PERSONAL FINANCIAL PLANNING (FIN533)

GROUP PROJECT

TOPIC:
TOPIC 1: CONSUMER CREDIT
TOPIC 2: INSURANCE PLANNING

PREPARED BY:

Name Matrix No

Noorul Izzah Shahidah binti Noorul Zairi 2022787719

Nur Auni Hazwani binti Halim 2022758233

Siti Fatimah Amalina binti Abdul Razak 2022996515

Zuhairah Puteri binti Mohd Zamzuri 2022782473

PREPARED FOR:
MADAM NOOR SHARIDA BINTI BASRI SHAH

SUBMISSION DATE:
13th JANUARY 2023
 ACKNOWLEDGEMENT
First and foremost, we would want to express our gratitude to Allah SWT for His
direction and favor in making this endeavor a success. We wouldn't be where we are now if it
weren't for His care. We have received assistance from far too many people, and we are grateful
to have them all in our lives. Without them, we wouldn't know anything about the project at all.

The lecturer for Personal Financial Planning (FIN533), Madam Noor Sharida binti Basri
Shah, is the most significant individual in this project because she has been the greatest educator
for us. We appreciate her for instructing us in a considerate and loving manner.

Lastly, to the group members, Noorul Izzah Shahidah binti Noorul Zairi, Nur Auni
Hazwani binti Halim, Siti Fatimah Amalina binti Abdul Razak and Zuhairah Puteri binti Mohd
Zamzuri. Thank you for understanding group members. Without your cooperation, we could not
do the project on time. Thank you to all friends who have been sharing ideas with us. We hope
our hard work will pay off.

SUMMARY
Consumer credit, which is related to the use of credit by individuals and families for
personal purposes, is the report's first topic. The second issue is insurance planning, which
includes life insurance, disability and health insurance, property and liability insurance, and
insurance for education.

In this report we are discussing a few aspects which are the importance, the selected
current issue and statistical information for each topic.
 TABLE OF CONTENTS

ACKNOWLEDGEMENT 2
SUMMARY 2
1.0 INTRODUCTION 1
1.1 Background 1
1.2 Purpose 2
2.0 BODY TOPIC 1 - CONSUMER CREDIT 4
2.1 Importance 4
2.2 Current Issues 5
2.3 Statistical Information 6
3.0 BODY TOPIC 2 - INSURANCE PLANNING 8
3.1 Importance 8
3.2 Current Issue 8
3.3 Statistical Information 9
4.0 CONCLUSION 12
5.0 RECOMMENDATIONS 13
5.1 Consumer Credit 13
5.2 Insurance Planning 14
REFERENCES 15
APPENDICES 17
1.0 INTRODUCTION

1.1 Background

1. Consumer Credit

Credit is defined as a capacity to buy or borrow based on trust or faith in a

borrower's ability and intention to repay. The amount, use, length, and interest rate of a
person's borrowing generally depend on their credit score. The lender and the borrower
are typically the two parties engaged. Before extending credit to a client, the lender will
make a number of evaluations, including a character and capacity evaluation of the
borrower to ascertain the borrower's capacity to repay the loans. Additionally, loans
nowadays allow customers to buy products and services like homes and cars.

A person needs consumer credit since they have a limited amount of cash
available to them for purchases. Credit increases a person's purchasing power, allowing
them to increase their immediate consumption. A power to buy or borrow on trust is
consumer credit. They do this because they borrow or buy something first and then pay it
back. Because credit must be repaid, consumer credit and consumer debt management
can both be described as ways to manage money. By deciding on a lower principal
payment and lower interest rate, this aids in debt management.

2. Insurance Planning

Insurance is also defined as the transfer of risk by the policy owner, who can be
an individual or an organization. The insurance company is paid in the form of premiums,
and it will repay you in the event that you suffer losses or damages. It is a common
misconception that life insurance is only for people who have families. While it is true
that the primary aim of life insurance is to provide income replacement to your
dependents in the event of your death. It can also be used to support your retirement or
your children's education.

