Keywords

1 Introduction

Malaysia is one of the 70 countries that distributes loans to students and suffers from a high default rate [1]. Government of Malaysia formed the National Higher Educational Fund Corporation (NHEFC), also known as Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) in 1997 for administering educational loans. The scope of the PTPTN loan includes public and private universities, as well as polytechnics. Students taking diploma, first degree, master, doctorate and professional courses are eligible to apply for these loans [1]. Between 1997 and 2011, around Malaysian ringgit (RM) 35 billion loan was given to students who registered for higher education studies in Malaysia. However, as shown in the financial performance of PTPTN from 1997 to 2011, it clearly shows poor repayment collections. Although the repayment has gone up in 2003 to 2011, but the increasing rate is consider low and as in 2011, approximately 51 % have defaulted in repayments and it became a major problem for Malaysia (Table 24.1).

Table 24.1 Financial performance of PTPTN
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In addition, this is a serious issue in the funding of Malaysian higher education, as stated by the former Minister of Higher Education Malaysia, Datuk Khalid Nordin, as quoted in a press statement:

…If this default rate continues, it is estimated that the resulting deficit for NHEFC may be RM 42 billion in the year 2020 [2].

Accordingly, in order to lessen the problems associated with the non-repayment, it is imperative to study why default rate is high amongst educational loan borrowers.

Researches in the realm of educational loans have identified several factors contributing to defaults and repayments. These include the characteristics of students as they begin college, such as family income, race/ethnicity and students’ college experiences in terms of the type of institution, field of study and educational outcomes [3–6]. In addition, students’ financial aid and the amount of debt they incur, such as students’ employment and income after college, are said to be relevant factors [3–6]. However, no studies have so far explored attitudes and perceptions of Malay Muslim students towards educational loan repayment.

Therefore, this study intends to answer the following research questions:

  1. 1.

    What is the attitude of Malay Muslim students towards educational loan repayment?

  2. 2.

    What are the perceptions of Malay Muslim students towards educational loan repayment?

This study will open up important questions, which have been previously unaddressed in the context of educational loans. This study will extend the knowledge regarding the attitudes and perceptions of Malay Muslim students towards educational loan repayment.

2 Literature Review

2.1 Malay Muslims in Malaysia

Malaysia is a land of heterogeneous people owing to its multiracial, cultural, lingual and religious characteristics. The country is categorised as a developing country with a population of 30 million [7]. Notably, Malaysia’s population consists of Malays, Chinese, Indians, the natives of Sabah and Sarawak, indigenous groups, ethnics’ communities such as Khmers, Thais, Pinoy and others from several countries. Malays and indigenous groups, commonly known as Bumiputera make up around 61 % of the total population. Around a quarter of the population—24 %—is Chinese. Moreover, Malaysians of Indian ethnicity comprise 7 % of the population, whilst the remainder comprises other groups totalling 8 % [8].

The followers of Islam are called Muslims. All Malays in Malaysia are Muslims and are defined as such by Article 160 of the Constitution [9]. Prerequisites for being considered Malay include: one must be Muslim, speak the Malay language and observe and practise the traditions of Malay culture [9]. Islam is based on the Sunnah (life) of Prophet Muhammad and the Quran. The Quran and Sunnah play a central role in constituting Islamic law that describes and governs the duties, morals and behaviour of Muslims as individuals or collectively in all aspect of life [10]. Malaysia is one of the developed nations in the Muslim world, with Muslim Malays as the dominant ethnic group culturally and politically. Nevertheless, Malaysia is a multiracial, multireligious and multicultural society, with Malays, Chinese, Indians and numerous other indigenous people living side by side. One of the most important factors that distinguish Malays from non-Malays in Malaysia is their religious faith. It is an established fact that religion plays a significant role in human behaviour and attitudes [11].

2.2 Higher Education in Malaysia

Higher education in Malaysia comprises of two main categories: government and private. Public higher education institutions are funded by the government and are similarly governed as self-managed institutions, whilst private higher education institutions include private colleges, private university colleges, open universities, virtual/e-universities and branch campuses of international universities, all of which are also governed as self-managed institutions. The importance of higher education has been translated into significant investment by the government of Malaysia, which has accounted for 20 % of total government expenditure [12]. Importantly, almost 47 % of the total development allocation for education is set aside for higher education—or RM 8.9 billion out of RM 18.7 billion [13]. The Malaysian government is identified as a generous contributor to higher education funding. For instance, public higher education institutions in Malaysia receive 90 % of their funding from government sources, with the remainder derived from student fees [14]. The borrowers consist of Malays, Chinese and Indians; however, Malays are identified of the highest.

