Six firms have been selected to pilot new business models for moneylending, as part of an initiative to better protect borrowers through business-led improvements, which include more comprehensive use of data to assess creditworthiness, using digitalised processes to lower cost and giving better terms to those who repay their loans early or on time.
The Ministry of Law (MinLaw) said in a press release on Tuesday (11 November) that it had issued an invitation for proposals to pilot new business models for moneylending on 11 May 2018 and the applications was closed on 20 July 2018.
The ministry stated that these six firms were selected for having the strongest proposals amongst the 38 firms which applied, as well as meeting a set of stringent mandatory criteria, including the soundness and completeness of the business model, participation in debt assistance schemes, professional debt recovery practices, customer and communication strategies, and effective cost of credit and credit policies.
It added that the firms have also paid-up capital of at least $1 million, which shows their financial standing. MinLaw also noted that they have a demonstrated track record in providing consumer credit, whether in licensed moneylending or in other sectors of consumer credit.
The six firms are Credit 21 Private Limited, Dey Private Limited, IFS Capital Limited, Minterest Holdings Private Limited, Quick Credit Private Limited, and Xingang Investment Private Limited. The number of moneylending outlets, the firms can apply to operate are respectively: 4, 4, 1, 1, 4, 1.
In total, the six firms will be allowed to apply for licences for up to 15 new outlets which represents less than 10% of the 162 outlets currently operated by the 157 licensed moneylenders. According to the ministry, the number of moneylending outlets has decreased from 215 outlets, to 162 outlets since the moratorium was imposed in 2012.
The ministry said that six firms will be issued moneylending licences to operate the outlets they apply for, in a one-time lifting of the moratorium imposed on the issuance of new licences.
The ministry added that the licensees will be allowed to operate for up to two years beginning in 2019, following which MinLaw will evaluate the results of the pilot and consider options for refining the moneylending regulatory regime.