From January to August 2023, nearly 900 suspected loan sharks were apprehended
by AUFA MARDHIAH & VEISHNAWI NEHRU
LOAN sharks, often referred to as “Ah Long”, operate outside legal boundaries, offering high-interest loans with unethical and sometimes violent collection methods.
Despite rigorous enforcement and legal measures to curb their activities, “Ah Long” continue to flourish, often exploiting gaps and constraints in the financial services market.
These gaps have led to the public resorting to loan sharks, with recent reports indicating a significant number of investigations and arrests related to such illegal activities.
According to the Home Ministry in October, from January to August 2023, nearly 900 suspected loan sharks were apprehended, following over 1,200 arrests in the previous year, highlighting ongoing law enforcement efforts to curb these.
This shows that the loan-sharking business in Malaysia remains a concerning and persistent issue.
Malaysia’s Money Lending Landscape
In Malaysia, the Moneylenders Act of 1951 serves as the cornerstone of regulation for moneylenders, mandating licensure for their operations.
Despite its robust provisions, the Act, which is overseen by the Ministry of Local Government Development, has loopholes that often surface when individuals suffer financial or physical harm.
However, amendments made in 2003 and 2011 have bolstered enforcement mechanisms, granting enhanced powers to the police to intervene in cases of unfair or unlawful practices by moneylenders.

Victims must be protected and those responsible for harassment or assault must be held accountable, says Nik Ahmad Kamal — pic courtesy of Nik Ahmad Kamal
Taylor’s University Law professor Prof Dr Nik Ahmad Kamal Nik Mahmod, who is also National Professors Council’s head of governance, law and management cluster, said the amendments have been instrumental in tightening regulations and ensuring accountability.
“Recent amendments empowering law enforcement agencies have played a crucial role in tightening regulations and ensuring accountability,” he told The Malaysian Reserve (TMR).
As Malaysia continues to navigate the complexities of money lending regulations, vigilance and adaptability remain paramount.
Collaborative engagement between policymakers, law enforcement agencies and stakeholders are essential in addressing loopholes and strengthening enforcement.
By fostering dialogue and cooperation, Malaysia can further fortify its financial safety net and promote greater transparency and fairness within the money lending industry.
Moreover, the battle against predatory lending practices, often perpetuated by illegal moneylenders, continues to pose significant challenges for both authorities and vulnerable individuals.
Against this backdrop, the indispensable role played by non-governmental organisations (NGOs) and support groups in aiding victims cannot be overstated.
However, as Nik Ahmad Kamal pointed out, distinguishing between legitimate moneylenders and predatory ones is crucial.
“NGOs and support groups are vital in assisting victims, but if moneylenders operate within the bounds of the law, there may be no case against them,” he said.
Yet, instances of harassment or assault against these organisations for protecting borrowers from unfair treatment by moneylenders are not uncommon.
In such cases, he emphasised the importance of seeking legal recourse, including reporting incidents to the police or relevant regulatory authorities.
“Victims must be protected and those responsible for harassment or assault must be held accountable,” he said.
Regardless, efforts to combat illegal money lending must extend beyond mere enforcement to address the underlying demand for such services.
Nik Ahmad Kamal advocates for extensive engagement between policymakers, NGOs, support groups, the Association of Moneylenders and victims to develop effective solutions.
“The main problem lies in the demand for unlawful money lender services.

Providers of alternative and cheaper loans, such as Tekun Nasional, can help mitigate the demand for unlawful money lender services — TMRpic
“Providing alternative and cheaper loans, such as through government micro-credit schemes such as National Entrepreneurial Group Economic Fund (Tekun Nasional), can help mitigate this demand,” he said.
Money Lending According to Shariah
International Islamic University Malaysia (IIUM) Institute of Islamic Banking and Finance assistant professor Dr Nazrul Hazizi Noordin explained that Malaysia has a variety of Shariah-compliant financial products and services available to cater to the needs of underserved and unserved populations, designed to ensure access to financial services while adhering to Islamic principles.