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 Due to the rising cost of healthcare and medical services, health insurance is now
seen as essential in modern society. The majority of Malaysians are unprepared for this
and have no idea how much it will cost to receive care if they are identified as having a
serious disease or injury. Most parents do not want their kids to grow up without access
to a quality education and be at a disadvantage in the complex world of today. Even
though it may require a large financial outlay, education insurance is the best gift a parent
can give their child.

1.2 Purpose

1. Consumer Credit

The purpose of a consumer credit is the system allows consumers to borrow

money or incur debt, and to defer repayment of that money over time. Having credit
enables consumers to buy goods or assets without having to pay for them in cash at the
time of purchase. Having a good credit record means that a person has an established
history of paying back 100% of his or her debts on time. A person with good credit will
be able to borrow money more easily in the future, and will be able to borrow money at
better terms. On the other hand, having a bad credit record means that a person has had
difficulty in the past with paying back all of the money he or she owes, or with making
payments on time. Lenders are less likely to loan more money to a person with bad credit,
making it difficult for that person to buy a car, a house, or obtain a credit card. Access to
credit is a valuable benefit, which a person should protect and manage wisely.

2. Insurance Planning

Insurance planning is a critical component of a comprehensive financial plan that

includes evaluating risks and determining the proper insurance coverage to mitigate those
risks. The principal goal or purpose of insurance planning is to identify and analyze risk
factors in life and seek proper coverage to attain a peace of mind if disaster strikes. The
chances of recovering partly or fully are assured by having insurance. Therefore,
insurance is an economic device transferring risk from an individual to a company and
reducing the uncertainty of risk via pooling. It also serves as a foundation for credit,

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indemnity in the event of losses, social problem-solving, and enhancing our ability to
utilize our assets. Furthermore, it benefits society by encouraging savings and generating
funds for investment.

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2.0 BODY TOPIC 1 - CONSUMER CREDIT

2.1 Importance

Credit is an important aspect of our lives on a daily basis and through our most
challenging moments. Whether you are a college student, a working professional, a parent, or a
widower, it is imperative to establish and maintain solid credit. For large purchases like a house
or a car, as well as job opportunities, a strong credit history may be utilized.

Firstly, since credit and economic growth are linked and without credit the economy
cannot grow, credit is the most important element of the economy. Everybody knows that
without credit, no matter how modern an economy may be, it cannot grow. Consumers and
businesses can borrow more money and spend more when credit is available to them. An
increase in investments and consumption generates jobs and boosts revenue and profit.
Additionally, the expansion of credit affects asset prices, raising their value. Due to the increase
in wealth brought about by rising asset values, the owner has the opportunity to borrow
additional money. Credit also drives up spending, which boosts the economy's revenue levels. As
a result, the GDP (gross domestic product) rises, hastening the rise of productivity.

Secondly, credit cards are an important component of life that provides daily comfort for
most people. Credit cards are a practical and safe payment method for customers and they do not
need to carry large amounts of cash when shopping and also when on vacation, buying real estate
or financing a car. It allows one to spread payments while maintaining access to needed goods
and services when needed. Additionally, the way a person has handled debt in the past can be
seen in their credit history, which is used by many businesses to forecast their future financial
actions.

Lastly, as a student, they also can start building their own credit even though they feel
that they are not responsible enough. They can gain access to their parents' account as an
authorized user. This will enable parents to keep an eye on their child's spending and determine
whether they are staying within their budget. Due to the shared nature of the account, if a parent
establishes good credit, this benefits their child as well. If they do not have a reliable source of
income, this can be their sole choice for creating credit. The usage of credit is very beneficial for

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students who may live far from their families so that their parents do not have to worry if their
children do not have cash to buy daily essentials, books, food, and other things because it is
handy for shopping.

