Majority of Bumiputeras, or specifically the bottom 72% of ASB unit holders, only recorded average savings of RM536 in their ASB accounts last year, a measly amount that is not even near RM1,000.

Not only is the number miniscule, it is also decreasing, by 12% since 2012, which is in reverse of the rising trend in overall savings of total ASB unit holders.

Bumi Unit Trust Holders — A Tale Of 2 Classes

MA Khalid
Monday, May 18, 2015

Recently, I received a copy of the 2014 Amanah Saham Bumiputera (ASB) Annual Report, a report that is much awaited given that it acts as a proxy for the rate of savings of the Bumiputera population in Malaysia. This report is of interest as the level of investments of Bumiputeras in other unit trusts is still significantly low.

At a glance, there has been an overall increase in savings last year where average savings increased by 13% since 2012, at RM15,928. In other words, Bumiputeras have raised their savings by RM1,831 on average for the last two years.

However, a closer look at the data reveals a distinct inequality gap. Majority of the unitholders, which amounts to 6.16 million savers, exposes a more gloomy reality.

The fact of the matter is that a majority of Bumiputeras, or specifically the bottom 72% of ASB unit holders, only recorded average savings of RM536 in their ASB accounts last year, a measly amount that is not even near RM1,000.

Not only is the number miniscule, it is also decreasing, by 12% since 2012, which is in reverse of the rising trend in overall savings of total ASB unit holders.

In addition, the small amount of savings of the bottom 72% translates into very low nominal dividends ie a measly RM45 in 2014, which is equivalent to RM3.75 per month. This amount barely pays for one typical breakfast consisting of roti canai and teh tarik.

This is in stark contrast to the rich or, more accurately, the top 0.2% of ASB unit holders.

In comparison to t he majority whose average savings are RM536, the average savings of the upper class, which represents 16,928 unit holders, recorded a whopping RM745,038 in 2014. This is 1,400 times the average of the bottom 72%. Unlike the bulk of the savers who experienced declining investment, this group’s investment grew by nearly 8% from 2012 to 2014.

The nominal dividend payout of the upper class were also sizeable, not surprising given their large principal. In 2014, the top 0.2% received an average dividend pay-out of RM63,328, which is equivalent to RM5,277 per month. In other words, the pay-out received by the upper class was enough to pay for their children’s education in a private university or to purchase a luxury Ducati Scrambler motorbike in cash. And clearly they can afford thousands of roti canai and teh tarik in a month.

So, is the savings gap widening or narrowing? Clearly, it is the former. If we add up all the savings of the bottom 72%, their contributions would constitute a meagre 2.4% of total savings. This figure actually declined from 3.2% in 2012.

The picture is very different for the top 0.2% who saw their savings increase from 7.7% to 8.8% within the same period.

Said differently, the total savings of the top 0.2% is 3.5 times the total savings of the bottom 72% in 2014, an increase from 2.4 times in 2012.

It is highly plausible that the rising cost of living and low average wages act as the main barriers for a majority of Bumiputeras in increasing their savings. Considering these factors, the launch of ASB2 last year may not be effective with limited benefits to the low-income households.

The focal issue at hand is fi nancial const rai nts, as opposed to the lack in platforms for savings  nd investments. The lack of savings or the nominal gap in financial investment is not peculiar among the Bumiputera community, but also among other races. In fact, the widest gap occurs among the non-Bumiputera, in the Chinese community.

However, the efforts of Permodalan Nasional Bhd (PNB), through programmes such as Minggu Amanah Saham Malaysia (The Malaysia Unit Trust Week), which is aimed at enticing Bumiputeras to save, should be continued. At present, more than half of Bumiputeras do not have an ASB account, a saddening fact indeed. This can be addressed by raising awareness on the importance of savings at a young age.

Additionally, it is important for PNB to analyse the need for a regulation on ASB withdrawals, which limits the ability of unit holders to withdraw their ASB to, say, only once or twice in a year, without penalty. This is to ensure unit holders receive high nominal dividend pay-outs.

It is to my knowledge that many unit holders who save via monthly salary reduction withdraw their savings at the beginning of each month, possibly due to the lack of funds for monthly spending. Zero penalty for withdrawal perhaps play a part in encouraging withdrawals. ASB might want to consider imposing a service charge on withdrawals, not u nlike other private unit trust schemes.

An appropriate withdrawal mechanism needs to be studied upon urgently to safeguard and increase the savings of the majority. At the same time, strategies to enable the lower income to invest more easily and readily through micro savings, say via mobile phones remittance modality can be fully explored.

It is perhaps timely for PNB to re-align its ongoing operations with its original mission and the current government’s commitment to address the need to uplift the economic fortunes of the Bumiputera, particularly the bottom 40% of the populace.

We do not want a situation where there is a widening gap among our citizens, much like the Malay proverb, “Yang kaya bertambah kaya, dan yang miskin bertambah miskin”.

* MA Khalid is an economic researcher based in Kuala Lumpur

link http://themalaysianreserve.com/new/story/bumi-unit-trust-holders-%E2%80%94-tale-2-classes