KUALA LUMPUR, Malaysia–Licensed community lenders (previously known as moneylenders) are increasingly offering a lifeline for many small entrepreneurs and society.
Experienced licensed community lender Mahinder Singh Gill said they played an integral role in spurring the economy by serving those unable to secure micro-credit loans or financial aid from commercial banks and other established sources like the Small-and-Medium Enterprises Corporation.
“I believe that licensed community lenders account for some five percent of the country’s total loans given out by banks and financial institutions.
“About 80 percent of borrowers are retailers who have taken loans as little as RM5,000 each, while the remaining small-and-medium enterprises or individuals account for RM30,000 loans each.
“There are as many as ten borrowers each month, approaching the 3,200 licensed community lenders in the country,” said Mahinder, who is a former HSBC banker and now MD Capital Berhad managing director.
Additionally, licensed community lenders offer employment to 20,000 Malaysians.
Mahinder is also the Malaysian Punjabi Licensed Moneylenders Association president, representing 500 member-companies.
He said his association, established since 1952, had a credible record by bridging them with government agencies and the public.
“We educate our association members on the uptodate compliance and changes in government policies, as well as assist them in its implementation.
“We facilitate training to upgrade their knowledge and skills to remain competitive.
“Additionally, we carry out regular social and welfare programmes to support local communities,” said Mahinder.
Mahinder blamed the negative perception towards community lenders owing to the strong-arm tactics by unlicensed lenders towards borrowers who failed to repay outstanding loans.
Hence, lenders are mistakenly frowned upon by the public, owing to the bad publicity from errant non-licensed ones.
“As the first-choice alternative (after commercial banks that strictly follow borrowing guidelines), licensed community lenders are much sought after as we are more sympathetic towards borrower’s needs.
“The borrowers come to us as a last resort to seek financing for their business start-ups, education, healthcare or personal matters.
“We, therefore, use our discretion and try to accommodate them as much as possible,” said Mahinder, adding licensed community lenders offer loans at regulated interest rates.
It is learnt that licensed community lenders offer interest rates as low as 1.5 per cent per month.
Mahinder said that licensed community lenders vet borrowers based on their capacity to repay loans; their credible character; financial market condition; availability of collateral; and the investment capital sought.
“We administer legal processes to recover outstanding loans,” said Mahinder, adding they were governed by the Housing and Local Government Ministry’s Moneylending Act 1951.
Interviewed by INS Contributors