RCE in compliance with new SKM guidelines

RCE Capital Bhd, a provider of loans to civil servants, says it is in compliance with GP6, a new guideline issued by the Malaysian Cooperative Commission or Suruhanjaya Koperasi Malaysia (SKM) pursuant to the Co-operative Societies Act 1993.

GP6, issued last November, is a set of guidelines governing co-ops’ lending activities. The guidelines also set out three types of business models practised by co-ops in providing credit facilities to members:

1) The co-operative’s credit activities are funded by internal sources and the lending operations are managed by the co-op.
2) The co-operative’s credit activities are funded by financial institutions and the lending operations are managed by the co-op.
3) The co-operative acts as an agent for banks and lending activities are managed by banks.

Under GP6, model 3 is not allowed.

“For us, our dealings with the co-operatives are in compliance with the guidelines and ours is based on the second model where we fund the co-op and the lending activities are managed by the co-op,” said Loh Kam Chuin, CEO of RCE.

“We have always worked with our business partners to ensure our activities are in compliance.”

RCE provides unsecured loans to civil servants through strategic tie-ups with co-operatives. Funds are channelled to the co-operatives which then extend loans to members and repayment is done under a salary deduction scheme.

The programme is administered by Angkatan Koperasi Kebangsaan Malaysia Berhad (Angkasa), the country’s centralised collection agency for participating co-operatives.

An officer at SKM said co-operatives had applied for an extension of time to comply with the new guidelines. The SKM has given co-operatives up to Sept 1, 2010 to comply with GP6 and GP7.

GP7 sets out the guidelines for financing activities based on Islamic principles. RCE just announced its financial performance for the first quarter ended June 30, 2010, which saw net profit rising 27.5% year-on-year to RM23.63 million from RM18.53 million even as revenue fell 12.1% to RM58.88 million.


This article appeared in The Edge Financial Daily, August 20, 2010.