2.2 Current Issues

The Malaysian consumer credit market is expected to experience a slowdown in 2020 as

a result of the coronavirus (COVID-19) epidemic, according to the most current updated
post-COVID-19 figures published by GlobalData, a well-known data and analytics company.
According to GlobalData's Global Retail Banking Analytics, consumer loans, which increased at
a rapid compound annual growth rate (CAGR) of 5.9 percent between 2015 and 2019, are
anticipated to decelerate to 2.4 percent in 2020. Like it did in the majority of other nations across
the world, the COVID-19 outbreak rocked the Malaysian economy and had an impact on the
consumer credit industry.

Shivani Gupta, Senior Banking and Payment Analyst at GlobalData, stated: "New loan
applications may also experience a decline as customers become more wary of taking on more
liabilities as a result of the uncertain economic climate. Consumer spending is impacted as
cautious consumers make fewer large-ticket purchases and stay at home.

The supply and demand for mortgage loans, which make up the majority of consumer
loans in Malaysia with a nearly 60% share in 2019, are under increasing pressure. A
wait-and-see attitude is therefore common because of the outbreak, which has made buyers and
sellers more cautious. GlobalData has updated its predictions for mortgage balance growth for
2020 from 7.9% to 2.2% in order to reflect this. However, those impacted by the COVID-19
epidemic will find some solace in the central bank's statement that current loans (including
mortgages) will automatically defer payments for six months starting today.

The COVID-19 pandemic has significantly impacted the local economy, says Shivani.
The current government initiatives, which include a decrease in lending rates, will minimize
borrowers' expenditures associated with loan repayment. However, it might not be enough to
persuade customers to take out any additional loans.

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2.3 Statistical Information

According to predictions made by GlobalData, a top provider of data and analytics, the
Malaysian card payments market will expand strongly by 15.2% in 2022, driven by the
government's financial inclusion initiatives, the steady increase in consumer spending, and the
growing popularity of contactless payments.

The value of card payments in Malaysia experienced a significant growth of 15.9% in

2021, after experiencing a 5.4% loss in 2020 as a result of decreased consumer spending during
the COVID-19 uncertainty, according to GlobalData's Payment Cards Analytics. In order to
reach MYR401.9bn ($96.5 billion) in 2026, the value of card payments is anticipated to expand
at a compound annual growth rate (CAGR) of 11.5% between 2022 and 2026.

Although a cash-reliant society, Malaysia has made great strides in the use of electronic
payments over the past several years, aided by government efforts such as the cap on interchange
fees, the migration of payment cards to EMV standards, and the building of POS infrastructure.
In the short term, COVID-19 slowed the growth of the payments market, but it also encouraged
customers to switch from cash to digital payments.

Figure 1 : Card Payment Value and Growth Rate by Year

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 Malaysia's economy shrank in 2020, with the GDP of the nation falling by 5.6%. The
GDP of the nation did, however, expand by 3.1% in 2021 and 5.0% in Q1 2022. Consumer
spending should increase as economic activity picks up, supporting the expansion of payment
cards.

As a sizable section of the population in Malaysia is still not covered by banking and
payments, the country is putting an emphasis on digital banks to further advance financial
inclusion in the nation. In this regard, the government granted five licenses for digital banking in
April 2022; these companies are expected to start operating in the following two years. In order
to promote financial inclusion in the nation, these digital-only banks will complement existing
banks. This will drive up card penetration and payment card usage.

To promote card acceptance among retailers, the central bank is aiming to significantly
reduce interchange fees. The central bank published a draft in December 2021 calling for the
interchange fee on debit cards to drop from 0.15% to 0.10% and the interchange fee on credit
cards to drop from 1.10% to 0.60%. This is still being discussed and has not yet been put into
action.

Due to the COVID-19 pandemic, more and more customers are opting for "touch-free"
transactions, which is encouraging the use of contactless cards. In 2021, two out of every three
card payments made in physical stores were contactless, up from one out of every two in 2020,
according to Bank Negara Malaysia.

"The Malaysian payments card market witnessed continuous growth in the last few
years," says Reddy in his conclusion. Although the COVID-19 pandemic slowed the market's
expansion, government initiatives to promote digital payments, improved payment infrastructure,
and increased consumer demand for new payment technologies will all support the market's
expansion in the next few years.

