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How Micro Business Loan in Malaysia Has Become a Lifeline in Pandemic

The widespread imposition of Movement Control to combat the situation of the growing pandemic has literally hampered the economic recovery.

microfinancing
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How Micro Business Loan in Malaysia Has Become a Lifeline in Pandemic

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  1. How Micro Business Loan in Malaysia Has Become a Lifeline in Pandemic? The widespread imposition of Movement Control to combat the situation of the growing pandemic has literally hampered the economic recovery. Especially in Malaysia, small-scale businesses are the most affected which actually constitutes a majority of the share in the business sector. To curb the issue of SMEs, especially concerning generating sufficient capital funds, micro business loan in Malaysia is the only profitable alternative left. Looking at the inevitable growth of raising capital of around RM377 Million as of June this year, it has funded more than 1,100 small and medium enterprises to stay on track of economic success. From the above statement, it is clearly stated the fact that peer-to-peer funding has become a growing norm to raise much-needed finance. It also calls for SMEs to have a better view of P2P financing as to how it works and regulations. How Does Peer-to-Peer Financing Works for SMEs in Malaysia? The working process of P2P financing is more flexible with less red tape as compared to the conventional financial offers. Borrowers or issuers need to complete an application on the P2P platform and ask for a substantial amount of capital. Once approved, an investment note will be issued to the inventor who will make an informed decision on which investment to put their money into and the amount. Once that is decided, issuers will get the required funds online to continue growing their enterprise. How is P2P Financing Regulated? It is essential to witness the regulatory regime to have a better view of micro-business loans. For your information, P2P financing is governed by the Securities Commission (SC) of Malaysia and exempted from the Moneylenders Act 1951. Also, there are few regulations for both P2P operators and issuers. For P2P Operators • P2P operators must be locally incorporated in Malaysia. • They must be having a minimum paid-up capital of RM5 Million. • There must be an effective and transparent risk-scoring system. • Clear information of any material changes to the issuer’s proposal. • Need to have a debt-recovery regime. • Maintain a trust account with a licensed institution. For Issuers

  2. • The finance option is only available for locally incorporated or registered private companies and enterprises. • Issuers are not permitted to retain any funding that exceeds the initial limit. • Issuers have to comply with disclosure requirements pertaining to the intention of the risk factor involved. Conclusion There is no doubt in the fact that P2P lending in Malaysia has gained substantial growth and popularity. There are a high number of transactions on the P2P platform allowing SMEs to scale up their businesses despite the economic upheaval and rising pandemic.

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