Submitted by: Submitted by vincentvindy
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Category: Other Topics
Date Submitted: 08/10/2011 11:17 AM
Introduction / history
Finance companies are a group of financial institutions which is second largest trading in taking deposits after the commercial bank. In the early 1960s, the finance company was incorporated as a limited company engaged in the activities of lending money , like licensed moneylender. Generally, the finance company provides loans to purchase vehicles under hire purchase agreements and to finance a business. Unlike the moneylenders, the finance company can abandoned savings and funds from the public in the form of deposits. This is because financial companies are not allowed to accept deposits when they were focused on fixed deposits and savings deposits. Finance companies often charge an interest rate higher than the lending rates of commercial banks. Thus, the deposit interest rates higher of finance companies.
Initially, the activities of finance companies regulated by government agencies (other than BNM) is responsible for the provisions of the Moneylenders Ordinance 1951, Companies Act 1965 and the Hire Purchase Act 1967. Thus, the rapid expansion of financial companies in terms of scope and activity, a form of control is needed to control their impact on domestic financial conditions. The government has decided to bring finance companies under the control of BNM through the drafting of the Companies Act which was later renamed Loan Finance Companies Act 1969 which eventually was repealed by BAFIA 1989.
Finance companies are not allowed to operate a current account and foreign exchange. But since 1991, some big financial companies which is strong position are allowed to provide foreign exchange facilities, including selling traveler's checks and issuing guarantees.
Translate by Vincent lee kin siang ( 01PPM10F2006 )