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3.0 BODY TOPIC 2 - INSURANCE PLANNING

3.1 Importance

Insurance planning is essential for people nowadays. The reason for that statement is
because people cannot predict the time that they will be involved in any accident and the total of
loss they will incurred. People with low income will likely have problems settling the bill as the
bill will be costly to them. This is when insurance comes in handy as it will cover all the loss.

In industry and in everyday life, insurance offers financial help and lessens unforeseen
circumstances. It offers safety and protection from specific occurrences. An unexpected loss is
often feared. Insurance offers protection from any unforeseen loss. For instance, in the case of
life insurance, the insured's family is given financial support upon his passing. If you have other
insurance, you are protected from loss from things like fire, the sea, accidents, etc.

Next, health coverage is seen to be crucial for controlling health risk. This is because
anyone can suddenly fall unwell with a catastrophic illness without knowing when these things
are uncertainties in life. Additionally, rising medical costs are a major worry. One of the
insurance plans that covers various health risks is medical insurance. In the event of a medical
insurance coverage, the insured receives medical assistance.

Moreover, risk transfer from the insured to the insurer is made easier by insurance.
Spreading risk among a lot of people is the core pillar of insurance. Many people get insurance
plans and pay the insurer premiums. Anytime a loss happens, it is recovered by the provider's
money.

3.2 Current Issue

Malaysia was shocked by a very severe flash floods tragedy in the middle of December
2022. As of 19th December 2022, a total of 8,201 families and 28,686 people were relocated to
308 evacuation centers due to 81 flooded regions, 15 landslides, 5 roads, 3 bridges in 20 districts
throughout 5 states which are Johor, Kelantan, Pahang, Perak and Terengganu. Although this is a
natural disaster that always happens, this matter still has an impact on every layer of society,
especially for those whose property is affected.

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 High-impact floods continue to clearly miss the importance of flood coverage. Malaysia's
worst fear is any country experiencing a flood. Since we cannot prevent floods, we should
purchase flood insurance. According to news from the New Straits Times by Dhesegaan Bala
Krishnan (2021), the Federation of Malaysian Consumers Associations (FOMCA) has
encouraged insurance and workshops to assist automobile owners who do not have flood
protection with the cost of restorations.

​The only people who can make an insurance claim are those who purchase it, but Fomca
expects that the insurers will be compassionate of the victims and assist them by lowering some
prices and providing refunds. A few choices for aid and support, including an extension of a few
months for premium, have been made available to flood-affected life insurance and family
takaful clients, according to news from The Star by Tan (2021). The president of the Life
Insurance Association of Malaysia (LIAM), Loh Guat Lan, indicated that the association's
member companies are committed to providing the necessary assistance to affected families so
that they may feel secure knowing that their insurance needs are satisfied. We can therefore see
how crucial it is to have insurance that is not only particular to flood insurance but also to any
other sort of insurance because we cannot predict what will happen to us in the future.

3.3 Statistical Information

According to a press release by Zurich Malaysia in 2021, one of the conclusions from
Zurich Malaysia's Impact of Pandemic on Protection report was that 59% of Malaysian drivers
still lack proper protection against water damage. If drivers are not ready and believe they will
not be affected, they risk being caught off guard.

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 Figure 2: Percentage of Malaysian Motorist that Insured by Flood Damage

Figure 2 above shows that 59% of Malaysian motorists are not insured by flood damage.
This shows that more than half of Malaysian motorists are still not aware of the importance of
insurance and have not purchased any flood insurance for their motorcycle. This results in
motorists that are still not covered for flood damage until now. The rest 41% have insured their
motorcycle and have no problem in covering their loss in flood damage years ago.

Figure 3: Percentage of Malaysian Motorist that is insured against Cause of Flooding

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 Figure above shows that one in three motorists which is about 34% are protected against
loss due to storms including falling trees. The remaining 66% still have no idea about protecting
their motorcycle from storms. Other than that, there are only 29% that are protected against the
loss due to landslides and the remaining 71% are not protected against landslides.

