Easy access to multiple loan schemes has been identified as a key factor contributing to serious debt problems among teachers, with some facing the risk of bankruptcy.

National Union of the Teaching Profession secretary-general Fouzi Singon said the issue affects teachers nationwide and is not confined to any single state. He said the availability of loans and investment offers has increased financial exposure within the profession.

Past Cases Highlight Financial Vulnerability

Fouzi pointed to a previous case involving an investment scheme known as CSA Academy, where around 1,700 teachers across Malaysia were affected. The case, he said, highlighted how quickly financial risks can spread among educators.

He added that such incidents reflect broader vulnerabilities, particularly when financial products or schemes are promoted through trusted networks.

Selangor’s Teacher Population Increases Exposure

According to Fouzi, Selangor often receives attention because it has a large teacher population, estimated at more than 40,000. The size of this group, combined with strong social connections within schools, allows loan and investment offers to circulate quickly.

He also said teachers tend to show interest in business and income opportunities. While this can be positive, it can also increase exposure to schemes that promise fast or attractive returns.

Calls For Tighter Loan Approval Controls

Fouzi said stricter controls are needed in the loan approval process, particularly at the departmental level. He stressed that department heads should carry out more rigorous assessments and avoid approving loan applications automatically without clear justification.

He added that stronger oversight could help prevent teachers from taking on debt beyond their repayment capacity.

Debt Service Ratio Determines Loan Eligibility

When applying for a loan, one of the key factors banks use to assess eligibility is the Debt Service Ratio, or DSR. DSR shows how much of a person’s monthly income is already committed to debt repayments.

The calculation is based on total monthly loan commitments divided by net monthly income, multiplied by 100. A higher DSR reduces the amount a borrower may be eligible to receive, even if the loan application is approved.

Checking DSR before applying for a loan helps borrowers understand whether they can realistically qualify for additional financing, rather than relying solely on lender approval.

Concerns Over Lenient Lending Practices

NUTP has urged Bank Negara Malaysia to strengthen supervision of financial institutions, citing concerns that some lenders are too lenient when approving loans for civil servants.

According to Fouzi, there are cases where loan approvals appear to exceed borrowers’ actual ability to repay, increasing the risk of long-term financial stress.

Family Pressure Adds To Debt Burden

Fouzi also highlighted cases involving teachers, particularly women, who took out loans after being encouraged by their spouses to fund business ventures. When these ventures failed, the teachers were left carrying the financial burden alone.

He said these situations underline the need for better financial decision-making and clearer awareness of shared financial responsibilities.

Financial Stress Can Affect Teaching Performance

Fouzi said financial distress and the threat of bankruptcy can have wider consequences beyond personal finances. Emotional stress linked to debt can affect teachers’ motivation, performance, and mental well-being.

He added that these pressures may also affect students and the overall school environment.

Push For Financial Education And Early Support

NUTP has proposed closer cooperation between the Education Ministry, the Finance Ministry, and the union to organise financial management programmes, particularly for new teachers.

Fouzi said these initiatives should involve experienced individuals who can share practical lessons and real-life examples to help teachers make informed financial decisions.

He also reminded teachers to spend prudently, manage their finances carefully, and avoid being influenced by offers that appear overly attractive, noting that teachers play an important role as financial role models.

Bankruptcy Data Shows Growing Risks For Fixed-Income Earners

Earlier this week, Malaysian Insolvency Department director-general Datuk Ishak Bakri said Selangor recorded the highest number of bankruptcy cases in the country, with teachers among the most affected groups of civil servants.

High personal loan commitments were identified as a major contributing factor, with fixed-income earners facing higher exposure to bankruptcy risks based on insolvency data and financial literacy programme findings.

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