GoodKredit brings automated short-term micro-loans to those in need

• Short-term micro-loans between US$242 to US$2,422
• Loans can be approved and disbursed within 24 hours

IN THE face of financial trouble, it’s often difficult to find someone to turn to. GoodKredit Malaysia is hoping to be one of those avenues. Launched on April 23, the platform offers itself as the country’s first automated short-term loan provider.

Through their proprietary application, users will be able to apply for a micro-loan to the sum of US$242 to US$2,422 (RM1,000 to RM10,000).

“GoodKredit is here to make lending more efficient, scalable and an option to those truly in need,” says GoodKredit chief executive officer Cheok Tuan Oon.

“This is a huge untapped opportunity for us to empower Malaysians, facing unanticipated needs and less able to access the traditional financial system. GoodKredit offers the financially underserved the speed to meet emergency needs, not wants.”

GoodKredit positions itself as an alternative means of attaining short-term loans, filling a gap in traditional financial services. As noted by GoodKredit brand and communications head Amelia Tan, banks have strict, rigid processes when it comes to dispersing loans, especially on a smaller scale.

The minimum amount of a personal loan from a bank, Tan adds, is RM10,000. This may prove overbearing for someone who may be seeking a smaller loan – say, RM2,000 – for an emergency.

At the same time, banks take a longer time to disburse the loan amount due to their strict processes.

Filling a gap

The bank’s solution for short-term and smaller loans are credit cards, which have fairly high interest rates if you’re not able to repay it quickly enough. There’s also the option of a cash advance using a credit card, should an emergency require cash, but that has notoriously high fees and interest charges.

Desperate enough, and loan sharks may start appearing as a viable alternative. The problem, of course, is the exorbitant interest rate and other dangers.  

GoodKredit fills this gap by first allowing micro-loans of RM1,000 to RM10,000, with a repayment tenure of either six, nine or twelve months and an Annual Percentage Rate (APR) of 18%. They also don’t require collateral or a guarantor, and the entire process can be done via the mobile app.

It’s also the speed in which they can disburse the loan that makes GoodKredit appealing. By partnering credit score entities CTOS and CCRIS, as well as using their own credit scoring algorithms via mobile devices, GoodKredit will be able to determine if you’re qualified for a loan within 30 minutes, and can approve a loan within 24 hours.

Loans can be repaid using JomPAY or by simply banking in the amount (plus interest) directly to GoodKredit.

Tan says that GoodKredit isn’t here to replace or compete with banks. “We’re not here to compete with the banks. In the long run, we want to complement each other,” she says.

Assessing needs

GoodKredit positions itself as tool to help the B40 and M40 community in Malaysia who may be in need of a loan but can’t turn to financial institutions. Cheok says that applicants will have to state a reason for the loan, and GoodKredit may reject or reduce the loan amount depending on what the applicant truly needs.

Depending on that need, the loan may not be disbursed entirely as cash – it can partially be given as vouchers that can be used through the app, with any of GoodKredit’s 4,000 partnering vendors. Someone may, say, ask for a loan of RM2,000, with half of it going to groceries and half for house rent, the rent portion may be given in cash while the rest is given as Tesco vouchers.

Cheok explains that there is a good reason for implementing a voucher system. “By circulating the money spent within our ecosystem, we know exactly if the person is spending according to the motive of their loan,” he says. It’s to avoid people from taking a loan for car repairs, for instance, but instead use the cash to gamble away at Genting Highlands.

The platform is licensed under the Credit Community umbrella by the Malaysian Ministry of Housing and Local Government (KPKT). Some may raise eyebrows at the absence of involvement by the Central Bank (Bank Negara Malaysia) or the Securities Commission of Malaysia, but – as Cheok points out – the service falls under the purview of the KPKT and the Moneylenders Act 1951.

While GoodKredit is touted as an automated micro-loan mobile app, the process isn’t entirely fully automated. Those with their loans approved will still need to physically visit GoodKredit’s office to sign an agreement and have it verified by a Commissioner of Oaths.

This, Cheok says, is due to the law as stipulated under the Moneylenders Act 1951.

It leads to a limitation of the service, however. As the B40 group, which GoodKredit aims to empower, mostly reside in rural areas and further from GoodKredit’s premises, reaching them will prove difficult.

Cheok says that it’s an issue they are looking into with the KPKT. “The technology is there, but we can’t alter the law,” he says. A solution may be to open more branches and offices nationwide, Cheok adds, but as for allowing users to get their loan without physically signing an agreement, that will require further discussions with KPKT.