M'sian youth fall into debt to buy smartphones

SHAH ALAM - Many Malaysian youth are currently willing to get into debt for the sake of buying branded and latest smartphones worth thousands of ringgit.

This is simply because they want to be seen as leading a rich and luxurious life, said Consumers Association of Penang (CAP) education officer NV Subbarow, adding that this trend of buying smartphones through monthly credit installments has become worrisome.

He said there were cases of buyers who were willing to spend up to more than RM8,000 to buy a smartphone.

"From my observation, teenagers are now obsessed with using smartphones that cost thousands of ringgit because they don't want to be seen as missing out in the latest trend and technology, as well as to be popular for having the latest phone in their friends' circle.

"Not only that, I also found that most of them are university students, students who had just finished school and are working part-time jobs," he told Sinar on Wednesday.

Subbarow said most teens could not distinguish whether the purchase was a need or just a want.

At the same time, he also expressed disappointment over the group's attitude, as they were willing to put aside more important matters in order to fulfil their wishes.

"Teenagers should focus on their education and not be in debt just because they want to buy a certain smartphone.

"Moreover, I also found that the majority of borrowers are teenagers from low-income groups, so they need to avoid buying things that exceed their financial means," he said.

Meanwhile, the Federation of Malaysian Consumer Associations (FOMCA) deputy secretary-general, Nur Asyikin Aminuddin, said purchasing smartphones through installment payments is bad for financial management, especially for the younger generation.

Asyikin said the group should learn to save money to buy the things they want.

"Don't get used to being in debt just to buy things you dream of.

"They need to know the difference between necessities and wants.

"During this uncertain economic situation, we need to get rid of the habit of going into debt to buy things that we do not need and learn to prioritise spending on the necessities first," he said.

Smartphone financing is the top outstanding payment.

Meanwhile, RHB Bank Bhd (RHB) in research that many borrowers did not pay their debts for smartphone financing.

According to a research note published by RHB Investment Bank Bhd, a large part of non-performing loans (NPLs) were made up of borrowers who did not pay for smartphone financing service.

Observing the constraints from a protracted microeconomic perspective, Aeon Credit management was confident that the growth in receivable finance was still at a high quality level and was significant for the financial year 2024 (FY24).

"Aeon Credit Service (M) Bhd management still intends to increase receivable finance to about 10 per cent compared to last year, but will focus more on customers with higher credit scores, especially for its financing segment objective.

"Since smartphone financing forms a large part of NPLs.

"Other key segments for growth are credit cards (through the Aeon retail ecosystem), vehicle financing (specifically mopeds and used cars), and personal financing," the note said yesterday.

According to the note written by analysts Nabil Thoo and David Chong, the credit costs were expected to grow slightly in FY24 but reposession activities should prompt a better recovery.

Aeon Credit's new focus as they move forward is on customers with stronger credit quality, which could be a positive factor for NPLs and credit costs.

"The management (Aeon Credit) expects asset quality pressure in FY24 with NPL expected to increase to three to four per cent by the end of financial year 2023 with about 2.89 per cent growth.

"This is because the borrowers' cash flow has decreased due to inflationary pressure, but the group is at ease under the loan loss coverage (LLC) of 252 per cent and a management overlap allocation of RM105 million which is about 13 per cent of the total allocation," the note said.

INFO - Aeon Credit is a financial institution in Malaysia that introduced the Easy Payment schemes in 1997.

Aeon Credit has been listed on the Malaysian Stock Exchange and has 71 branches and service centres throughout Malaysia.

* Source: Aeon Credit Service (M) Berhad