How to start your Licensed Money Lending business


Moneylending is very often confused with loan sharks. In Malaysia, the Moneylenders Act 1951 governs the process of lending money with interest. Loan sharks, or often known as Ah Longs are illegal moneylender that impose high interest for payback. In most cases, the borrowers are unable to pay back and illegal or violent methods to retrieve the payback are used.

Are there legal moneylenders besides banks?

Yes, there are. And they are protected and governed by the laws to ensure that there is no hanky-panky when it comes to lending money. The law protects both the lender and the borrower so that no one ends up being on the losing side.

Know your rights

As a moneylender, the Moneylenders Act has been amended so that unscrupulous activities can be curbed. One of the main changes is in the licensing. It is your responsibility as a moneylender to ensure that you fulfill these requirements.

You will need to follow all the requirements in terms of applying for a license or to renew a current one. You have to maintain the paid-up capital in your company. Besides that, you will also need to have supporting documents like a police officer-signed statutory declaration.

More power for police

In the amended law, PDRM (Royal Malaysian Police) now have more power to act against moneylenders. This means that should a report be made by a borrower who complained against you, the police have the authority to investigate. This includes searching your premises with or without a warrant if needed. The idea behind this is to stop illegal loan shark activities.

So, what is it in for you then?

As a moneylender, you are required to operate within the law. In other words, you have to abide and run your business around what you can and cannot do. The society’s perception of moneylenders (both licensed and unlicensed) are very negative and this is because of the loan sharks (ah longs) who have been harassing borrowers who cannot pay.

What can you do for borrowers?

It is up to the moneylenders to change the mindset of borrowers. As long as you operate within the needs of your borrowers with an intention to help them, they will come to you.

  • Borrowers will not turn to you if they have a choice
  • Borrowers probably cannot get a loan from banks
  • They need cash urgently and cannot wait for the long process from banks
  • They need cash for a short term

The thing is, they are able to pay back but loan sharks with ridiculous interest rates are making life difficult for them. Hence, they are afraid to approach moneylenders who operate officially. Have an open-door policy When you are open for discussions and arrangements of payback schedule, your borrowers will be more receptive. After all, everything will be in black and white and signed before the loan comes into effect.

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