Cover image via Mikail Ong/NSTP
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Last year's bankruptcy figures reveal a worrying trend that warrants closer attention
Malaysia recorded nearly 7,000 new bankruptcies over the past year, averaging about 19 individuals declared bankrupt every day.
Even more troubling is the scale of debt: over the past five years, more than 80% of those declared bankrupt owed at least half a million ringgit.
Data from the Insolvency Department showed that 19,432 cases during this period involved debts ranging between RM500,000 and RM999,999, while 5.5% or 1,275 individuals owed more than RM1 million.
Economist Prof Emeritus Dr Barjoyai Bardai said the magnitude of these figures suggests that bankruptcies are not driven solely by reckless consumer spending, but by prolonged exposure to high-risk borrowing and weak income resilience.
This includes the lack of real purchasing power despite nominal wage increases, as well as limited financial buffers, particularly among business owners.
Nearly half of the bankruptcy cases recorded between 2021 and 2025 were linked to personal loans.
The data also revealed the troubling inclusion of retirees and students, pointing to early and late-stage financial vulnerability.
Penang has the third-highest number of bankruptcies in Malaysia
By state, Selangor recorded the highest number of cases last year at 1,570, followed by Kuala Lumpur (904), Johor Bahru (577) and Kota Kinabalu, Sabah (447).
Cumulatively, Selangor (19,226) and Kuala Lumpur (14,181) remained at the top, with Penang close behind at 13,620 cases.
Last year alone, 375 new bankruptcies were recorded in Penang, bringing the total in the state over the past five years to 1,712.
The numbers are rising, with 324 cases in 2024, up from 283 cases the previous year.
Barjoyai attributed Penang's high bankruptcy figures to persistently high property prices and a strong concentration of small businesses.
He said the state consistently ranks among the most expensive in terms of housing relative to median income.
"Larger housing loans mean higher long-term financial risk, while small and medium enterprises are highly sensitive to economic downturns.
"When businesses fail, personal bankruptcy often follows," he said, adding that Penang's economy is fuelled by traders, small manufacturers, and food and tourism operators.
However, Barjoyai said Penang's situation is not a paradox, but the result of economic success combined with structural pressure.
Urbanised and developed states typically record higher bankruptcy rates because debt usage is more widespread.
"A state with a more 'developed' economy would also have higher lifestyle expectations, greater debt usage and more exposure to financial products.
"Urban and semi-urban populations consistently show higher bankruptcy rates than rural areas," he added.
