MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
by 2025. Their mandates are focused on underserved retail and SME segments, offering low-ticket, data- driven products. While the balance-sheet scale of these banks remains modest relative to incumbent banks, they are increasing competition for deposits and SME lending. Traditional bank lending continued to account for over 90% of SME financing in 2024. Loan products offered by digital banks are likely to feature shorter tenors, simplified documentation, and dynamic pricing models based on behavioural and transactional data, rather than traditional collateral. Consumer Credit Bill 2025 Malaysia’s Consumer Credit Bill 2025 (the “Pro- posed Act”), administered by the Consumer Credit Oversight Board (CCOB) was passed by the Dewan Negara (Senate) in September 2025. The Proposed Act seeks to bring non-bank credit providers (includ- ing buy-now-pay-later (BNPL) operators), moneylend- ers and leasing companies under a single licensing and supervisory framework, and will be implemented in phases, subject to regulatory-roll out. The Proposed Act provides a clearer regulatory footing, particularly for fintech lenders and BNPL operators, which should allow greater formalisation of alternative credit chan- nels. For traditional banks, this creates both competi- tion from better-regulated non-banks and opportuni- ties for partnerships and co-lending. Alternative credit providers are seen to be driving inno- vation in pricing, user experience, and product design, particularly in unsecured consumer and micro-SME lending. While traditional banks remain dominant in mid to large-corporate lending, the rise of alternative channels is expanding credit access to underserved segments and fostering competition. Importantly, the BNM’s oversight of digital banks, together with the CCOB’s regulatory framework for non-bank credit providers, ensure that emerging players operate within a prudentially supervised environment. 1.5 Banking and Finance Techniques Hybrid instruments are an important feature of Malay- sia’s financing landscape. Issuers regularly tap the market through perpetual bonds and sukuk, which combine equity-like features (no fixed maturity, dis- cretionary distributions) with fixed-income investor appeal. In particular, the SC noted that the sukuk
market is “innovating with perpetual and sustaina- bility-linked structures to meet corporates’ capital management needs while offering investors attractive risk-return profiles”. Malaysia’s sukuk market, valued at MYR1.9 trillion in 2024, provides a deep pool of institutional demand for perpetual sukuk, particularly from pension funds and insurers. These investors view hybrids as a recognised asset class, strengthening the link between corporate borrowers and long-term capital providers. 1.6 ESG/Sustainability-Linked Lending Malaysia has positioned itself as a regional leader in sustainable finance, with the SC driving product innovation through the introduction of the SRI Sukuk Framework in 2014, and its expansion into the SRI- Linked Sukuk Framework in 2022. These frameworks facilitate the issuance of sukuk that finance projects aligned with ESG criteria. In its 2024 annual report, the SC reported that SRI sukuk issuances had reached MYR20.7 billion cumu- latively since inception, reflecting growing corporate appetite for sustainable instruments. Under Malaysia’s Capital Market Masterplan 3 (CMP3), the SC has set out its long-term ambition for sustainable and inclu- sive growth, with ESG principles integrated into capi- tal-raising and fund-management activities. 2. Authorisation 2.1 Providing Financing to a Company Generally, no person may conduct money-lending business as a moneylender in Malaysia without a licence under the Moneylenders Act 1951 (the “Mon- eylenders Act”) unless exempted under the Mon- eylenders Act. Such restriction would apply to any lending of money at interest, with or without secu- rity, and proof of a single loan at interest will raise a presumption that the lender is carrying on the busi- ness of moneylending, until the contrary is proved. The exemptions under the Moneylenders Act include, among others, financial institutions licensed under the Financial Services Act 2013 (FSA). Under the FSA, a bank is required to apply to the BNM for a banking business licence to provide financing.
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