Developers as Moneylenders

Our government’s recent announcement of its plans to issue money-lending licenses to developers has been taking a lot of political flak. I’ll leave it to others to discuss on the socio-economic aspects of this silly move but I’d like to take a minute to study the legal-mathematical aspects of this.

Section 6
Sec 6 of the Act requires that the license be issued out only to individuals, partnerships, and a registered business. Money lending licenses cannot be issued out to companies. Most developers are incorporated as companies. So, if any developer wishes to take a money-lending license, they would need to use a different entity.

The trouble with not using a company is that of taxes. Any income derived from this money-lending activity will be construed as individual income and will be charged at the highest rate of 28% considering the amount of money they will be lending out.

Some developers may not like the idea of paying such an exorbitant tax rate but that’s completely up to the developers.

Section 5D
Sec 5D of the Act says that the Registrar (not the Minister) has the power to attach any number of conditions to the license granted. That’s why the Minister claims in the article that he has the power to set the maximum interest rate at 6% instead of the 12%-18% limits as stated under the Act. In actual fact, it’s the Registrar who has the power.

Section 17
Sec 17 of the Act says that interest can only be calculated in a simple interest method as compound interest is prohibited. This is something that lots of people have missed out on in their criticisms of the decision. I know that lots of lawyers are not very good with math, so I’ll try to explain it.

Simple v Compound
Simple interest is calculated linearly. What this means is that the amount of interest incurred, increases proportionally with the duration of the loan. Compound interest increases exponentially with the duration of the loan.


I generated this plot from two different calculations, the straight line one is the simple interest at 6% and the one curving upwards is compound interest at 5%. From this plot you can see that the intersection is at around 8 years.

What this means is that if a borrower had a choice to take a bank loan at 5% or a developer loan at 6%, they would actually pay less interest to the developer than to the bank if the duration of the loan was 8 years or more.

However, this hides a very important question – where is the developer going to get the money to lend to the borrower? Since most developers are highly leveraged, this means that they do not have the cash to hand out to the borrowers. In fact, they’re probably going to have to borrow money from the bank in order to lend it to the borrower.

Granted, the developer could probably negotiate a pretty low interest rate from the banks but the base-rate set by Bank Negara is between 3%-4.25% and they cannot go lower than that. This means that there is still an intersection, just at arond 20 years instead.


This plot shows that the developer can make a profit from lending at 6% on a borrowing of 4% right up to around 20 years. After that, the developer actually pays more interest to the bank than the amount collected from the borrower.

This seems to indicate that there’s a sweet spot for these developer loans – between 8-20 years – to turn a profit for the developer and pay lesser interest for the borrower. So, from a purely legal-mathematical perspective, these developer loans do make some sense for both the developer and for the house buyer.

There are many other financial factors not yet considered for this e.g legal fees etc. Of course, there is the whole other socio-economic aspect on how such a move may be detrimental in a country where the household debt is already really high. Also, this move will continue to drive up housing prices and will probably contribute to a property bubble. There’s also the moral hazard that is presented when the developer serves as the lender.

Robotic Sex in Malaysia

I read with a smile, a recent article on how a conference on Love and Sex with Robots that was scheduled to run in Iskandar Malaysia is now caught in a limbo. Our IGP has been quoted as saying that:

There are many laws that we can use. It is an offence to have anal sex in Malaysia, what more with robots.

I’m confused as to what kind of offence it is to have sex with robots? So, I checked out the Penal Code. Quite naturally, I first jumped to the parts which concern unnatural offences.

S.377 of the PC says that, “Whoever voluntarily has carnal intercourse with an animal shall be punished with imprisonment for a term which may extend to twenty years.”

Since a robot is not an animal, this section does not apply, obviously.

S.377A of the PC says that, “Any person who has sexual connection with another person by the introduction of the penis into the anus or mouth of the other person is said to commit carnal intercourse against the order of nature.”

Since a robot is not another person, this section does not apply either.

S.377D of the PC says that, “Any person who, in public or private, commits, or abets the commission of, or procures or attempts to procure the commission
by any person of, any act of gross indecency with another person, shall be punished with imprisonment for a term which may extend to two years.”

Since a robot is not another person, this section does not apply too.

So, I’m kind of concerned. Which laws does the IGP intend to slap on the organisers of the conference? While it is true that anal sex is unlawful in Malaysia, as we have learned from Sodomy 2.0, it is only unlawful when committed by another person, not a robot.

Therefore, I humbly submit that our IGP is speaking without authority. There is no law that bans sex with robots in Malaysia. I doubt that our out-dated and out-moded Penal Code was written with robots in mind.

So, dildos need not worry.

Updated: S.377B cannot be read alone because it merely spells out the punishment for carnal intercourse against the order of nature but the definition of what that is in S.377A, which requires another person.

Conflicting Court of Appeal

Yesterday, in the case of Yuneswaran, our Court of Appeal backtracked on it’s earlier decision given in Nik Nazmi v PP that is to say that: with regards to the Peaceful Assembly Act, Section 9(5) is valid and enforceable.

Now, I have yet to read the full written judgement so I don’t know the full reasoning behind this backtracking. However, based on the scant news reports, it seems that the bench did not provide answers to many of the issues raised by Yuneswaran’s counsel during submissions.

We alerted this bench that they cannot go against the 2014 case of Nik Nazmi Nik Ahmad versus Public Prosecutor on the same issue. We told the judges that only the Federal Court could overrule the Court of Appeal.

Looks like stare decisis has gone out the window.

In Dalip Bhagwan Singh v PP, a Federal Court case, the salient point of that case is that the only reasons for the Court of Appeal to depart from its own previous decision has been spelled out in Young v Bristol Aeroplane Co Ltd, which are:

  1. a decision of the Court of Appeal given per incuriam need not be followed;
  2. when faced with a conflict in respect of its own previous decisions, the Court of Appeal may choose which decision to follow irrespective of the dates of those decisions; and
  3. the Court of Appeal ought not to follow its own previous decisions if such decisions are, expressly or by necessary implication, overruled by the Federal Court, or if they cannot stand with a decision of the Federal Court.

Since there are no previous conflicts in respect of its own decisions, reason (ii) does not apply. Since the case never reached the Federal Court, reason (iii) does not apply either. Therefore, I humbly submit that the counsel for Yuneswaran is right and that the Court of Appeal has made an error unless it can show that the previous decision was made per incuriam.

By simply making the decision that it made yesterday, the Court of Appeal itself has potentially stepped beyond its powers unless it can show that the previous decision made was a mistake. I would love to see the legal reasoning that goes into calling the previous decision a mistake. Simply saying that it will cause uncertainty in Law is not a legal reason for regarding it as a mistake.

The best solution would have been to have the issue brought up to the Federal Court and decided there. That is the whole principle of stare decisis that we have governing the Courts. If any Court can simply depart from its previous decisions, that would result in uncertainty in Law.

With this one decision, the Court of Appeal has single-handedly created the very uncertainty in Law that it sought to avoid.