We’ve covered a lot on the B40 income group previously, and with the changes in how B40, M40 and T20 are classified, you’ve most likely heard it as the topic of discussion on many news outlets.
B40, M40 and T20 stand for Bottom 40%, Middle 40% and Top 20% respectively. Much like your income tax brackets, these income classifications are used to categorise Malaysians by their household income.
The bulk of attention is cast on the B40 group, and rightly so!
Malaysians who belong in this group typically struggle to keep up with rising living costs - hence the many affordable housing initiatives reserved just for the B40 (we’ll get to that in a second!).
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A Refresher On Our Old Income Classifications
Before we get into the new income classifications, let’s take a look at the previous income thresholds so we can better compare.
Previously, Malaysians were considered to be within the B40 tier if their median household income was RM3,000.
Those with median households earning RM6,276 were considered M40, while anything at the median household income of RM13,149 puts you in the T20 tier.
Rethinking Malaysia’s Income Classifications
It’s important to know that these income classifications are there to aid the government to adequately plan social security schemes and the formulation of national development plans amongst other things.
Hence, they’re anchored on figures from the Household Income & Basic Amenities Survey Report (HIS) which is conducted twice every five years.
Despite this, the middle class are faced with a classic “urban poor” struggle.
If referring to the income thresholds as stated above, those classified as middle class would be “too poor” to get by comfortably in urban areas, but also “too rich” to qualify for B40 assistance programs. Could this be you?
This is where the new income classifications come in!
According to the Household Income & Basic Amenities Survey Report 2019 by the Department of Statistics Malaysia (DOSM), the income classifications have been revised to reflect inflation, rising cost of living and household size amongst a host of other factors.
Check out the table below for the new B40, M40 and T20 classifications.
New Income Classification (as per Household Income & Basic Amenities Survey Report 2019)
RM10,961 - RM15,039
RM4,850 - RM5,879
RM5,880 - RM7,099
RM7,110 - RM8,699
RM8,700 - RM10,959
RM2,501 - RM3,169
RM3,170 - RM3,969
RM3,970 - RM4,849
How Bad Is Income Inequality In Malaysia Now?
Be it over the table at breakfast or online, income inequality is a common complaint Malaysians aren’t shy to be vocal about. But what are the actual statistics?
According to The State of Households 2018 by Khazanah Research Institute, household income in Malaysia has been steadily increasing from 1970 until 2016. To put this into perspective, median household income has increased more than 6 times since 1970.
While it may not seem like it, income inequality has actually seen a steady decline.
The Gini coefficient is a measure that's used to represent income inequality, and Malaysia has improved from a high Gini coefficient of 0.513 in 1970 to 0.399 in 2016 (a higher Gini coefficient indicates greater inequality).
Are You Classified Under B40?
With the new classifications set in place plus COVID-19’s financial impact, many of us may find ourselves dropping or hopping a tier.
In particular, this will affect your eligibility for government aid such as affordable housing schemes.
For those previously fringing near the B40 threshold yet unable to receive the benefits B40 homebuyers were entitled to, look at the bright side! You can now be eligible for the many affordable housing schemes reserved for the B40.
What Are Some Of The Housing Schemes For B40 In Malaysia?
1) MyHome (Program Perumahan Rakyat) by Bank Simpanan Nasional (BSN)
The MyHome (Program Perumahan Rakyat) scheme is targeted at those who are self-employed, or those bringing in an irregular income.
Under this scheme, some of the terms include a loan amount that is capped at RM300,000 with a maximum age limit of 65 years old at the end of the tenure.
The good news is that you can get financing of up to 100% of the property's purchase price, which is inclusive of the stamp duty and Mortgage Reducing Term Assurance (which is a type of home loan insurance).
This means that you don't need to fork out for the hefty 10% down payment if you're eligible, and the money can be put towards other uses, such as getting the home ready or in an investment plan!
Many Malaysians in the B40 and M40 tiers start off renting as they go before saving up enough funds to purchase.
With the Rent-to-Own (RTO) scheme, buyers can choose to enter a lease and rent the property for a period of up to 5 years in place of the hefty down payment.
At the end of this contract, you have the option to purchase the property – hence, rent-to-own.
There are a variety of RTO schemes available on the market such as Maybank HouzKEY, PR1MA and Smart Sewa. Scroll to the bottom of our RTO guide here to find out how to apply!
General eligibility: Buyer who does not own any property in Selangor, with monthly household income of not more than RM5,000 a month for Type A or low-cost housing; OR, not more than RM15,000 a month for Type B, C, and D properties, including affordable and low-cost housing (prioritized for those below RM10,000/month).
It’s important for us as Malaysian citizens to keep updated on where we stand financially in the grand scheme of things. Not to compare our financial situations, but so that we are aware of what programs, incentives or subsidies we may be eligible for.