were introduced by Singapore’s financial institutions in January 2017 to help borrowers reduce their debt over time. Debt consolidation plans consolidate a borrower’s existing unsecured credit balances across various institutions under a single entity and offer effective interest rates that are lower than card and credit line rates.

    Customers on debt consolidation plans will have lower monthly repayments as compared to the total individual payments a customer incurs, and the benefit of making repayments to a single bank. Customers of Citibank Singapore can choose a loan tenure of up to seven years and will receive a credit card with a limit of one month’s income.

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  • Kering faces €1.4 billion Italian tax bill

    Kering faces €1.4 billion Italian tax bill

    Kering is facing an Italian claim for €1.4 billion (£1.2 billion) in unpaid taxes. The company’s Swiss-based Luxury Goods International (LGI) subsidiary has been under investigation for allegedly avoiding tax on earnings generated elsewhere. The probe has largely centred on Gucci, Kering’s star brand and biggest revenue driver. Italy’s tax police carried out checks at Gucci’s Florence headquarters and Milan offices in 2017, and drew up the report that has now been handed to Kering, a source close to the investigation said.

    Kering has consistently denied avoiding tax, saying its activities were fully compliant with all tax obligations.

    In its statement on Friday, the group said the Italian tax authorities’ findings for the years 2011-2017 had yet to be finalised by their own enforcement team.

    “Kering challenges the outcome of the audit report both on the grounds and the amount,” the company said, adding that it “does not have the necessary information” to record a provision against any potential bill for back taxes or penalties.

    The company has said that LGI is a substantial firm in its own right, with 600 employees handling inventory, billing and supply-chain logistics, with a business model “known to French and other competent tax authorities”.

    According to reports by France’s Mediapart newspaper and Germany’s Der Spiegel, Kering’s wholesale activities – the sale of products to retailers such as department stores – have come under particular scrutiny.

    Some business carried out by Kering employees in locations including Milan and Paris was billed through the Swiss unit, incurring lower tax rates, according to those reports.

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  • Foreign flows into Asian bonds turn positive, Malaysia leads

    Foreign flows into Asian bonds turn positive, Malaysia leads

    Foreign flows into Asian bonds turned positive in October, in stark contrast to the sharp outflows faced by equity markets due to slowing earnings and concerns over trade. Data from central banks and bond market associations showed overseas investors bought a net US$2.24 billion (RM9.4 billion) in Malaysian, Thai, Indonesian, South Korean and Indian bonds in the last month. That compared with net outflows of US$2.46 billion in September.

    Malaysia’s bond market led the region with inflows of US$1.8 billion in October, the highest in 2018. At the end of last month, foreign ownership of Malaysian government securities rose to 40.7% from 39.5% in September, the data showed.

    Thailand and Indonesian bond markets also attracted foreign money of US$1.07 billion and US$886 million, respectively.

    “Thailand’s large current account surplus and growth recovery have boosted the perception of Thai debt as a relative safe haven in the region,” said Khoon Goh, Singapore-based head of Asia research for ANZ Banking Group in a note.

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  • Vietnamese banks report Jan-Sept rise in bad debts

    Vietnamese banks report Jan-Sept rise in bad debts

    Thirteen of 17 listed banks have seen their bad debts rise in the first 9 months of this year, according to banks’ financial reports. Experts blame this on recent credit growth, loose lending practices and accumulated old non-performing loans.

    Bad debts of VietinBank, the country’s second largest lender by assets, rose by 34.5 percent to nearly VND12.13 trillion ($519.82 million) in the first 9 months of this year.

    Group 5 debt, the worst category for potential loan losses, accounted for the largest proportion at 72 percent of the bank’s total bad debts. Group 5 debt was also the category with the biggest increase in the last 9 months, rising 68 percent to nearly VND8.74 trillion ($374.57 million).

    At BIDV, Vietnam’s biggest bank by assets, bad debts had totaled VND17 trillion ($728.65 million), a 21.1 percent increase over late 2017. However the bank’s bad debt ratio stood at 1.76 percent, well below the 3 percent danger limit set by the State Bank of Vietnam.

