Some thoughts about the new online moneylending guidelines in Malaysia

Online moneylending is a fintech business that does not fall within the typical purview of either Central Bank of Malaysia nor the Securiites Commission of Malaysia.

In fact, moneylending business falls within the purview of The  Ministry of Housing and Local Governments (or better known as KPKT (Kementerian Perumahan Dan Kerajaan Tempatan) in Malay. 

Perhaps moneylending is a local business which means a moneylender should only operate in a certain locality or town. For example, suppose I’ve got a moneylending shop in Shah Alam. In that case, I cannot set up another similar lending business in Subang Jaya unless I’ve got the regulator’s approval to do so beforehand is where KPKT is involved.

A bit about the moneylending and the new online moneylending guidelines in Malaysia

The Moneylender Act has been around since pre-independence since it got enacted in 1951. There hasn’t been any significant revisions or changes. Many moneylenders I have seen will use the template loan agreement provided in one of the schedules inside the statute. 

Fintech is also changing the moneylending business. KPKT, as the regulator, had to develop new guidelines to cater and regulate new ways of lending money. 

For some reasons, I couldn’t find the English version of the guidelines on the official KPKT’s page (I usually have terrible experience accessing or finding stuff on the government’s website). I only have the Malay version of the guidelines that I got on my Whatsapp from one of my fintech clients. You can get a copy of the guidelines from my Google Drive link here and the FAQ on the KPKT’s website (also in Malay).

Titled ‘Garis Panduan Pemberian Pinjaman Wang Dalam Talian Untuk Syarikat Kredit Komuniti’  the document sets out the requirements and the ‘expected conditions’ to be satisfied an applicant seeking to get approved as an online moneylending platform. 

 How to qualify to as an online moneylending platform

To apply to run an online money lending business in Malaysia, you must first already be a licensed moneylender. In other words, the online money lending business is an additional approval that you need to have on top of getting the usual moneylending licence. To get a moneylending licence, you need to have a local entity including applying the regulator, including putting up RM2 mil cash as paid-up or cash reserves.

Essentially the applicant needs to demonstrate that it has invested in a ‘suitable IT infrastructure’ to conduct an online platform including having a dedicated server including getting an independent party to perform a ‘security system assessment’.

Currently, the regulator has approved eight companies (mostly big boys like Axiata Digital, BigPay Later, JCL Credit etc.) to operate online money lending business in Malaysia. It is unclear if the regulator is open to accepting the new application or the first batch will act like a ‘pilot’ to see if there’s a demand for online moneylending from potential borrowers.

In the FAQ page, the regulator states the application process is between three to six months. But in my experience, some of the fintech clients that I’ve worked with said that the regulator does take some time. For instance, the KPKT needs to get the police for their help before issuing out the final approvals, including conducting the necessary background checks against the business directors.

I got surprised when I first found out many years ago for the first time that moneylending business falls within the purview of The  Ministry of Housing and Local Governments (or better known as KPKT (Kementerian Perumahan Dan Kerajaan Tempatan) in Malay. 

Perhaps the idea was a moneylending shop should only operate in a certain locality or town. For example, suppose I’ve got a moneylending shop in Shah Alam. In that case, I cannot set up another similar lending business in Subang Jaya unless I’ve got the regulator’s approval to do so beforehand is where KPKT is involved.

A bit about the moneylending and the new online moneylending guidelines in Malaysia

The Moneylender Act has been around since pre-independence since it got enacted in 1951. There hasn’t been any significant revisions or changes. Many moneylenders I have seen will use the template loan agreement provided in one of the schedules inside the statute. 

Fintech is also changing the moneylending business. KPKT, as the regulator, had to develop new guidelines to cater and regulate new ways of lending money. 

For some reasons, I couldn’t find the English version of the guidelines on the official KPKT’s page (I usually have terrible experience accessing or finding stuff on the government’s website). I only have the Malay version of the guidelines that I got on my Whatsapp from one of my fintech clients. You can get a copy of the guidelines from my Google Drive link here and the FAQ on the KPKT’s website (also in Malay).

Titled ‘Garis Panduan Pemberian Pinjaman Wang Dalam Talian Untuk Syarikat Kredit Komuniti’  the document sets out the requirements and the ‘expected conditions’ to be satisfied an applicant seeking to get approved as an online moneylending platform. 

 How to qualify to as an online moneylending platform

To apply to run an online money lending business in Malaysia, you must first already be a licensed moneylender. In other words, the online money lending business is an additional approval that you need to have on top of getting the usual moneylending licence. To get a moneylending licence, you need to have a local entity including applying the regulator, including putting up RM2 mil cash as paid-up or cash reserves.

Essentially the applicant needs to demonstrate that it has invested in a ‘suitable IT infrastructure’ to conduct an online platform including having a dedicated server including getting an independent party to perform a ‘security system assessment’.

Currently, the regulator has approved eight companies (mostly big boys like Axiata Digital, BigPay Later, JCL Credit etc.) to operate online money lending business in Malaysia. It is unclear if the regulator is open to accepting the new application or the first batch will act like a ‘pilot’ to see if there’s a demand for online moneylending from potential borrowers.

Some thoughts on the timeline

In the FAQ page, the regulator states the application process is between three to six months. But in my experience, some of the fintech clients that I’ve worked with said that the regulator does take some time. For instance, the KPKT needs to get the police for their help before issuing out the final approvals, including conducting the necessary background checks against the business directors.

Additionally you should also consideration the paperwork involved to get the first hurdle sorted out which the moneylender licence itself. In other words, the actual timeline can potentially be longer depending on how much work you have done internally or engage other professionals like a legal counsel to get the paperwork sorted.

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