Figure 4: Percentage of Vehicles Owners who knows Insurance Coverage

Figure above shows the percentage of vehicle owners who know their insurance coverage
for their road tax. 47% claim that they do not know the coverage content for their road tax. This
shows that nearly half of Malaysians did not know the use of the road tax itself while it is crucial
to know it so that they know what to do when accidents happen in the future.

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4.0 CONCLUSION

In a nutshell, participants must make sure they fully understand the policy or plan,
including the product features, conditions, benefits limits, and exclusions, before purchasing an
insurance policy or joining a takaful plan. Additionally, one must make sure that the premium or
contribution required is cheap and that the level of coverage chosen is sufficient and appropriate
for their needs. In addition, the participant must only communicate with registered agents,
licenced brokers, insurance companies, or takaful operators directly. They must also keep track
of the duration of the insurance and the deadline for premium or contribution payment.

Personal debt, often known as consumer debt, is currently outstanding consumer credit.
In terms of the macroeconomy, debt is used to finance consumption rather than investment.
Credit card debt and other consumer debt are the most prevalent types of consumer debt, and
they frequently have interest rates that are greater than those of long-term secured loans like
mortgages. To be able to purchase something they cannot afford, people must use credit.

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5.0 RECOMMENDATIONS

5.1 Consumer Credit

Nowadays, the majority of people use credits since there are many advantages
like convenience when shopping. However, consumers must be wise in managing their
expenses. They should be able to think rationally and realistically in decision making
especially when it comes to financial matters. They must be aware of the disadvantages
of credit such as temptation to overspend. This is to prevent the misuse of credit which
can lead to loss of income due to failing to repay the loan.

The cost of the interest depends on a number of variables, such as the state of the
economy, how well the client is thought to be able to pay back the loan, pressure from
competing lenders, and the inherent security and structure of the credit product. If one is
not attentive, they could end up overspending due to the hefty interest that must be paid.
We have to pay the amount in full each month in order to completely avoid interest fees.
In order to eliminate the balance, we will try to pay as much as we can each month.

In addition, we will be charged a fee for late credit card payments. Then, we must
continuously pay at least the minimal amount by our due date in order to avoid late
payment costs. Create a schedule for automatic or recurring payments from a bank
account. This enables us to have a track record of timely payments. Regular account
checks also make it easier to detect fraud or mistakes. Suspicious behavior can be the
outcome of identity theft. As a result, experts advise monitoring one credit report every
four months. It might be a fraud, so be wary of counselors that promise to pay off all of
your debt rapidly for a small charge.

Finally, avoid submitting too many credit card applications quickly. In fact, a
rigorous inquiry is required for any activity, which lowers credit score. Refinancing a
loan, asking for a credit limit increase, and renting a car are among additional actions that
could necessitate hard pulls. So, in order to break those patterns, we need to consider our
options. Avoid cash advances because they come with a lot of additional fees and interest
and indicate a worse financial problem. In conclusion, consumer credit can help us reach

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 our financial objectives, but if it is not used wisely, it can also lead to our financial
downfall.

5.2 Insurance Planning

The insurance is a promise of payment offered to individuals or organizations

concerned about risks who have made prepayments to an insurance firm in the event of a
loss. It is a type of risk management in the context of law and economics that is largely
employed to hedge against the risk of a contingent loss. The equitable transfer of a loss
risk from one entity to another in exchange for a premium is what is referred to as
insurance.

Therefore, participants must ensure they completely comprehend the policy or

plan, including its terms, conditions, benefits, restrictions, and exclusions, before
obtaining an insurance policy or enrolling in a Takaful plan. The needed premium or
contribution must also be reasonable, and the amount of coverage must be adequate and
fit the individual's needs.

To avoid being duped, we must also be wise consumers. Additionally, the

participant must only communicate with registered agents, licenced brokers, or an
insurance or takaful operator directly. They must also keep track of the duration of the
insurance and the deadline for premium or contribution payment.