    The bad debt ratio of VPBank, meanwhile, rose to 4.7 percent by Q3, compared to 2017’s year-end figure of 3.39 percent. At the end of Q3, VPBank’s bad debt had increased by 52 percent compared to the beginning of the year, reaching VND9.4 trillion ($402.9 million)

    At Techcombank, total bad debt rose 33 percent between January and September, with Group 5 bad debt rising by 31 percent. Overall, the bad debt ratio on the bank’s loans rose to 2.05 percent from 1.61 percent at the beginning of the year. The bank’s bad debt is currently at VND3.43 trillion ($146.82 million).

    trillion VNDVietnamese banks’ bad debtas of September 201812.112.117179.49.43.43.4VietinbankBIDVVPBankTechcombank05101520BIDV● Bad debt: 17

    Banking expert Nguyen Tri Hieu said that the increase in bad debt was related to credit growth. New bad debt rises as banks increase lending and adopt looser lending practices, he said.

    The country’s credit growth in the first nine months of this year was 9.52 percent.

    Pham Hong Hai, CEO of HSBC Vietnam, said that from 2019 onwards, bad debt may re-emerge as a problem for banks after the recent credit growth and instability in global financial markets.

    State Bank of Vietnam Governor Le Minh Hung said recently that bad debts and potential bad debts of the sector amounted to 8.61 percent of total credit by the end of September.

    Vietnam’s banking sector posted an estimated 18.17 percent credit growth in 2017, according to the Ministry of Finance. It has targeted a credit growth of 17 percent this year.

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  • Bankrupt US retail giant Sears owes Vietnamese firm $4 million

    Bankrupt US retail giant Sears owes Vietnamese firm $4 million

    Sears, a U.S. retail titan that has filed for bankruptcy, owes a Vietnamese textile company upwards of $4 million. Sears Holdings filed for bankruptcy on October 15 after failing to make a $134 million debt payment tranche. Its subsidiaries, Sears, Roebuck and Kmart are partners of Vietnamese textile firm Thanh Cong, contributing about 7 percent to the textile firm’s revenue every year.

    Last year, Sears contributed VND220 billion ($9.38 million) to Thanh Cong’s revenues of VND3.2 trillion ($136.5 million). Sears remaining debt to Thanh Cong is VND95 billion ($4 million), or 3 percent of the textile firm’s total assets, according to Vietnamese company’s  third quarter report.

    Thanh Cong CEO Lee Eun Hong said that his company was seeking to participate in the process and retrieve its money.

    The hearing is scheduled for November 15.

    Thanh Cong Textiles, established in 1967, has reported accumulated revenues of VND2.82 trillion ($120.3 million) in the first nine months of this year, up 15 percent year-on-year.

    Exports account for 88 percent of the firm’s revenue.

    The bankruptcy filing by Sears follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Eddie Lampert in an attempt to turn around the company he acquired in 2005 for $11 billion.

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  • Debt deal secures Oroton funds extension

    Debt deal secures Oroton funds extension

    Troubled luxury handbag retailer Oroton has secured a six month extension of a $35 million finance package with Westpac in a deal that could result in a major shareholder controlling the company’s debt.

    Oroton’s former director Will Vicars, a fund manager who holds an 18.2 per cent stake in the retailer, and Westpac have agreed on a put and call arrangement that extends the maturity date of the debt by six months to October, 2018.

    The call option enables Vicars Entities to purchase all of the Westpac debt any time until one month after April 16, 2018, while the put would allow Westpac to transfer a $20 million working capital component of the facility to Vicars if there is a default.

    The funds will be used in the lead up to Christmas and post-Christmas sales amid Oroton’s ongoing sales slump, with the retailer’s revenue down 11 per cent in the nine months to April 30.

    In a trading update to the ASX on Tuesday, Oroton said the arrangements with Westpac and Vicars Entities will not stop it from pursuing other corporate or financing arrangements.

    “Oroton Group has had commercial-in-confidence discussions with numerous substantial shareholders gauging their interest in providing a measure of credit support to Westpac in order to secure the continuation of the company’s facilities,” the company said in a statement.

