Factors Influencing Generation Y Bankruptcy In Malaysia

Research Question

A research question show a fundamental direction of a study. It guides the researcher in every stage of their analysis and report. The research question of this study is:

a) What is the number of bankruptcies among Gen- Y in Malaysia?

b) What are the factors that influencing the Gen-Y bankruptcy in Malaysia.

Research objective

The objective of the study is certainly intended to answer and solve the research problem which has been stated above. In line with the research question, the objective of this research is: a) To identify the bankruptcy rate of Gen-Y Malaysia. b) Investigate the factors influencing bankruptcy among the Gen-Y in Malaysia.

Literature review

Definition of Gen-Y and Bankruptcy

According to Jacquelyn, the word ”bankruptcy” is a legal process initiated by an individual or a company due to the inability to settle debts owing. Bankruptcy happens when a person is unable to settle his debts (known as a Debtor) owed to the people or the party who loan him the money. The parties who gave out the loan are known as a creditor. For example, a banking institution or even company giving out hire-purchase schemes (Jacquenlyn, 2008). According to the Business Dictionary, Gen-Y are the generation of people who born during the 1980s and early 1990s. The name of Gen-Y is based on Generation X that preceded them. Gen-Y is also known as “echo boomers” because they are the children of the parent born during the baby boom (the “ baby boomers”). In the same time, Gen-Y is also known as Millennials echo boomers, internet generation, I Gen and net generation because Gen-Y is children born during the time period have constant access to technology (computers, cell phones) in their youth and they are the generation which enhance with technology knowledge.

Gen -Y Bankruptcy in Malaysia

Young bankruptcy is a common issue that happens in every country. According to Asia News dated 24 Aug 2018 reported that 64,632 Malaysian aged between 18 to 44 have been declared bankrupt over the last five years. In the other word, this number represents that almost 60% of the cases reported in the Malaysia Insolvency Department is Gen-Y. (Asia News, 2018). In the same article, Malaysia Insolvency Department Director General Datuk Abdul Rahman Putra Taha said that most of the bankruptcy cases in Malaysia were primarily caused by the inability to sustain car loan, personal loan, housing loan and business loan(Asia News, 2018).

Credit card and bankruptcy

A credit card is a card issued by a financial institution that allows its user to borrow pre-approved fund at the point of sale in order to complete a purchase (Investing Answer). Nowadays every individual can easily obtain credit card base on their income and occupation. As the result, the number of credit card holders had reached about three million on last century (Wall, 2004). Previous studies have shown that people are willing to spend more – as much as 83% when they paying with a credit card than cash (Peterson, 2018). According to New Straits Times dated 3 Dec 2017, many young graduates never notice that credit card change their buying behavior. They think that having many credit cards is an indicator of success. Beside, in line with the development of information technology, New Straits Times newspaper dated 09 July 2017 reported that a survey conducted by Overseas Bank Limited (UOB) Malaysia found that Gen-Y who grew up with the internet, mainly used their credit card to buy airline tickets and book hotel accommodation. They also used their credit cards to purchase products from fashion and retail outlets through the world wide web. This has led to a 26 per cent rise in credit card spending among card member aged between 26 and 35.

Finally, the rise in credit card spending has relied high-cost borrowing among Gen-Y, and according to an interview in this study, high cost borrowing or also known as credit card debt may trap Gen-Y toward bankruptcy (New Straits Times, 2017). Uma Murthy & Paul Anthony Mariadas (2017), explore the factors bank policies on credit card to be the causes of bankruptcy of Gen-Y. Nowadays, many card issuing bank companies trying to sustain their marketplace by offering different types of incentive and benefits. For example, incentives such as annual fee waiver, cash rebate, point redemption and even airline miles. Furthermore, some bank even lower down their minimum requirement for credit card application. Other than that, according to Uma Murthy & Paul Anthony Mariadas credit card issuing also provide attractive repayment policies where if customer able to pay back the debt in the grace period of time, there will no any interest charge. Otherwise, 1% interest of total outstanding will be charged. According to a news reported in The Star Online news (2017), Bank Negara Malaysia (BNM) has taken various measures to ensure that only eligible and capable individual were given a credit card to control the level of credit card debt. Beside, Bank Negara has also issued a Guideline on Responsible Financial Practices to require financial institutions to ensure that the loan or credit card is given to an individual who able to pay (The Star Online, 2017).

Attitude toward money and bankruptcy

Attitude toward money is another major factor that leads to Gen-Y bankruptcy (Murthy & Mariadas, 2017). We defined attitude toward money as the meanings, feelings, values and beliefs attached to money. Furnham & Okamura (1999) stated the symbolic and psychological value of money are far exceeding its relative economic value as common associations with power, prestige, security, status, achievement, anxiety, distrust love and freedom illustrate. According to the pass literature report, the attitude toward money will actually affect an individual spending behavior. Based on the finding of Duh Helen Inseng (2016), money attitude dimensions variedly affect compulsive buying (Inseng & Teichert, 2016). In the same report, researchers stated that Bonsu (2008) suspects that outcomes of consumer behavior like credit card abuse, compulsive buying, consumer debt accumulation and bankruptcy may emanate from high scores of certain money attitude dimensions.

Poor financial planning and bankruptcy

According to Avadhut, financial planning is the process of meeting an individual life goals through a systematic and disciplined arrangement of your personal finances. With the above definition, we realize that a poor financial planning individual will not meet their life goals. According to a report on Borneo Post, Azaddin Ngah Tasir, the Chief Executive Officer of AKPK said that base of AKPK’s data, 43. 3% of those people seeking help was people who poor in financial planning (Borneo Post Online, 2018). Previous studies, found that poor financial planning is one of the significant psychological variables associated with the level of debt and bankruptcy. A poor financial planning is one of the predictors of debt (Adzis, et al. , 2017). Joyce (2013) stated that, lack of investment decision, serve as a factor of poor financial planning. According to Joyce, Gen-Y Malaysia respondent are relying on their personal investment and saving for their retirement fund. At the same time, Joyce stated that a wrong investment decision may also lead Gen-Y bankruptcy.