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Financial Fragility of Urban Households in Malaysia

Author

Listed:
  • Abdullah Yusof, Selamah

    (Department of Economics International Islamic University Malaysia P. O. Box 10, 50728, Kuala Lumpur MALAYSIA)

  • Abd Rokis, Rohaiza

    (Department of Sociology and Anthropology International Islamic University Malaysia P. O. Box 10, 50728, Kuala Lumpur MALAYSIA)

  • Wan Jusoh, Wan Jamaliah

    (Department of Business Administration International Islamic University Malaysia P. O. Box 10, 50728, Kuala Lumpur MALAYSIA)

Abstract

Household debt in Malaysia has been on an upward trend and increasing at a relatively fast pace. This study provides an in-depth micro analysis of the current Malaysian urban households’ vulnerabilities by examining the extent of their ability in dealing with financial shocks and factors that attribute to their financial fragility. Using a recent strictly random sample, it is found that Malaysian urban households are financially vulnerable. Only 10 percent of the households are resilient to shocks related to unemployment, physical disability, divorce, death, or changes in interest rate or stock market. More than a fifth of the households are not able to survive for at least three months if their income is cut off. Additionally, more than a fifth of these households do not have enough savings or any other source to turn to if there is a need to raise RM10,000 within a short period. Household income significantly affects a household current financial situation, while those with better financial knowledge and higher levels of education are less likely to be in asset poverty. The inability to cope with financial shocks differs across ethnic groups partly due to the wealth disparity and access to sources of funds. Initiatives must be undertaken to assist the households in facing these challenges and for them to exercise financial prudence. Additionally, household debt must be closely monitored to ensure that it is sustainable.

Suggested Citation

  • Abdullah Yusof, Selamah & Abd Rokis, Rohaiza & Wan Jusoh, Wan Jamaliah, 2015. "Financial Fragility of Urban Households in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 49(1), pages 15-24.
    • Handle: RePEc:ukm:jlekon:v:49:y:2015:i:1:p:15-24
    DOI: http://dx.doi.org/10.17576/JEM-2015-4901-02
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    References listed on IDEAS

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    2. Ján Buleca & Nikola Šubová & Lenka Malièká, 2022. "The Relationship between Household Wealth and Financial Vulnerability in the Post-communist Countries of the Euro Area," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(7-8), pages 569-588, July.
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    4. Tongpu Zhao & Ruiyun Wanyan & Lingyan Suo, 2023. "Research on the Effect of Commercial Health Insurance Development on Economic Efficiency," IJERPH, MDPI, vol. 20(6), pages 1-16, March.

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