Malaysian-based financing firm RCE Capital injected millions into Singapore fintech firm, which could compete with banks' personal loan facilities. 

RCE Capital has taken a slice of Singapore's money-lending business via a S$40 million fund injection into Singapore fintech firm Credit Culture, who will in turn offer lower lending rates and encourage prompt debt repayment.

Credit Culture plans to launch a moneylending platform that offers loans with attractive monthly interest rates capped at 1 per cent by the end of February, its founder and CEO Edmund Sim was quoted in the  «Business Times» (behind paywall) on Tuesday.

Upon obtaining its license, the Singapore fintech will run an online platform that claims to be able to disburse loans within 10 minutes directly into the applicant's account. The digital loan application process is made fast and seamless as it taps on MyInfo, the central data repository of Singapore citizens' information.

Comparing With Cards and Personal Bank Loans

The rates charged by Credit Culture are significantly lower than those charged by banks on overdue credit-card payments, which averages 24 per cent per annum, or more than 2 per cent per month. However, the effective interest rate could turn out higher than personal loan rates offered by some banks. 

A search for personal loans on financial portal moneysmart.sg shows that effective interest rates ranged from 8.2 percent to 13 percent (excluding processing fees), depending on loan quantum and tenure. In Singapore, licensed moneylenders cannot charge a monthly interest rate of more than 4 per cent under the Moneylenders Act.

Injection Via Bonds

The S$40 million investment from RCE Capital comes via the purchase of five-year bonds issued by Credit Culture. The debt securities are in turn secured against loan receivables from Credit Culture.

The coupon rate on the first S$20 million is 10 per cent per annum, while the rate for the balance S$20 million has not been set, RCE Capital said. The bonds can be redeemed ahead of their maturity at the discretion of Credit Culture. 

The Singapore fintech has also granted call options to RCE Capital, which give the latter the right to take a stake of up to 30 per cent in Credit Culture, on the fully enlarged shareholding basis.