2.3 Attitude Towards Educational Loan Repayment

In the literature, many factors are found to predict repayment behaviours such as borrowers’ characteristics [4, 15]. This refers to the borrowers’ attitude towards a variety of subjects that could affect their tendency to default on loans [15] as well as the way they handle debt experiences [16, 17]. In addition, [16] found that the important predictors of debt repayments were attitudinal and psychological factors. A study by Abu Bakar et al. [18] has found that overall participants have negative attitudes towards loan repayment, and their negative attitudes may affect the repayment of the loan after graduation. Other studies found the factors which influence attitude towards loan repayment, including ethnicity, gender, marital status, employment status [19, 20] and borrowers’ willingness and ability to repay [21].

Attitude is primarily influenced by parents because their contact with their children begins earlier and more sustained. A study by Grolnick and Slowiaczek [22] found that young people who talk to their parents regularly about the positive habits are more likely to behave positively than young people whose parents do not talk to them regularly [23] found that attitude is learnt from the family during the childhood and remains fairly stable throughout life. Many authors found the role of birth order in determining the global personality and intelligence of the child as the study by Faraon and Ozolins [24] found the effects of birth order on attitudes towards climate change and racism.

The study of Ajzen and Fishbein [25] introduces the theory of reasoned action (TRA) which explains attitude is identified to associate with the behavioural intention and then intention leads to the actual behaviour. This theory is used to investigate the underlying processes leading to loan repayment decisions. The TRA states that the immediate determinants of the decision are the intention to repay loan. Loan repayment intention, in turn, is predicted by the extent to which a student evaluates loan repayment positively or negatively (students’ attitude towards loan repayment) and the perception of social pressure (subjective norm) [26]. That is, if students have a positive attitude, they will be more inclined to make a repayment. Furthermore, they will be more inclined in making repayment if they experience positive social pressure from significant others to do so.

2.4 Perceptions Towards Educational Loan Repayment

Perceptions towards loan repayment and the impact of the loan to the student upon graduation are also crucial. Concern has been voiced by undergraduate students that education debt impedes them from buying cars, buying a home, having children or moving out of their parents’ home following graduation [3]. However, a study by Millett [27] indicated that the financial aid college students received does not become so much of a burden that it constrains their options when they graduate. Moreover, a study of Pell Grant borrowers found that loan repayment does not have a significant impact on the probability of owning a home [3]. On the other hand, a loan owed by students carried forward upon graduation became an important issue in their career choices [28], predominantly owing to the fact that students have different concerns about repaying the debt they owe [29].

Perceptions regarding whether loan repayment will affect a student’s personal life after graduation can be important in terms of predicting repayments and defaults. A study by Abu Bakar et al. [18] questioned students about their perceptions regarding whether or not National Higher Education Fund Corporation (NHEFC)—from where they procured the loan—would affect their life following graduation. Almost 70 % of the students claimed that loan repayment would delay them from buying cars, 43.6 % claimed it would delay them from getting married and 36.1 % claimed it would delay them from having children. Since getting married in Malaysia is still embedded within cultural practices, it can be very costly—especially for the bridegroom-to-be. Notably, half of all male participants, compared with only 39 % of all female participants, indicated that loan repayment would delay them from getting married. Having a loan to pay back may have an impact on the participants’ ability to save for their marriage, and this also influences when they will start having children [18]. Another study has also found that students considered the size of the loan as having an impact on their decision of when they should get married, have children and purchase a new car [29].

3 Methodology

The qualitative data collection methods that have been implemented consist of focus group discussions, followed by in-depth interviews to validate and clarify the focus group findings. This dual approach (focus groups and semi-structured interviews) allowed for richer findings than just one comparative analysis [30] Although the two qualitative methods are time-consuming, according to Frechtling et al. [31], combining the two qualitative methods which are focus groups and in-depth interviews pays off in improved instrumentation as well as sharpening the understanding of findings. In addition, the purpose of semi-structured interview use in this study is to obtain information relating to personal stories, which is considered sensitive for particular respondents.

