Monash and CTOS release comprehensive report on consumer credit landscape in Malaysia
Monash University Malaysia and CTOS, a leading credit reporting agency in Malaysia, have released a comprehensive report titled "CTOS State of Consumer Credit 2022 Malaysia," which provides an in-depth analysis of the credit landscape in Malaysia.
A CTOS score is a credit score calculated by CTOS Data Systems Sdn Bhd. It is a numerical representation of a person's creditworthiness based on their credit history, outstanding debts, payment history, and other factors that may indicate their ability to repay loans or credit. CTOS scores range from 300 to 850, with higher scores indicating better creditworthiness. Lenders and financial institutions assess the risk of lending money to a particular borrower using credit scores, as it objectively measures the borrower's financial behaviour and credit history.
The report includes valuable insights into consumer behaviour and credit risk trends based on the analysis of millions of credit records, making it an essential resource for businesses, policymakers, and individuals alike. It highlights the continued improvement of the Malaysian consumer credit score, a significant positive trend for individuals and businesses. A higher credit score can lead to better financial opportunities and more favourable terms on loans and credit. The report also provides information on debt levels and credit utilisation, offering valuable insights into the credit habits of Malaysians. The report is timely as the Malaysian government unveiled its latest budget.
The average CTOS Score in Malaysia was 678 in 2022, an increase of three points over 2021 despite the pandemic from 2020 through 2022. As Malaysian consumers experienced more disposable income throughout the pandemic, the CTOS Affordability Index Average also increased, reaching an average of RM5366 per person in 2022.
In addition, the report provides information on debt levels and credit utilisation, offering valuable insights into the credit habits of Malaysians. The average credit card utilisation climbed 0.6 per cent to 23.7 per cent in 2022, even though the average outstanding credit card balance of RM11,955 per person is a record low.
1 out of 5 people in Malaysia had fair creditworthiness (18.0%) with credit scores between 651- 696. About a quarter of Malaysian consumers (26.6%) had poor or low creditworthiness, with credit scores between 300 and 650. These represented 44.5 per cent of the consumer population who should improve their financial planning to manage credit commitment and pay on time.
Professor Nafis Alam, who is the Head of Monash University Malaysia's School of Business, commented on the statistics presented in the report, stating that during challenging times, the lower income group or B40 had a considerably higher credit card usage of 34.2 per cent, which is higher than the national average of 23.7 per cent, as they relied on this form of financing to sustain their finances. He also noted that the younger generation (Gen Y & Z) exhibited an increased usage of credit cards, which could be attributed to their social preferences and spending behaviour.
One of the most remarkable aspects of this report is the collaboration between Monash University Malaysia and CTOS. The partnership between academia and industry demonstrates the power of combining research and data to provide insights that benefit society as a whole. By leveraging Monash University's academic expertise and CTOS's industry knowledge, the report offers a unique perspective on the credit landscape in Malaysia.
Professor Nafis, who co-wrote the report with Associate Professor Manjeevan Singh, Dr Ewilly Liew and the CTOS Data Systems Sdn Bhd team, noted that the partnership between Monash and CTOS is a testament to their mutual commitment to advancing financial inclusion and offering valuable insights to individuals, policymakers, and businesses. He expressed pride in working alongside CTOS to produce a comprehensive evaluation of the credit environment in Malaysia.
"The collaboration between academia and industry is essential in providing a deeper understanding of the credit landscape in Malaysia and developing effective solutions to address the challenges facing society," he stated.
The "CTOS State of Consumer Credit 2022 Malaysia" report is available for download here.