IOUpay to Roll Out New Product Initiatives Targeting Malaysian Civil Servants Under IDSB Agreement

IOUpay’s latest strategic partnership aims to provide market-leading consumer credit products to Malaysian Federal Civilian servants in various governments ministries, with a mitigated risk, an icing on the cake.

Malaysia-focused fintech IOU pay (ASX: IOU) announced that its wholly owned subsidiary, IOU Pay (Asia) Sdn Bhd (IOUpay Asia) has entered into a new strategic partnership with I.Destinasi Sdn Bhd (IDSB).

Preparation is now underway for the rollout of the first product initiative under the agreement for newly hired Malaysian Federal Civil Servants (FCS) in the education and health sectors, and other government agencies. keys.

The launch of the strategic partnership involving a first product-to-market initiative aimed at attracting newly hired federal government employees underscores the strategic value of IOU’s investment in IDSB, which it announced in September 2021.

The company recently announced revised completion conditions for tranche two that will allow it to acquire an aggregate 34% stake in IDSB upon completion.

The first project between IDSB and IOU will be a new bridging loan product tailored and targeting newly employed FCS.

The company said the project would generate revenue for IOUpay and IDSB in two ways, including:

  • IOU to receive margin on short-term bridging loans offered to the initial client category of low-risk bonded government officials.
  • IDSB with pre-committed repayment of the bridge loan through a pre-approved 10-year term loan facilitated by the IDSB and funded by partner banks. The IDSB will receive increased revenue through initial agency fees for each new client and ongoing loan servicing fees on 10-year refinanced loans.

IOU said the first project is a first in the local market with a new short-term bridging financing product on a broad target customer base, initially focused on bonded public servants, with the possibility of expanding to all federal public servants in more generally.

Strong annual revenue potential

Based on a 10% penetration of this opportunity estimated for illustrative purposes, IOU stated that the total deal value could reach RM20 million (~A$6.6 million) annually in volume. new bridging loans and RM200m (~A$65.6m) in IDSB. term loans.

Through this collaboration, the IDSB can recruit into its longer-term funding offerings a large number of new staff who need short-term funding from IOUpay.

The Malaysian government workforce is over 1.7 million civil servants.

Each year, approximately 20,000 people enter employment as SCF in the education and health sectors.

A significant proportion of new workers must commit to serve for a period of eight years (bonded civil servants) to obtain government sponsorship and financial aid for their higher education.

IOU said the FCS portfolios of potential customers represent prime target customers for the company given their stable, long-term employment and IDSB’s ability to use the AG-Code license to mitigate the risk of credit.

IOUpay accesses a large number of high credit quality customers with a unique product offering, can significantly increase its monthly transaction volumes, and provides a committed transaction pipeline for long-term IDSB funding.

Talks to secure wholesale funding

IOU will fund new bridging loans from BNPL’s current capital allocation and is in talks to secure a special purpose wholesale funding facility with a non-bank Malaysian Financial Institution (NBFI).

IOUpay said the NBFI is committed to providing 100% of the required capital for the bridge loan product as the first project under the IDSB strategic partnership.

Discussions with the NBFI are progressing with a view to funding the first project and, if successful, other projects under the strategic partnership.

IOU said the value of establishing wholesale funding facilities initiated through this collaboration extends well beyond the IDSB’s initial strategic initiatives, with the potential for capital to grow and grow at a lower rate. cost to achieve the company’s sustainable and profitable growth objectives across all of its customer portfolios.

Sharia-Compliant Funding

Both companies are focused on identifying areas where they can cooperate and achieve synergy in their offerings, including Shariah-compliant personal financing for FCS.

IOU announced in July that it had received Shariah compliance certification from independent global Shariah consulting firm, Tawafuq Consultancy.

The IDSB and IOU will provide Shariah-compliant personal funding to FCS employees under a payroll deduction scheme under the IDSB’s license to use the General Code of Accountants for withholding on salary, and the provision of loan servicing services, including payment collection for its bank customers.

Other strategic focuses include the creation of short-term products using IOUpay’s platform, the existing product suite and the ability to create new products in coordination with the IDSB and funders. third parties, including partner banks and NBFIs.

The bridging loan product initiative as the first project under the new strategic partnership reflects IOU’s continued consumer credit diversification, focusing on short-term credit for low-risk customers and leveraging its competitive strengths to capture a greater share of customer lifetime value.

This article was developed in conjunction with IOUpay, a Stockhead advertiser at the time of publication.

This article does not constitute advice on financial products. You should consider obtaining independent advice before making any financial decisions.

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