To loan or not to loan / Anita Abu Hassan, Rosliza Md Zani and Mohd Syazrul Hafizi Husin

Malaysia has a population of about 32 million people, with a median age of 29.6 years in 2021. About 69.6 percent of the overall Malaysian population is currently dominated by the working group category, which includes those aged 15 to 64 (Department of Statistics Malaysia, 2021). The majority of the population comprises youth who are working and highly productive, keen to advance in their careers, and yearning to enjoy an affluent lifestyle. This opens up a wide range of opportunities for banks to market their credit facilities to these groups of people. However, along with the aforementioned data, 85.20 per cent of bankruptcy cases from 2017 to 2021 involved borrowers between the ages of 25 and 54. The age group is made up of the following percentages: 25.54 per cent for people in their 45th to 54th year, 36.42 per cent for people in their 35th to 44th year, and 23.24 per cent for people in their 25th to 32nd year (Malaysian Department of Insolvency, 2021). Each loan application is expected to be approved by the management as proposed. All disbursement loan accounts are also anticipated to reach a fully paid status. By the end of the day, the banks get their principal money back together with profit or interest charged, and the customer gets financing to own the assets and goods. It is an ideal situation. But in the real world, sometimes unexpected things happen. Some of the loan life expectancies would end up at bankruptcy filing. Every credit facility carries a non-repayment risk. This risk jeopardises the bank's ability to generate income and could result in losses. If the customer failed to service the interest on the loan or failed to pay the financial commitment on time, the loan account would be in arrears status. The account may turn from a performing account to a non-performing account. At this stage, the monitoring and recovery department will do its part by doing the collection of the unpaid money from the customer. The overdue or delinquent loan account may return to performing status once the customer pays all the outstanding payments. If the customer has a permanent cash flow problem, this is when they request for rescheduling or restructuring of their credit facility, and the account would be turned back to performing. But if none of these steps is taken by the customer, the bank normally will proceed with the legal process, and if the outstanding loan amount reaches RM100,000, the bank can initiate the bankruptcy proceeding.