10 Things to Know About Koperasi Loans
1. What is a Koperasi loan?
A koperasi loan (or a Cooperative loan) is a type of credit service from Cooperatives or Foundations (Yayasan) that’s available only to civil servants working in the government, local municipal councils, as well as selected government-linked bodies. Credit cooperatives are registered with the Cooperative Commission of Malaysia (SKM) and regulated under the Cooperatives Act of 1993.
2. Who runs koperasi loans?
Cooperatives in Malaysia offer credit facilities by using their own funds or borrowed from other sources. These sources are usually limited, therefore they are also dependent on a steady flow of funds from local financial institutions.
Many mainstream banks in the country are playing their part in funding the cooperatives. Examples are CIMB Koputri, RHB Islamic IDSB, Public Islamic Bank’s BAE AG Personal Financing-i and many more.
3. Who are eligible to apply for Koperasi loans?
Only civil servants and selected staff members who work for federal or state governments, municipal workers, statutory bodies, government-linked agencies and others.
Each cooperative loan will have a list of employers who are eligible to apply; for example this includes members of organisations such as PKNS, SYABAS, TNB (Tenaga Nasional Berhad), public universities, and many more.
Koperasi loan providers may also require that civil servants be employed for at least six months at said government body.
You can apply for a koperasi loan if you are 21 (some providers have a lower minimum age of 18), up to 58 years of age.
A monthly wage of RM1,500 is usually set as the minimum required to be eligible to apply for a koperasi loan. Private sector employees and those who run their own businesses are not entitled to apply for koperasi loans.
4. What are the credit criteria to fulfil when applying for a koperasi loan?
It is less strict compared to conventional bank loans. Cooperative loans tend to set a slightly lower credit approval criteria as loan repayments are directly deducted from the borrower’s salary by Biro Perkhidmatan ANGKASA (via SPGA – Sistem Potongan Gaji BPA) or the Accountant General’s Department.
Koperasi loans are attractive to civil servants because those with a less-than-stellar CTOS records, blacklisted in CCRIS (with a Special Attention Account) and even registered with AKPK are still eligible to borrow.
Furthermore, loan applicants with high payment commitments or debt service ratio (DSR) will also be considered by koperasi loan providers, unlike conventional loans.
5. How does the repayment work?
Monthly repayments are conducted via an automatic salary deduction scheme by the National Cooperative Movement of Malaysia, or better known as Biro ANGKASA as mentioned previously. Likewise, some koperasi loans also accept deductions via the Accountant General’s (AG) Department.
The Public Services Department imposed a rule that loan instalments plus other deductions cannot exceed a set limit of 60%; this was designed such that the borrower’s take-home pay is at least 40% of his or her gross salary to ensure that a decent standard of living is still possible.
6. What are the loan tenures available?
Koperasi loan tenures are up to a maximum of 10 years, as stipulated by the government. Conventional bank loans on the other hand, usually only reaches seven years.
7. How high are the interest rates and the payouts available?
Interest rates (or profit rates, if they are Islamic-based) are also lower than most banks; expect as low as 3.88% per annum from selected koperasi loan providers. You will also need to take into account of the potential loan payout available to you.
One can borrow up to RM250,000 or the maximum instalment amount that can be deducted from the borrower’s pay. However, it is important to note that the loan sum disbursement is rarely 100%, and you can expect anything between 70% to 98%. This is dependent on the koperasi loan provider chosen.
Therefore it’s important to first work out how much the monthly repayment will be before signing up for the loan.
8. What are the documents requested?
- Photocopy of NRIC, verified by employer
- Latest three months’ pay slip
- Verified letterhead from the employer
- Bank statements
- Copy of a utility bill (Tenaga, ASTRO, etc)
- Photocopy of Bank savings account book (could vary depending on the underwriter of the loan)
Different providers would request for a combination of documents for your application, but it’s best to prepare these in advance. Keep in mind that multiple copies of these documents are often requested for, so remember to keep additional copies at hand when forwarding your application.
9. What can I use the loan for?
Weddings, unexpected bills, vacation, renovation, emergency situations, almost anything. But of course, GoBear expects you to be a savvy spender – a wise Bear always sets out to plan and manage his or her finances for the future.
10. How else is a cooperative Loan different from your regular commercial bank loan?
The majority of cooperative loans are Islamic-based and therefore Shariah-compliant. Being grounded on Islamic banking and finance principles such as Tawarruq and Murabahah means that the sale and purchase of commodity is payable by instalments or deferred payments.
Many koperasi loans also come with compulsory takaful insurance protection to ensure that any outstanding amounts in the circumstances of death or total permanent disability can be accounted for.
GoBear tip: Legitimate loans (be it koperasi loans or conventional personal loans) will not request for ANY payment, upfront or not. Should there be any transactional fees, they will be deducted from the loan sum instead of making an advance payment.