    The statement thanked Mr Vicars for his ongoing support, which included a $3 million line of credit to Oroton which expired, without being used, on July 31.

    Vicars resigned from Oroton’s board in May, saying he wanted to reduce the number of his directorships.

    Oroton has reaffirmed its previous guidance for underlying full-year earnings before interest, taxes, depreciation and amortisation of $2 million to $3 million.

    However, it said the group’s net debt was forecast to be about $6 million, down from its previous guidance of $10 million, with the improvement largely due to the timing of tax payment refunds.av

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  • Most banks in Vietnam expect profits up, bad debts stable this year

    Most banks in Vietnam expect profits up, bad debts stable this year

    Bad debt in Q2 and in the whole of this year would stay unchanged or dip slightly from Q1. About 90 percent of financial institutions operating in Vietnam are expected to reap higher pre-tax profit in 2017, while they could control or reduce bad debts this year, a State Bank of Vietnam (SBV) survey has found.

    Most of the respondents in the survey, conducted between February 25 and March 9, expected their bad debt to loan ratio in the second quarter and for the whole of 2017 would stay unchanged or below that in the first three months.

    Based on SBV data, bad debts in Vietnamese banks, mostly incurred due to a slowdown in the country’s real estate market in the early 2010s, have been cut to 2.46 percent of loans at the end of November, 2016, from 4.83 percent in December 2014, one year after it set up an institution to deal with toxic loans, the Vietnam Asset Management Corp.

    The survey on business trends for the April-June period, conducted by SBV’s Monetary Forecasting and Statistics Department, has targeted all Vietnamese banks and foreign bank branches in the country and has a response rate of nearly 90 percent.

    Banks expected the annual credit growth to slow to 17.23 percent this year, from the expansion of 18.25 percent in 2016, while deposits in 2017 could grow 16.23 percent from last year, below the 16.76 percent expectation in the December 2016 survey, the SBV said.

    Half of the lenders would keep their fees unchanged for the whole of 2017, while 20 percent of them said they planned slight decrease and another 30 percent said they expected a small rise.

    Banks expressed confidence in the government’s effort to improve business climate and three quarters of the surveyed institutions look forward to a better business situation in the second quarter, while eight in 10 of those believe they can achieve better results in the whole year.

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  • AirAsia’s Indonesian affiliate plans debt-to-equity conversion

    The Indonesian affiliate of Malaysian budget carrier AirAsia Bhd is planning to convert debt into shares to meet a new government rule on equity.

    The debt will be converted into preference shares which carry no voting rights, Sunu Widyatmoko, President Director of PT Indonesia AirAsia, told Reuters in a text message.

    He declined to disclose the amount to be converted as it is pending approval from the Indonesia investment coordinating board.

    Indonesia AirAsia is among several airlines that have until Sept. 30 to meet Indonesia’s “positive equity” rule after the country’s transport ministry extended the deadline from July 31.

    The ministry previously said 13 airlines had “negative equity” – meaning assets used to secure loans were worth less than the outstanding balance of the loans. It said those airlines risked suspension if they did not turn equity positive.

    AirAsia shares jumped as much as 5.4 percent in early trade, outperforming the benchmark index which was down 0.6 percent.- Reuters

  • Save no more? Are Japanese turning spendthrift?

    Save no more? Are Japanese turning spendthrift?

    The Japanese spent more than they saved in the 12 months ended March 2014, the first time that’s happened since the data set began in 1955, with the savings rate at a negative 1.3 percent in the last fiscal year.

    “It’s something to keep an eye out for in the medium-term because Japan’s debt has been funded domestically, and very cheaply. But foreign investors would require a more appropriate risk premium,” said Toru Yamamoto, Daiwa’ Securities chief rates strategist.

    Japan has quite a bit of debt, with the country’s debt-to-gross domestic product (GDP) at over 220 percent, one of the highest in the world, financed by the domestic savers and Japanese government bond (JGB) investors at some of the lowest interest rates globally.

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