Fighting with the Big Fox? What about the Small Virus? The PTPTN Loan

The PTPTN (Perbadanan Tabung Pendidikan Tinggi Nasional) was initiated with the objective to provide financial assistance to students to pursue their education in local public and private universities, as well as polytechnics. Students who pursue their diploma, first degree, master’s degree, doctoral degree or professional courses are eligible to apply for these loans.

Between 1997 and 2015, 2,464,937 loans with an approximate value of RM55.83 billion were approved for students pursuing their higher education studies in Malaysia (PTPTN Annual Report, 2015).   Another projected PTPTN’s funding requirement is to be around RM24 billion in the next 5 years or RM46 billion in the next 10 years. This is around 2.4% of the national debts of RM1 trillion debts and can go up to 4.7% in the next 10 years for the same debts.  The average funding requirement is around RM4.5 billion to RM5.00 billion per year. This is especially in the backdrop of RM19 billion in receivable and more importantly a portfolio of RM8.1 billion in overdue or unpaid balances.

Private Higher Education Provider (PHEPs) approved loans represented a small fraction of the total volume of loans approved during the initial years of PTPTN’s implementation (a mere 10.2% in 2000). However, the number of loans going towards PHEPs has increased over the years, culminating in the highest ever percentage of loans given to HEP in 2015 (47.6% of total loans). With the number of private higher education institutions (HEI) students projected to overtake the number of public institution students, it is likely that the number of loans for HEI students will overtake the loans for public HEIs in the very near future. (Malaysia Education Blueprint (Higher Education), 2013-2025).

Among the factors which must be considered is the projected increase in the HEP enrolment under the Higher Education Blueprint 2013-2025. According to the Blueprint, PHEPs enrolment levels are expected to exceed that of public higher education providers, with IPTS being projected to grow at a 2.5% higher growth rate than Higher Education from 2012 to 2025. Student enrolment in Higher Education is projected to increase from 455,000 to 867,000 during this period, while the corresponding increase in Higher Education is 545,000 in 2012 to 765,000 in 2025. The tuition fees for PHEPs, which usually operate on a for-profit model, are significantly higher than their public counterparts. With a greater proportion of Higher Education students seeking PTPTN loans, it follows that the total amount of funds required to meet this demand would also have to increase commensurately.

The annual intake of local students in Public and Private Higher Education is projected to increase to approximately 322,000 and 247,000 respectively in 2025. Of these, the percentage of successful loan applicants from Public and Private Higher Education is assumed to be 50% and 75% respectively in 2025. The number of loans approved for Public and Private Higher Education Institute is approximately 162,000 and 185,000 respectively, while the average loan amounts are RM20k and RM37.5k respectively. The total annual loan amount for Public and Private Higher Education Institute is projected to reach RM3.3 billion and RM6.95 billion respectively in 2025. Finally, cumulative loans given out to private and public higher education are projected to reach RM57.8 billion and RM83.7 billion respectively.

The issue of low repayment rates has been around for quite some time. According to figures from 2012 to 2015 annual reports, the accumulated repayment rate, which, at 54.6% in 2011, was not high, to begin with, had dipped to 45% in 2014, increasing only slightly to 46.6% in 2015. In 2015, a total of RM15.63 billion in repayments were due. Instead, only a total of RM7.14 billion was collected (or 46.6% of the total) (2012 to 2015 PTPTN Annual Report).

In response to increasing financial constraints arising from low repayment rates, PTPTN had implemented several mitigation measures beginning of 2004. These included:

i. Introducing the National Education Savings Scheme / Skim Simpanan Pendidikan Nasional (SSPN)
ii. Introducing the SSPN-I PLUS scheme with insurance/Takaful elements
iii. Increasing the number of PTPTN offices and payment options
iv. Reducing the maximum loan amount for PuHEI and PrHEI courses
v. A direct deduction from the salaries of civil servants who owe PTPTN money
vi. Drawing from borrowers’ Employees Provident Fund (EPF) repay PTPTN loans
vii. Introducing Income Contingent Loan Repayment (ICLR) for civil servants
viii. Blacklisting PTPTN defaulters and preventing them from leaving the country
ix. Credit Blacklist for PTPTN defaulters (Ceased in June 2018)

Even if PTPTN has imposed many strategies to help the loan player to facilitate their payment, the number of the outstanding account remains at the unbelievable stage.

Several factors contribute to the non-performing loan. One of the significant reasons is due to the attitudes towards repayment of the loan. From our research, Humanology found that the defaulters refuse to pay the loan because they claim that the rest also do not serve the loan. Hence, they only follow the majority. Some of the defaulters reported that it is better to keep their money in the fixed deposits of banks rather than paying the loan because there is no significant impact on them when the loan is not served. Hence, there is a need to look into the human factors to nurture the habit of taking up accountability for them to serve the loan in order to create sustainability and to help other students in the long run.

Moving Forward

In order to improve the repayment of the PTPTN loans, it is important to have a very comprehensive and efficient collection and bad debt recovery program introduced.

Model 1: Solving Non-performance Loan through Compassionate Methodology

The compassionate methodology is essential to understand the borrower behaviour. Hence, conducting an in-depth initial survey to understand the PTPTN loan borrowers, to assess their motivations, challenges, attitude and general information of the general demographics information.  From the research, it is essential to building a comprehensive PTPTN borrowers’ profile to provide an insight into the management of the collection and bad debt recovery.

At the same time, PTPTN should consider developing and propose, a viable collection and bad debt recovery in an outsourced operation, to allow PTPTN to focus on its main objective to help students in the pursuits in higher education. Hence, the debt collection could be focused and assisted with experts who could cultivate and nurture the behaviour of fathanah, siddiq, tabligh and amanah. When the attitude is formulated, it promotes the culture of paying back after they have graduated.

However, for the long non-performing borrowers, the outsourced operations for collections and bad debts would help PTPTN to overcome their paralysing funding problems while helping borrowers build a greater payment trend to alleviate overall PTPTN overdue outstanding repayments.

At the same time, it is essential to revise and nurture the leadership for the future PTPTN employees to improve on the policy and strategies for receivables management. Deliberate and continuous, scientific evaluation of the collection and bad debt recovery to help PTPTN to form, update and revamp the overall general policies and strategies as deemed fit by PTPTN to assist students in their pursuit of higher education and the collection of their subsequent repayment. Developing and reviewing the overall collection and bad debts recovery policies and strategies, in the outsourced operations of the collection and bad debts to meet the objectives and expectations of PTPTN.

Lastly, developing a benchmark for the status of PTPTN portfolio.  The detailed status of accounts of the respective PTPTN’s borrower as part of the overall portfolio.  The quantifying of the Action vs Results for the collection and recovery of bad debts. Establishing the status of the PTPTN portfolio’s processes, information system compatibility and general resources used in the pursuit of collection and recovery of bad debts.  Identification of the different requirements for a comprehensive collection and bad debt operations.  Developing the interfacing and compatibility between the different systems and operations for a seamlessly integrated collection and bad debts operations.

Summary

It is essential to apply the humane methodology to help the nation to grow by collecting the debts from the students. Students who have benefited from the PTPTN should play their role as Malaysians to pay the loans that they have obtained previously. By playing their own role, PTPTN funds would not be depleted and at the same time, they are able to allow more people to benefit from this loan.

by

Datuk Dr. Leow Chee Seng,

Datuk Haji Shamsul Bahari Abdul Aziz,

Udhaya Kumar Naranam,

Dr. Vincent Leong Wing Sum