KUALA LUMPUR: The micro-financing scheme launched by Bank Negara two months ago to help small enterprises and individuals may spell the death of the Ah Long, or loan sharks.
The scheme, now being offered by three banks – Public, CIMB and RHB – will allow loans of between RM500 and RM50,000 and the borrowers will only need to show minimal or no collateral to obtain the money.
These small businesses can choose to pay back on either a daily or weekly basis to the lending institutions.
While the Ah Longs charge an interest rate of more than 38% per year, the micro-credit system charges between 12% and 18%.
The lending agencies must approve the loans in five to 11 working days to ensure that these businesses get their money quickly.
Besides the three banks, development financial institutions like Bank Pertanian, Bank Simpanan Nasional and Bank Pembangunan were also providing such facilities.
According to the Bank Negara Annual Report, the plan was to provide “the widest accessibility, flexible collateral requirements, fast approval and to encourage good repayment practices”.
Central bank Governor Tan Sri Dr Zeti Akhtar Aziz said the loans would also be disbursed through 600 cooperatives.
She said there was no need for much collateral to provide these businesses loans because “their businesses are always viable.”
“They are very good paymasters. We only just need to look at Indonesia and Bangladesh to see how successful the schemes are. The NPL (Non-Performing Loans) are less than 2%, which is better than any other loan schemes,” she told a briefing.
She also said the scheme was targeted at really small traders like pisang goreng sellers or those with roadside stalls.
The report also revealed that the SME Council had agreed that a logo be created for the scheme so that borrowers could place stickers at their stalls and shops to create public awareness of the programme.
Bank Negara is also developing a “Graduation Programme” to enable the larger micro enterprises to get bigger loans.