According to Nazrul Hazizi, addressing societal norms and promoting the benefits of Shariah-compliant financing can help reduce reliance on loan sharks — pic courtesy of Nazrul Hazizi’s LinkedIn
Among the key Shariah-compliant financial products and services in Malaysia includes Islamic microfinancing, which provides working capital and capital expenditure financing for individuals and businesses through Shariah contracts such as commodity murabahah.
Another important aspect is Islamic social financing, which integrates Islamic philanthropic funds such as zakat, waqf and sadaqah with traditional microfinance.
For instance, Maybank Islamic Bhd’s Aspirasi Wanita Programme, part of the iTEKAD initiative by Bank Negara Malaysia (BNM), channels zakat funds to offer benevolent financing, empowering women entrepreneurs with seed capital to enhance their economic status.
Complementing these micro financing options are structured training programmes aimed at upskilling beneficiaries in financial management, business acumen and digital literacy.
These programmes aim to bolster financial literacy, foster entrepreneurial behaviour and enable beneficiaries to generate sustainable income, thereby enhancing their quality of life.
Microtakaful is also available, with offerings such as FWD Kasih and PruBSN Microtakaful Jariyah providing affordable protection against various risks for low-income individuals, including illness, economic uncertainty and calamities.
Lastly, Islamic pawnbroking, known as Ar-Rahnu, offers short-term financing solutions to underbanked individuals requiring immediate cash for diverse reasons such as urgent financial needs or business expansion.
This financing is provided against valuable pledged items such as gold jewellery, with transparent and equitable terms and conditions agreed upon between the pawnbroker and the customer. Nevertheless, Islamic finance plays a crucial role in promoting ethical lending practices and safeguarding consumers from predator y behaviour through its adherence to Quranic principles and emphasis on social justice.
Upholding the principle of social justice, Nazrul Hazizi said Islamic finance ensures fairness in business and financial dealings, particularly in providing financing to customers.
It places significant importance on ethical and moral considerations, prohibiting practices such as charging interest (riba’) and engaging in transactions involving excessive uncertainty.
By mandating clear disclosure of terms and conditions, Islamic finance prevents predatory practices and protects consumers from exploitation or misinformation, thereby fostering transparency and trust.
Furthermore, he added that Islamic finance encourages financial institutions and investors to prioritise the wellbeing of society.
Rather than merely avoiding negative activities, they are urged to seek investments and ventures that contribute positively to people and the environment.
“By focusing on positive impacts, Islamic financial institutions can fulfil their ethical role as stewards of wealth in a manner that protects the interests of not only their customers but also the broader community and the planet,” he told TMR.
Commenting on the challenges to the widespread adoption of Shariah-compliant financing options, he said that it faces several challenges that need to be addressed for greater acceptance and implementation.
One major obstacle is the lack of awareness among the general population regarding the principles and advantages of Shariah-compliant finance, which hampers individuals and businesses from considering these financial products and services as viable alternatives to conventional options.
Therefore, efforts to educate and raise awareness about Shariah-compliant finance are crucial in overcoming this barrier and promoting its adoption.
Additionally, there is a perception of complexity associated with Shariah-compliant finance, with some individuals viewing these financial products and contracts as intricate and challenging to comprehend compared to conventional finance. Simplifying the communication and explanation of Shariah-compliant finance principles and underlying contracts could help make them more accessible and understandable to a wider audience.
Regulatory challenges also impede the widespread adoption of Shariah-compliant finance, as some jurisdictions may lack fully developed or supportive regulatory frameworks for these products.
Clear and supportive regulatory frameworks are essential for fostering an environment conducive to innovation and growth in the Islamic finance industry.
Moreover, inconsistencies in Shariah interpretations and practices among scholars and financial institutions can lead to public confusion.
Greater harmonisation of Shariah rulings and practices could help address these challenges and promote a more cohesive approach to Islamic finance.
“Shariah scholars must be responsive and adaptive in issuing resolutions on contemporary socio-economic issues and needs.
“Their opinions and guidance can pave the way for the development of new financial products tailored to address these challenges, thereby enhancing the accessibility and appeal of Shariah-compliant finance to a wider audience,” he added.
Despite the availability of Shariah-compliant financing, people often resort to loan sharks for several reasons.