Next, consumers frequently underestimate the amount of coverage they require in

life insurance. They frequently consider solely how much would be required to pay off
their largest debt. But they ought to think about how much more would be required to
support kids, pay for education, or meet any long-term demands.

However, being insured as early as possible is one of the best methods to prepare
for such occurrences. This is due to the fact that, generally speaking, the risk is smaller
the younger the policyholder or insured person is. Consequently, the cost of insurance is
likewise reduced.

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 REFERENCES

Kagan, J. (2022, November 6). What is consumer credit? definition, advantages and
disadvantages. Investopedia. Retrieved January 13, 2023, from
https://www.investopedia.com/terms/c/consumercredit.asp

1. introduction 2. what is consumer credit? - federal trade commission. (n.d.). Retrieved

January 12, 2023, from
https://www.ftc.gov/sites/default/files/attachments/training-materials/law_practice.pdf

ClearTax. (2023, January 12). Consumer credit. Definition, Understanding, and Why
Consumer Credit is Important? Retrieved January 13, 2023, from
https://cleartax.in/g/terms/consumer-credit

The role and importance of insurance – explained! Your Article Library. (2013, September
10). Retrieved January 13, 2023, from
https://www.yourarticlelibrary.com/insurance/the-role-and-importance-of-insurance-explain
ed/7540

Reporter, S. (2021, May 5). Chart of the week: Malaysia's consumer loan growth to
decelerate in 2020. Asian Banking & Finance. Retrieved January 13, 2023, from
https://asianbankingandfinance.net/lending-credit/news/chart-week-malaysias-consumer-l
oan-growth-decelerate-in-2020

GoCardless. (2022, March 9). What are the advantages of consumer credit? United
Kingdom. Retrieved January 13, 2023, from
https://gocardless.com/en-us/guides/posts/what-are-the-advantages-of-consumer-credit/

GlobalData UK Ltd. (2022, August 8). Card payments in Malaysia to grow by 15.2% in
2022, forecasts GlobalData. GlobalData. Retrieved January 13, 2023, from
https://www.globaldata.com/media/banking/card-payments-in-malaysia-to-grow-by-15-2-in
-2022-forecasts-globaldata/

Aliagha, U. G., Jin, T. E., Choong, W. W., Nadzri Jaafar, M., & Ali, H. M. (2014, December
17). Factors affecting flood insurance purchase in residential properties in Johor, Malaysia.
Natural Hazards and Earth System Sciences. Retrieved January 13, 2023, from
https://nhess.copernicus.org/articles/14/3297/2014/

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Acko, T. (2022, October 14). Insurance Planning: Meaning, Importance and Benefits. Acko
General Insurance. https://www.acko.com/insurance/planning/

'aid car owners with no flood coverage' | new straits times - NST online. (n.d.). Retrieved
January 12, 2023, from
https://www.nst.com.my/news/nation/2021/12/757125/aid-car-owners-no-flood-coverage

What Is Consumer Credit? Definition, Advantages and Disadvantages. (2021a, May 18).
Investopedia. https://www.investopedia.com/terms/c/consumercredit.asp

Malaysia: Floods and landslides - dec 2022. ReliefWeb. (n.d.). Retrieved January 13,
2023, from https://reliefweb.int/disaster/fl-2022-000379-mys

Zurich Malaysia. (2021). 59% of Malaysian motorists are still not covered for flood
damage.
https://www.zurich.com.my/-/media/project/zwp/malaysia/docs/about-zurich/zurich-in-th
e-news/2021/20211123_zurich-malaysia_impact-of-pandemic-survey-on-motor-vehicle_
website.pdf?rev=1c69a8460102401fa44b42f709243cd8&hash=41011B40E331B4C277F
D0AE00DC7611D

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 APPENDICES

Figure 5: Takaful Companies in Malaysia Figure 6: Credit Cards in Malaysia

Figure 7: Credit Counseling and Debt Figure 8: Car Insurance Companies in Malaysia
Management Agency Logo

Figure 9: Latest floods in Malaysia

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