The central bank said the number of individuals facing bankruptcy had been on the downward trend since 2016, including the period following the hike in the overnight policy rate (OPR) in 2018.

“The number of youths (under 35) facing bankruptcy accounted for 14% of all cases from January to May 2022, a 10.9% decline from its previous rate of 24.9% from 2017 to 2019,” it said in a statement today.

It said that declaring someone bankrupt was a financial institution’s last resort, and was only done after all other remedial efforts to recover the loan were unsuccessful.

According to its policy on the Fair Treatment of Financial Consumers, financial institutions must ensure that borrowers facing difficulties repaying loans were treated fairly and given due consideration before any bankruptcy action was taken.

However, it noted that apart from financial institutions, there were creditors outside its jurisdiction that could also declare someone bankrupt.

BNM said figures compiled from seven domestic financial institutions, which account for 71% of all bank loans, showed that overall, bankruptcy cases had been on the decline since 2018.

There were 5,283 cases in 2018, dropping to 3,948 cases in 2019; 2,844 in 2020; 1,884 in 2021; and 515 from January to May this year.

BNM also found that borrowers had been gradually withdrawing from loan repayment assistance programmes and that the trend of loan repayments increased in the first quarter of 2022, to an average of 92% of pre-pandemic loan repayment levels recorded in the same quarter of 2020.

It advised borrowers to seek advice from the Credit Counselling and Debt Management Agency (AKPK) on its credit management programme.

“The programme can help restructure existing loans, allowing borrowers to continue to repay their loans, and could prevent potential legal action such as bankruptcy or property auctions,” it said.