When the announcement that the movement control order (MCO) was to be extended by an additional two weeks, hairdresser Nick broke into a sweat and began to make a mental calculation to see if he has sufficient funds to tide over his loss of income for four weeks.

The initial two weeks were bad enough, with overheads like rent and wages to pay for.

Nick’s staff are equally worried, and pray that they will not be laid off during this period.

Nick and his employees are some of many in the services sector who are primarily affected during this Covid-19 pandemic.

The loss of income throughout the MCO period is a huge burden for many in the bottom 40 (B40) and medium 40 (M40) segment, who lack financial buffers to meet debt obligations.

In particular, borrowers who are part of households with a monthly income of less than RM3,000 are deemed to be susceptible to financial distress, given their limited financial buffers to weather potential shocks.

According to Bank Negara’s Financial Stability and Payment Systems Report for the first half of 2019, the leverage of this group of borrowers continued to rise as a result of more accessible housing loans from the various assistance schemes introduced in recent years, despite greater constraints on their ability to borrow.

The leverage of this borrower group during the first half of 2019 was 8.9 times, as compared to 8.8 times in 2018 and 7.7 times in 2015.

In 2018, Malaysia’s household debt in 2018 stood at RM1.18 trillion, of which RM628bil were residential housing loans.

The central bank highlighted that some households were showing signs of difficulty in servicing their debt, especially among low-income borrowers with personal financing, and borrowers with larger housing loans above RM500,000 and who are more dependent on variable income sources.

As such, the six-month loan repayment moratorium period for individuals as well as small and medium enterprises (SMEs) provides relief to borrowers who are unable to finance their repayment obligations due to income loss from the MCO.

This also allows borrowers to have more cash in hand to purchase daily essentials.

Additionally, the B40 and M40 groups stand to benefit from the National Caring Aid (Bantuan Prihatin Nasional)’s mandate announced yesterday to provide a one-off cash payment totalling RM10bil, which reaches out to private employees, farmers and fishermen.