Thursday 29 January 2015

Bankruptcy cases from licensed lending on the rise

By Olivia Ho, The Straits Times, 28 Jan 2015

MORE bankruptcies here are arising from licensed moneylending activities, according to a report submitted to Parliament by the Estimates Committee yesterday.

The report showed the proportion of bankruptcy orders with proofs of debt filed by licensed moneylenders jumped from 7.3 per cent in 2012 to 10.5 per cent in 2013.

There were 210 of these bankruptcy orders in 2013, up from 128 in 2012 and 80 in 2011.

Marine Parade GRC MP Seah Kian Peng said this trend might be due to the number of licensed moneylenders here peaking in 2011, when they numbered 249.

As of 2013, there were 200 licensed moneylenders.

"Due to the increased access to licensed moneylenders then, the number of bankruptcies arising from that naturally increased, following a time lag," said Mr Seah.

He said the Estimates Committee is concerned that the "amount of lending was on the rise" and stressed the need for measures, such as restricting access to lenders and lowering interest rates, to ensure that "vulnerable groups who need the service of moneylenders are adequately protected".

He added that "licensed moneylenders still have an important role to play", as the alternative would be for people to borrow from unlicensed lenders, which would be harder for the Government to monitor.

The report expressed concern that the growth of businesses such as pawnbroking and moneylending, especially in the heartland, might indicate a growing number of such transactions among vulnerable groups like lower-income Singaporeans.

It noted that although the number of licensed moneylenders had declined from 2011 to 2013, the total value of loans has dipped only slightly from $480 million to $478 million in the same period.

The number of pawnbrokers has also almost doubled since 2006, and the value of loans they have granted increased from $1.6 billion in 2006 to $7.1 billion in 2012, before declining to $5.5 billion in 2013.

Mr Maximilian Koh, director of Thye Hua Kwan Problem Gambling Recovery Centre, said: "We have seen more of those seeking help for gambling turn to licensed moneylenders, thinking there is some form of control there.

"Many of them, at the point of desperation, borrow without realising that the interest rate is as high as (those offered by) loan sharks."

In November last year, a government advisory committee proposed a 4 per cent cap on interest rates, which moneylenders protested against as being too restrictive.

Mr David Poh, president of the Moneylenders' Association of Singapore, said: "The previous lack of a cap might have led to the rise in bankruptcies, with high interest rates going off the hook."

He added that the association was working with the Ministry of Law on instituting a 4 per cent interest rate cap with an additional 4 per cent late charge.

"If there's no cap at all, it's not fair on borrowers," said Mr Poh. "But if you don't have a late charge, borrowers won't pay on time."

Many borrowers in dire straits to begin with: Moneylenders
By Olivia Ho, The Straits Times, 30 Jan 2015

LICENSED moneylenders say the finger should not be pointed at them for the rise in the proportion of bankruptcies attributed to their activities.

Mr Peter Tan, vice-president of the Moneylender's Association of Singapore, said most of those who go bankrupt after dealing with licensed moneylenders were already in bad financial straits.

"Most of them are already scraping the bottom of the barrel when they come to us. It just so happens we are the last stop before they go over the brink," he said.

A Parliament report from the Estimates Committee on Tuesday highlighted the increase in bankruptcies attributed to licensed moneylending.

The report expressed concern that lending was on the rise, especially among vulnerable groups, such as lower-income Singaporeans.

According to Mr Tan, more people may be turning to bankruptcy orders as a form of protection against harassment from moneylenders. "It makes no sense for us to drive a person to bankruptcy. How will you get your money back if the only thing you can take from him is the shirt off his back?"

Ms Daphne Tan, director of licensed moneylender Unilink Credit, said more people may be approaching moneylenders because "it is becoming more difficult to get loans from banks".

Mr Tan said he often asks association members why they continue to lend to those who are at high risk of defaulting.

Mr Vincent Ne, director of Credit Xtra, said he has to take chances on potential defaulters in order to meet the high overhead costs he faces in terms of rents and wages.

"The high interest rates we charge are an unfortunate function of the high risk we assume. Otherwise, we cannot survive in the market," said Mr Ne, who currently charges about 25 per cent to 35 per cent monthly interest on his loans.

A government advisory committee is considering an interest rate cap of 4 per cent with an additional 4 per cent for late payments, The Straits Times understands.

Mr Tan said this cap was not sustainable and could drive licensed moneylenders out of business. "A lot of them will fold up and drive borrowers into the arms of loan sharks," he said.

Inflation gauge for the elderly?
By Chia Yan Min, The Straits Times, 28 Jan 2015

A NEW inflation index for the elderly may be created to gauge how this group of Singaporeans is affected by changes in the prices of goods and services.

The Department of Statistics (DOS) is studying the feasibility of compiling a separate consumer price index (CPI) for elderly households, according to a report released yesterday by Parliament's Estimates Committee.

This study will be complete by the end of this year, the committee added.

The eight-member committee examines the Government's Budget and suggests improvements. It is chaired by Marine Parade GRC MP Seah Kian Peng and includes six other People's Action Party MPs as well as Workers' Party MP Png Eng Huat.

Currently, the Government releases two inflation measures monthly. The DOS' CPI data calculates changes in the prices of a basket of goods and services typically bought by Singapore households, while the Monetary Authority of Singapore issues a core inflation figure that strips out accommodation and private road transport costs for a better gauge of everyday expenses.

Economists say a CPI focusing on the elderly would more accurately reflect living costs for this group, whose spending patterns can differ significantly from those of average households.

For instance, a CPI for elderly households should put more weight on the costs of health care, food and transportation, and less on items like education, said CIMB economist Song Seng Wun.

Even within broad categories such as health care and recreation, the types of goods and services bought by seniors would vary from those bought by younger consumers, he added.

"Older people might be spending more on services like massages and foot reflexology. Taking holidays is important too," he said.

The index would contribute to keeping the cost of goods and services affordable for the elderly, who are a particularly vulnerable group, said Mr Song.

DBS economist Irvin Seah added that such an index would be important in gauging how much government aid elderly households need in times of rising prices.

He suggested the authorities also consider compiling another consumer price index which tracks the cost of raising children, as part of ongoing efforts to boost Singapore's flagging fertility rate.

"Such an index might give a better idea of the kind of help parents need with childcare and medical costs," he said.

No comments:

Post a Comment