Respondents in the qualitative study are final-year undergraduate students at one public university. This university has been selected as it has 95 % Malay Muslim students from all over Malaysia and offers a variety of courses to students. In the cases of both focus groups and semi-structured interviews, respondents are NHEFC loan borrowers. In this study, the sampling procedures involve were convenience. However, purposive sampling were utilised in the second part of the qualitative study, which involves semi-structured interviews. Purposive sampling is used in the second qualitative part where the interviewees are selected on the criterion of specific fields such as finance and management. The purpose of the interviews is to ensure, validate, cross-check and strengthen the results of the focus group discussions [32]. Data were collected from two consecutive focus group discussions (each consisting of four participants); the groups have been selected only homogeneously in terms of total number of males and females.

3.1 Focus Groups

An invitation for the focus groups was sent to potential respondents in order to arrange the meetings. Furthermore, respondents who showed an interest in participating in the focus groups were reminded via telephone prior to the meeting commencing. Moreover, respondents were provided with input and interaction relating to the topic, which thus enabled the researcher to capture subjective comments and their subsequent evaluation. A discussion guide is first developed by the researcher which includes two major sections of questions. The first section comprises constructs definition and warm-up questions in an attempt to capture the main ideas relating to the research topic, whilst the second section comprises questions or issues developed in order to capture the perceptions and attitude towards educational loan repayment specifically. All questions are developed in an attempt to explore, elicit and probe the relevant information from the students’ points of view in an interactive setting of discussion. The moderator follows the discussion guideline in order to ensure that the discussions have thoroughly covered all the necessary topics based on the study objectives. Focus group discussions were conducted consecutively in the same week. Each session took approximately one hour. Each group included four respondents, and the groups were split so as to ensure gender balance whilst observing the established principle of respondents’ homogeneity (see Table 24.2). The moderator greeted the respondents, introduced the topic, provided a brief explanation of the study, and subsequently observed, explored, probed and taped the discussions.

Table 24.2 Details of respondents in focus groups
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3.2 Semi-structured Interviews

An interview guide was developed by the researcher. The questions were then developed so as to cover the study topic and were specified, probed and directed in order to explore interviewees’ opinions in depth and to thereby generate the relevant information. The interviewer allowed short pauses in order to provide the interviewee with the opportunity to reflect and strengthen their answers. The interview was a semi-structured one, asking questions in a specific sequence whilst still allowing for spontaneity when covering the topics in the interview guide. The interview meetings were prearranged by the researcher and the interviewees through personal contact, whereby interviewees were provided with overviews concerning the purpose of the interview. Furthermore, interviewees were reminded of the meeting by telephone. The interviews were carried out in the same day, in a flexible and relaxed atmosphere, owing to the informal setting. An introduction concerning the topic was given to the interviewees prior to proceeding into the interview. Each interview lasted for approximately 25–30 min, which is considered acceptable for a one-to-one interview [33]. The profile of interviewees and details relating to the semi-structured interviews are shown in Table 24.3.

Table 24.3 Details of respondents in semi-structured interviews
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The focus group discussions and semi-structured interviews were audiotaped and accordingly transcribed. The tape was reviewed in order to verify accuracy in transcription, to detect any additional information and to accordingly monitor the saturation level of the data.

4 Findings

Attitude has been found in this study to have a significant impact on the educational loan repayment. Notably, previous studies have determined various correlations between attitudinal variables and debt behaviour; however, the correlations established thus far have been weak [3, 15, 16]. Students are also concerned about being Muslims; therefore, they are responsible to repay a loan. Respondents in the focus groups and semi-structured interviews also confirmed this result, with student stating the following, for example:

....The repayment is low… anyone who chooses to repay or not to repay their loans depends on their attitude…however, as a Muslim, it is a must to repay loan....

Moreover, a previous study carried out by Abu Bakar et al. [18] indicates that, overall, students have negative attitudes towards loan repayment; however, our study finds that, overall, students have positive attitudes towards loan repayment. Moreover, the quantitative findings by Ismail et al. [1] confirm that a positive attitude emerging amongst students—such as in the context of loan repayment—will help other students to recognise that repayment is their obligation, and they will therefore make an effort to make repayments. Most of respondents have reflected this idea:

....I will make repayment… after I secure a job… I will plan that part of my salary to repay loan....