Sharing his opinion, Nazrul Hazizi highlighted several reasons.
Firstly, loan sharks tend to operate in communities where access to formal financial institutions is limited, making them a more accessible option for borrowing.
Moreover, loan sharks are perceived as being more lenient in their borrowing requirements compared to formal Islamic financial institutions, often not requiring extensive documentation or collateral.
This leniency, according to him, can be particularly attractive to individuals facing urgent financial needs, such as unexpected medical expenses or emergencies.
Although loan sharks may charge higher interest rates, the speed at which they provide funds may outweigh concerns about unfavourable terms.
“To address this issue, Islamic banks have a vital role in pursuing financial inclusion through innovative products such as zakat financing. Zakat financing offers more flexible repayment terms tailored to the borrower’s financial circumstances, reducing the need for individuals to turn to turn to loan sharks.
“By highlighting the compassionate and sustainable aspects of zakat financing, Islamic banks can demonstrate their commitment to financial inclusion,” he added.
Apart from that, the digital divide significantly impacts the accessibility of formal financial institutions compared to loan sharks.
In many communities, limited access to the Internet and digital banking services makes it challenging for individuals to access formal Islamic financial services.
Lastly, borrowing from loan sharks may be more socially acceptable in some communities or may be a generational practice ingrained in individuals’ attitudes and behaviours towards borrowing, despite the availability of Shariah-compliant alternatives.
Therefore, Nazrul Hazizi said addressing these societal norms and promoting the benefits of Shariah-compliant financing can help reduce reliance on loan sharks.

Chong (second from right) at a press conference regarding loan sharks at Wisma MCA on April 26. The modus operandi of loan sharks has evolved, morphing into a more aggressive and ruthless enterprise, he says — pic courtesy of Chong
Combatting Loan Shark Activity
MCA Public Services and Complaints Department Chief Datuk Seri Michael Chong has been at the forefront of this fight for decades.
Shedding light on the evolving landscape of loan shark activity in Malaysia, he said cases of loan sharks often occur, especially towards the end of the year.
“Over the past decade, some of these cases have been quite severe. However, the severity tends to decrease after about 10 years due to previous serious incidents.
“Indeed, the statistics paint a grim picture of the situation at its peak. In one year, we used to receive up to 500 to 600 cases consistently,” he told TMR.
He added that the trend persisted until shortly before the Movement Control Order (MCO) when it started to lower to below 300 cases per year.
“Since the implementation of the MCO, the number has reduced even further. For example, to date, we have approximately 100 cases,” he said.

Loan sharks not only harass borrowers but those around them as well such as family and neighbours
Moreover, he emphasised that the factors leading to the severity of loan shark occurrences in previous times typically occur during specific periods, such as a sports season — particularly football — which often results in an increase in such incidents.
He added that the majority of victims were lured into gambling recklessly, with Malays generally steering clear of it, although some may succumb to peer pressure or desires for material wealth.
He noted a similar trend among Indians, who typically refrain from heavy involvement but may be influenced by others or borrow money for their children’s education.
The overarching message revolves around the dangers of greed.
“Indeed, the allure of gambling, coupled with the promise of instant wealth, catalyses many individuals to fall into the clutches of loan sharks,” Chong said.
The philosophy of these nefarious entities, as explained by Chong, revolves around the insatiable desire for riches, driving borrowers into a never-ending cycle of debt and desperation.

The main problem lies in the demand for unlawful money lender services — pic source: MEDIA MULIA
However, the modus operandi of loan sharks has evolved, morphing into a more aggressive and ruthless enterprise.
“Nowadays, loan sharks are becoming more aggressive, resorting to threats and extortion, demanding much more than the borrowed sum, and harassing not only borrowers but those around them as well such as family and neighbours,” he added.
Commenting further, Chong said the authorities have adopted a comprehensive approach, utilising tactics such as internal security to infiltrate and dismantle these criminal networks.
“It is a difficult task that requires gaining the trust of informants and navigating through intricate webs of deception. Indeed, law enforcement agencies have made significant strides in apprehending loan sharks, thanks to valuable intelligence gathered from various sources.
