This article first appeared in The Edge Malaysia Weekly on January 13, 2025 - January 19, 2025

Green Packet Bhd (KL:GPACKET), which offers digital solutions ranging from payment gateways and e-wallets to social selling solutions, obtained a digital moneylending licence last week.

The licence will enable the company to expand its suite of financial products and services, and gain better access to its target market, which are small and medium enterprises. But is moneylending really a viable business for a company that tends to raise funds from private placements?

The age-old practice of lending money for interest offers high returns, but it carries high risks, too. Many companies, including property developers, automobile companies and retail chains that sell consumer products, have moneylending licences. These days, it is common for companies to make announcements of “financial assistance” to subsidiary companies that have a moneylending licence.

The basic requirements for moneylending are capital and reliable borrowers who will repay the loan. Most of these loans are unsecured and the borrowers are usually unable to obtain bank loans, hence the high risk.

Many listed companies with moneylending licences are issuing loans but struggling to recover the debts.

Considering the high risk, shouldn’t the Ministry of Local Government and Housing have some control over the issuance of the licences?

Such licences should only be awarded to companies with surplus cash and a strong business.

In the case of Green Packet, it does not have a strong business with a steady cash flow. In fact, it has had at least five rounds of share placements between 2018 and 2022. In the most recent fundraising exercise, it plans to raise RM19.1 million.

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