In addition, perceptions towards loan repayment will affect their personal life following graduation; however, these contribute to the repayment. The following is an example of the comment from respondents:

....I have commitment to my parents and as a Muslim everyone have responsibility towards their family… I have to help my siblings for their education…I plan to buy car therefore I have to pay a car loan, preparation to get married… of course it will affect NHEFC loan repayments....

In the previous studies in the non-Western context, the item of ‘loan repayment will affect my decision on the selection of the place to stay’ has been found to be important. However, in this study, the Malay Muslims students indicated that the responsibility to parents and siblings were the important items. Therefore, we can conclude that, in a Western context, students are more concerned with moving from their parents’ homes and living on their own following graduation; this differs with a non-Western cultures, however. Example of non-Western cultures is children take turns and cooperate to support and take care of their parents. This arrangement is known as the ‘unique family structure’ or ‘take-turn stem families’, whereby siblings are able to make arrangements according to a timeline whereby parents will live with them. This is because of the belief that caring for parents often brought the children into close and frequent contact with each other.

Importantly, becoming an adult in a Western context means having independence, being autonomous and self-sufficient in a variety of respects. However, in the majority of non-Western cultures, adult status is defined not by becoming independent but by taking on new interdependencies such as marriage and living with parents [34]. Respondents in the interview also confirm this. Examples include:

.....as a Muslim and as a son, I must take care of my parents…I will make sure that my parents stay with me when I get married but I will give my mother at least RM400 to RM500 every month to spend.....

This finding indicates that the more students concerned with contributing part of the salary to parents, home ownership, car ownership, marriage and having children, the lower their positive attitude would be towards loan repayment. The finding in this study are consistent with previous researches by [3, 35, 36], which show that, in order to achieve the future quality of life, selecting jobs that interest students, getting married, buying a first car, having children and buying a house, students are tempted to postpone their educational loan repayment. Since students have many other priorities in life—such as their responsibilities towards their parents and siblings—repayment would therefore be affected. The item is raised by most respondents in the focus group discussions and semi-structured interviews, who state that they would delay loan repayment because they wanted to contribute their salary to their parents; therefore, this would reduce the burden of parents to support other siblings. In other words, students perceive loan repayment as preventing them from giving part of their salary to parents. A respondent reflected his opinion as follows:

…I have to give money to my mother every month… at least to reduce a burden of my father to support my siblings… I have two younger sisters that still in the secondary schools…that is my priority…I may pay minimum or delay the repayment for NHEFC because that is not my priority....

5 Conclusions and Implications

The study highlights the importance of attitudes and perceptions of Malay Muslims to influence the intention to repay loan amongst final-year undergraduate students. In other words, the results of this study show that attitudes and perceptions contribute to loan repayment amongst Malay Muslims. This study makes some important recommendations based on the analysis of primary data concerning the reason behind educational loans repayment. Malaysia is categorised as a developing country, which has spent RM 35 billion on educational loans. Approximately 80 % of students taking loans from the NHEFC to enrol for higher education are Malay Muslims. Educational loans are one of the best ways of affording university studies. When students borrow, they take serious risks and make a serious commitment, which will ultimately affect their life upon graduation. Unlike other types of loans, educational loans have special terms, which make them fundamentally easier to afford and a more reasonable commitment for university students. However, the organisation providing loans has to continue with the aggressive plans to improve the loan repayment system. The challenge associated with creating positive students’ attitudes and perceptions towards loan repayment is found to be important.

As Muslims, the values embodied in the Quran and the practices of the Messenger Muhammad (SAW) constitute the Islamic values. These Islamic values directly and indirectly influence the Malay lifestyle. Religion has been an integral part of culture [37]. Therefore, it is important to understand and incorporate the religious effect when deciding to suggest methods and strategies to increase loan repayment. This is because as Muslims, they have to follow some rules. Many believe that religious incorporate a greater sense of well-being in individuals compared to less religious people [38]. When students perceive the positive attitude—especially during their final year of study—they are more likely to act positively and significantly; thus, they make efforts to repay loans following graduation. In addition, the impacts of loan repayments to borrowers following graduation have found to influence the repayments. A commitment to support their parents as well as to improve their quality of life includes buying car and getting married. Therefore, the organisation providing loans should provide repayment plans for borrowers, so that they can equally balance their needs and their responsibility.