Hiyaalu
Economics·

Borrowing Our Future: The Debt Trap Among Maldivian Youth

By Mohamed Jalaal

In ten years, our household debt has tripled. Much of that money did not build anything. It bought phones that are already outdated, parties that lasted one night, and trips that now live only on Instagram, while the repayments live on for years. We complain, rightly, about a country that borrows beyond its means. But a nation is only its people. If we cannot live within our own means, we should not be surprised that our country can't either. The next time a loan is one tap away, stop and ask the question, will this help me earn more than it costs me? If the answer is no, the most valuable thing you can do for your future self is simple. Don't borrow it.

In mid-2016, Maldivian households owed MVR 7.1 billion. By mid-2026, they owed MVR 21.6 billion. In ten years, our household debt has tripled. This is not just a story of a growing economy. Household debt has grown faster than the economy itself, rising from 10.5% of GDP in 2016 to 17.3% today.

Not all debt is the same

Debt itself is not the enemy. Almost every family that owns a home, and almost every business that has grown, borrowed to get there. The question is never whether you borrow. It is what you borrow for.

There are two kinds of loans.

A productive loan builds your future. It pays for something that earns, saves or grows. These could be a skill that raises your salary, a business that brings in income, a tool you need to do your work. The loan pays you back, often many times over.

A consumption loan spends your future. It pays for something that is gone, or worth far less, long before the last instalment is paid. The pleasure is today. The repayments are for the next three, four or five years.

The simplest way to tell them apart is one question:

Will this loan help me earn more than it costs me?

Take a motorbike. Bought because you need to get to work, it is a productive loan. It is how you earn your salary. The same bike, bought because your friends upgraded and you didn't want to be left behind, is consumption. Same bike, same bank, same interest rate. The difference is the reason.

If the honest answer is no, you are not borrowing money. You are borrowing from your future self, and your future self will have to pay it back with interest.

What we are really borrowing for

Now look honestly at what we borrow for.

  • The latest phone, on instalments, even though the old one still works.

  • The wedding party, because you wanted to showoff and the guest list cannot be shorter than your cousin's.

  • The honeymoon, because a resort photo has become part of getting married.

  • A concert abroad, flights and tickets on credit.

  • "Fly now, pay later" travel schemes that turn a holiday into monthly instalments.

  • Credit cards used to fund a lifestyle our salaries cannot.

Almost none of these pass the test. None of them will help us earn more than they cost.

According to MMA data reported by The Edition, personal loans and credit card balances reached MVR 7.7 billion in May 2025, up from MVR 3.6 billion in 2021. That is more than double in four years. In mid-2024, the central bank itself flagged that a large part of new lending to the private sector was going into credit card and instalment debt held by individuals.

Borrowing has also never been easier. Bank of Maldives' Lui Loan, its most popular loan, needs no collateral, goes up to MVR 1.2 million, and comes with an "instant approval" option that can put money in your account within hours. When the bank raised the limit, it pitched the loan as money for personal use, whatever the need. There is nothing illegal about any of this. But when a loan takes less thought than ordering food, we should not be surprised that people take it without thinking.

The squeeze

It would be easy, and unfair, to blame young people alone. The squeeze is real.

Rent in Malé swallows a huge share of a young person's salary. Starting wages have not kept pace with the cost of living. For many, the month runs out before the money does. And when it does, a growing number borrow from parents, siblings and friends, not for luxuries, but to pay the electricity bill, the water bill, the phone bill.

Then there are student loans. In principle, these are the best kind of debt, an investment in skills that should pay for itself. The government disbursed MVR 1.24 billion in student loans to 1,438 students in 2024 and 2025 alone. But a degree only pays back if it leads to a job that pays more. Repayment has been a long-running problem. A 2022 audit found MVR 81 million still unpaid on the loans the ministry manages directly. A student loan is productive only when the qualification matches what the job market actually pays for.

The concerning part is that high rent and low wages are exactly why consumption debt is so dangerous for us. When the margin is already thin, a phone instalment or a honeymoon loan is not a small extra. It is the difference between getting by and falling behind. A tight budget is a reason to borrow less for lifestyle, not more.

The cost we don't see

Debt does not only live in bank statements. It lives in people.

It is the young man who checks his account the day before payday and feels his stomach drop. It is the young woman who stops going out with friends because she cannot explain why she is always short on money. It is the couple whose first year of marriage is spent paying for the one night of their wedding.

Around the world, research consistently links unmanageable debt with anxiety, sleeplessness and depression. The stress does not stay inside the person. It spills into marriages, into families, into work.

Some try to escape the hole by digging faster. A loan to pay off a loan. A new card to cover the old one. For some, the escape is online betting, the hope that one lucky win will clear everything. It almost never does, and it usually makes the hole deeper.

If you are in this place right now, you are not alone, and it is not a personal failure to ask for help. Talk to someone you trust. Talk to your bank before you miss a payment, not after. Debt is a problem with a solution. Silence makes it worse.

A nation that doesn't save

Underneath all of this is a simple fact. We do not have a culture of saving. Most of us were never taught to put money aside before spending it. We celebrate the wedding, the new bike and the holiday photos. Nobody celebrates the emergency fund that quietly carried a family through a bad year.

So we save nothing, and when anything goes wrong, we borrow. Then we borrow again.

This has to change, and it has to change at three levels.

We, as individuals, need to ask the one question before every loan. Will this help me earn more than it costs me? We need to pay ourselves first, putting something aside the day the salary comes in, however small. We need to stop treating a big wedding or a resort honeymoon as an obligation. A marriage does not become stronger because it started in debt.

Banks need to lend responsibly, not just quickly. A loan that is approved in hours should still check whether the borrower can actually afford it. Every offer should show the total cost in plain numbers: borrow this much, pay back that much. A short cooling-off period on instant personal loans would cost banks little and save families a lot.

The state needs to take this seriously. Basic money skills (budgeting, interest, saving, the difference between good and bad debt) should be taught in every school before young people get their first salary and their first credit card offer. And the rent burden in Malé is a policy failure, not a personal one. As long as housing eats such a large share of a salary, young people will keep living on credit.

Borrowing our future

In ten years, our household debt has tripled. Much of that money did not build anything. It bought phones that are already outdated, parties that lasted one night, and trips that now live only on Instagram, while the repayments live on for years.

We complain, rightly, about a country that borrows beyond its means. But a nation is only its people. If we cannot live within our own means, we should not be surprised that our country can't either.

The next time a loan is one tap away, stop and ask the question, will this help me earn more than it costs me? If the answer is no, the most valuable thing you can do for your future self is simple. Don't borrow it.

Sources

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