Khazanah Research Institute says companies that offer buy-now-pay-later may have widened financial inclusion to households ignored by traditional lenders, but at the same time raises the debt exposure of high-risk borrowers who may have little financial literacy.
“By providing a simplified and often instantaneous credit approval process, BNPL has expanded the reach of credit to younger generations, those without a credit history, as well as individuals in less urbanised regions, most of which fall within the lower-income bracket,” KRI said.“While this has democratised credit access, it has also raised concerns about responsible lending practices and the potential risks associated with over-extension of credit to less financially literate populations.
There are at least seven major BNPL service providers actively operating in Malaysia currently, according to a recent report by, with the number expected to increase as the market grows and more financial institutions partner with BNPL companies or launch their own services.Much of the sector's growth is debt-financed but it's unclear how much exposure these companies have piled up over the year as they extend service coverage to more vendors.
“At present, exposures to BNPL are not captured in total household debt. In ensuring household debt is kept in check, there is a vital need to integrate BNPL exposures into household debt metrics, which currently only include traditional forms of debt such as housing loans, credit card debt, and personal loans, among others,” it said.