“Specialised units within the police force possess a deep understanding of the modus operandi employed by these illegal lenders, enabling them to effectively disrupt their operations and bring perpetrators to justice,” he added.
Nonetheless, he emphasised the importance of legislative measures in augmenting enforcement efforts.
“The government has enacted new laws to strengthen penalties against loan sharks, sending a clear message that such illicit activities will not be tolerated,” he added.
By imposing harsher consequences on offenders, authorities aim to deter individuals from engaging in predatory lending practices and protect vulnerable members of society from exploitation.
However, Chong noted that loan sharks rely on borrowers to sustain their business operations.
“While some individuals may turn to borrowing out of genuine financial hardship, others do so to support vices like gambling or maintain extravagant lifestyles,” he said.
Additionally, he observed that when loans start to strain families, it often leads to breakups, shedding light on the harsh realities faced by many households.
The underlying issue stems from overwhelming financial burdens that trap one or both partners, making it impossible for them to meet their repayment obligations.
This inability to repay, despite sincere efforts, often becomes the breaking point that drives families apart.
He pointed out that this phenomenon affects not only those directly involved in loan transactions but also bystanders who find themselves caught in the crossfire of financial desperation.
“People run away because the borrower often becomes complacent. If you owe money, you need to prioritise repaying it,” he emphasised.
Chong’s straightforward approach highlights the importance of confronting debts head-on, leaving no room for evasion or procrastination.
When advising individuals trapped in debt, he advocated for a proactive approach centred on self-reliance and diligence.
Furthermore, he stated that various NGOs, authorities, politicians and political parties have attempted to address the issue.
“Yet, despite these concerted endeavours, there are still many who remain trapped in the cycle of borrowing and never repaying,” he noted.
Chong’s practical evaluation of the situation unveils a sobering reality; conventional interventions, such as sending individuals to correctional institutions or hospitals, may produce limited results.
“Sending them elsewhere won’t necessarily solve anything. The best course of action is to provide support and hope for rehabilitation,” he added.
Malaysia’s ongoing struggle with loan shark activity emphasised the need for collaborative efforts to combat predatory lending practices.
Despite legislative measures and enforcement actions, loan sharks continue to exploit loopholes in the financial system, necessitating enhanced regulations and greater awareness of Shariah-compliant finance.
Through sustained vigilance and proactive measures, Malaysia can mitigate the harm of predatory lending practices and safeguard the financial wellbeing of its citizens.
According to Bukit Aman’s Commercial Crime Investigation Department (CCID), the statistics for cases of unlicensed money lending from January to April 2024 amounted to 260 cases with a loan value of RM1.04 million.
Meanwhile, 2023 recorded a total of 1,185 cases with a total loan value of RM5.92 million, 2022 recorded 1,009 cases with a total loan value of RM6.95 million and 2021 recorded 1,000 cases with total loan value of RM1 million.
Bukit Aman’s CCID director Datuk Seri Ramli Mohamed Yoosuf said there has not been a significant increase in loan shark cases for the past three years. However, various factors contribute to their occurrence.
“Firstly, borrowers face limited access to legitimate financial institutions, either because they do not meet bank loan criteria or require immediate funds. Consequently, they resort to ‘Ah Long’ due to the prolonged documentation process of bank loans.
“Secondly, the surge in online loan ads aggravates the situation, as they often falsely claim affiliation with licensed lending agencies, leading borrowers to engage in online transactions without realising they are dealing with ‘Ah Long’.
“Lastly, borrowers’ lack of awareness also plays a role, as many are unaware that licensed moneylenders can only operate from registered premises,” said Ramli in a written statement to TMR.
To curb the proliferation of loan shark activities, the Royal Malaysia Police (PDRM) has conducted investigations, operations, surveillance and continuous prevention programs to provide information to the public about the dangers of loan shark loans.
Based on the statistics of operations and arrests related to the case, January-April 2024 saw 273 arrests and 114 charges, while 2023 recorded 1,281 arrests and 475 charges, 2022 recorded 1,271 arrests and 431 charges, and 2021 recorded 1,067 arrests and 341 charges.
- This article first appeared in The Malaysian Reserve weekly print edition
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