KUCHING: Greater efforts must be made to lessen the load of guarantors including changing and review existing laws.
Assistant Minister of Youth Development Datuk Abdul Karim Rahman Hamzah said this is because guarantors made up a large number of those declared bankrupt.
He said being bankrupt at an early age could be a traumatic experience, especially if it is due to being a guarantor.
“It’s just like a ‘death penalty’ imposed on an innocent party. The public, whether they are young or old, should be made aware of the implications and dangers of being a guarantor to any facility given by a financial institution be it a personal loan or a loan for a car or a house.
“In the event of the principal borrower defaulting, the guarantors are jointly and severally liable in law to pay,” he told The Borneo Post when contacted yesterday.
He was commenting on a recent revelation by Minister in the Prime Minister’s Department Nancy Shukri that 13,540 people were declared bankrupt due to their failure to repay hire purchase and business loans from January to September this year in Sarawak.
She said as a whole, many youths in the state aged between 35 and 44 were declared bankrupt due to credit card debts, vehicle hire purchase and housing loans.
Abdul Karim said while youths should be more careful in managing their finances to avoid being caught in a web of debt, banks and financial institutions should also be more responsible by not indiscriminately approving loans and credit card applications.
“The government on the other hand should also play their part in formulating laws that are more stringent for credit card or car loan approvals. Now, practically anyone can apply and get approval for these facilities.
“The government should also see laws on guarantors be made more lenient. For example, the banks can only pursue after the guarantors when all avenues against the principal borrowers have been exhausted.”
In responding to the same issue, Works Minister Datuk Fadillah Yusof said the people, especially youths, should live within their means and get advice on how to manage their finances.
Parti Keadilan Rakyat (PKR) national women’s vice-president Voon Shiak Ni said the increasing number of youths declared bankrupt is worrying and called on the government to look into the rising cost of living.
“The continual petrol price hike and the rising costs of goods which are not in tandem with a rise in their salaries and pay have make it hard to manage expenses, especially for those with young families.
“The rising price of houses is also taxing on the young and the servicing of burdensome monthly instalments for their house and cars causes them to plunge into debt.”
Voon suggested the government help reduce the financial burden of youths by opening up more land for low and medium cost houses as well as upgrading public transport.
“Instead of suggesting more loans for the young, as stated by then Minister in the Prime Minister’s Department Datuk Seri (Mohammad) Nazri (Abdul) Aziz in April this year, some long-term solutions must be planned for the younger generation to be able to live their daily lives with less debt,” she said.
Nazri had been reported as saying bankrupts would be given loans through the RES-Q programme and offered solutions to direct them out of bankruptcy.