Malaysia’s Household Debt Soars To RM1.63T, Can Financial Assets Offer A Buffer?

At the beginning of 2025, the size of Malaysia’s household debt was making headlines. The Ministry of Finance (MoF) revealed that household debt increased to RM1.63 trillion at the end of last year, a staggering figure that might make anyone worry.

At the same time, MoF also reassured the public that this number is small in comparison to the overall financial assets of the country, which suggests that there is a safety net despite the debt.

This safety net source can range from saving money to getting a crypto CFD account, to improve their financial position in the modern world where the pulse of financial markets is connected to many things.

Financial assets to debt ratio

How does household debt relate to financial assets? The update from MOF made on February 26, 2025, presents a positive picture of the recovery during growth.

“‘Household debt was RM1.63 trillion at the end of 2024, but this is much lower than the total financial assets of Malaysians,” MoF stated. According to MoF, household financial assets totalled RM3.4 trillion, equal to 178.2% of Gross Domestic Product (GDP) at the end of 2024.

However, the figure is up from RM1.53 trillion in 2023, an increase due to borrowing for housing loans remaining the highest at more than 60 per cent, car loans, and personal credit. Nonetheless, the debt-to-GDP ratio has decreased slightly from 84.2% in 2023 to approximately 82% in 2024 due to the expected sustainable economic growth of 4.5-5.5% in 2025.

What makes up household debt?

What is the cause of this debt? For many, it is a question of being able to own a house. Property prices increased by 4.1 per cent between 2022 and 2023, and this has not been followed by a decrease.

In 2024, the property market also broke RM56.53 billion in the first quarter of the year, which is 34.3 per cent higher in value compared to the previous year.

Car loans are also not far behind, as more than 70% of buyers of Proton and Perodua choose nine-year loans, which is a clear indication of stretched finances. But then there is the ease of credit from the fintech companies, and there lies the debt.

However, MoF has not emphasised the financial assets such as savings, stocks, and EPF contributions as household debts.

Household financial assets help balance indebtedness

This is where financial assets come in handy. Household financial assets have also continued to rise and as of the end of 2024 were RM2.4 trillion, compared with RM2.23 trillion in 2016 based on historical trends.

EPF (Employees Provident Fund) remains the biggest source of retirement savings for salaried employees in Malaysia. It continues to offer dividends of over 5% annually which helps Malaysians grow their financial assets. However, there are concerns that EPF savings is no longer sufficient. In recent years, the basic savings goal as well as the age at which one is encouraged to save for it has been raised to 55 years, though some accounts have been depleted following the allowance of i-Sinar and i-Citra withdrawals during the pandemic.

On the other hand, Bursa Malaysia-listed companies, including Telekom Malaysia with an 18.5 sen dividend payment last year, are attractive to the more sophisticated investors. There is also the digital shift – more than 840,000 Malaysians have signed up for digital asset exchanges since 2021, in a market where cryptocurrencies transacted RM21 billion in 2021 alone.

Digital shift in financial assets

The story of this digital finance cannot be complete without this connection. The Securities Commission of Malaysia has its sights on making the country a blockchain hub and regulated platforms have been on the rise.

By 2025, the debate on cryptocurrencies will not only be a global discussion, but it will also be a local action. Even though Bitcoin and Ethereum are not yet recognized as forms of payment in Malaysia, it is impossible to deny their potential as investment tools, especially in light of the annual inflation rate of 2.4% in 2025 against 1.8% in 2024.

These assets may be a way of diversifying for households that have debt, although they are accompanied by volatility that is not seen in traditional assets such as gold, which has risen to RM245 per gram from RM133 in 2009. The Ministry could have approved these new participants as part of the financial assets board, which it established.

Sustainability of debt in Malaysia

However, it is not a rose garden. This has led to concerns about the sustainability of the debt. With wages still not increasing to match the cost of living – for instance, the price of food has increased by 3% and the utility companies are charging more – some people think that it is almost a cliff-edge situation.

Bankruptcy rates increased in 2024, especially among young Malaysians, 18-40 years of age, 73% of whom are already in debt according to the most recent research.

The government’s response includes structural changes, for instance, tightening lending laws and helping with repayment difficulties, but the Ministry’s latest statement avoids these contentious matters by focusing on the positive aspects of assets. It is a hopeful argument: although households have a lot of debt, they are rich – or at least appear to be – on the balance sheet.

Diversification in investments is necessary

For the typical Malaysian, this means that the balance sheet must be checked in 2025. Diversification in investments is important: EPF savings can be complemented by unit trusts, investing in Bursa Malaysia’s growth stocks or even a combination of the three. New digital tools are are democratizing access, allowing more people to invest via apps or blockchain.

So, where does this leave Malaysia? This is not a small figure of RM1.63 trillion in debt, but the financial assets buffer does weaken the impact. In other words, Malaysians are borrowing to improve the standard of living today and waiting for the wealth of tomorrow.

Blockchain to stocks; Malaysians are saving and spending with old-school discipline coupled with new-age risk-taking. It is a thin line that has been raised, and with assets and the economy, there is not much that can be done to drown out the debt.

For the time being, it is about being wise, having a diversified portfolio, and taking advantage of the digital revolution without compromising the fundamentals.

This is a guest post from a contributor.