Abstract
Malaysia is a country that aims to become a high-income status nation by 2020. Though, Malaysia currently is facing with over-indebtedness problems, an increasing trend in consumer loan demand, high household debt-GDP ratio, and also with a high number of bankruptcies. With regards to these issues, therefore this study is conducted to investigate the causes of over-indebtedness, specifically among the young generations. This study applied a face to face survey and interviewing eight young workers in one of the public universities in Malacca, Malaysia. The results indicate that low in financial knowledge and debt illiteracy are not the causes of over-indebtedness for the sampling frame. An individual with a good financial knowledge and debt literate, also associate with a high debt and over-indebtedness. Moreover, home and car loan are the dominant contributors for individual over-indebtedness, due to the perception that home and car are the needs in today’s life. These findings had brought a new dimension in exploring on the causes of over-indebtedness, where research on over-indebtedness should not only focus on the linking of financial literacy (financial knowledge and debt literacy) with consumer debt, but then should consider other contributing factors that give effect to individual over-indebtedness. It is hoped that this study may perhaps give benefits to regulatory bodies in formulating policies related to consumer debt in realizing the government’s intention to become a high-income status nation by the year 2020.
Highlights
Small business is the basement of modern economy nowadays and its growth is a major task of any economic policy
Funds of banking organizations are the main type of credit and investment resources but some problems often arise in lending to small businesses
A particular problem is the lack of trust between banks and small enterprises that is regarded as required condition for their efficient interaction
Summary
Small business is the basement of modern economy nowadays and its growth is a major task of any economic policy. Credit and investment resources are an important booster of small businesses because small firms normally lack their own funds and frequently use their personal savings. This is especially true for small industrial enterprises that have capital-intensive asset structure and low maneuverability in a changing environment. The interpretation of the term "credit" goes back to the Latin "credo" and means "believe", "trust". This is why lending is based on the principle of credibility of relations between the agents participating in this transaction and it assumes fair execution of the contract obligations by them
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