LETTERS: The long lines outside pawnshops in the Klang Valley on the first day of the conditional movement control order (CMCO) on May 4 and a few days after that could well be a reminder that more assistance is needed for the B40 and even the M40 households.
According to reports, the crowd were there to reclaim their valuables, put up more items as collateral, pay the interest or extend the repayment period.
Economists and analysts think that this is a reflection that more measures are needed to ensure that the effect from either loss of or reduced income is mitigated.
Looking at the situation, the MCO combined with similar trends in partial economic shutdown on a global level have caused prices of essential food items to spike.
By late April, for example, the price of cabbage is RM6.50 which represents a whopping 62.5 percent increase whereas the price of cucumber increased by 300 percent from RM1 to RM3.
In its findings from the second study on the economic impact of Covid-19 that was released in a press statement on March 24, the Malaysian Institute of Economic Research (MIER) reached the following projections:
1. Malaysia's real GDP may shrink about 6.9 percent, relative to the 2020 baseline. This translates into a 2.9 per cent real GDP growth for 2020, relative to 2019.
2. The number of job losses (presumably non salaried jobs) could be in the region of 2.4 million, 67 percent of which are unskilled workers.
3. Household income is projected to fall by 12 percent relative to the baseline, which amounts to RM95 billion.
4. Such a fall is manifested in a sharp decline in consumer spending by 11 percent, despite the drop in general consumer price level by 4.4 percent.
On the same day as the Prihatin 1.0 stimulus package was announced, a Khazanah Research Institute's (KRI) opinion piece, "The Impact of Covid-19 on the Urban Poor: Three Major Threats – Money, Food and Living Conditions" was published which highlighted a Bank Negara study which estimated the following:
1. A single adult living in Klang Valley needs to earn a minimum of RM2,700 a month to live adequately; and married couples with two children require around RM6,502 to "survive".
2. The article also mentioned that data from the National Housing Department (JPN) showed that 65.8 percent of the breadwinner of households in the People's Housing Projects (PPR) earn below RM2,000.
3. The average monthly income of households in PPRs range around RM2,000 in more developed states. The figures are RM2,039.40 for Selangor and RM1,994.40 for the Federal Territory of Kuala Lumpur.
Shrinking purchasing power, loss of employment, lower wages, rising poverty (as measured by the Poverty Line Income of which officially is at RM980 per month for the Peninsular, RM1,180 for Sabah and RM1,020 for Sarawak), higher cost of living and a safety net or welfare system on the back of limited fiscal capacity makes for grim reading of our socio-economic future.
On the long queues outside the pawnshops, Prof Denison Jayasooria of Universiti Kebangsaan Malaysia who is also prominent social activist sees this as a phenomenon of the "poor man's bank".
In view of this, the government should implement the following specific measures to help the people who rely on pawnshops to raise emergency cash:
The Ministry of Housing & Local Government – the ministry responsible for the licensing of pawnbrokers under the Moneylenders Act 1951 – should set up a one-stop centre to advise and guide borrowers to legitimate/legal pawnbrokers.
In the medium term, the government should legislate for a comprehensive consumer credit law to ensure a healthy market and enhance protection of borrower's rights and interests.
To conclude, it is conceded that it is common here in Malaysia for people irrespective of ethnic backgrounds to go to pawnshops as source of borrowing, especially so when the festive seasons are around the corner.
Indeed, based on the conditional MCO/Covid-19 scenario, long queues outside pawnshops may well be a new normal – at least for some time.
JASON LOH SEONG WEI
EMIR RESEARCH
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times