Effect of New Licensed Moneylenders Rules on Consumers' Access to Credit

Mdm Speaker, we amended the Moneylenders Act in 2008 to modernise the regulation of moneylending whilst safeguarding the interests of borrowers.

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In 2011, we introduced further measures to enhance protection for borrowers. These included a requirement for licence applicants to pass a written test, as well as advertising restrictions as we were concerned that excessive advertising might induce unnecessary borrowing.

In 2012, we imposed a moratorium on the issuance of new licences. The number of moneylenders had grown from 172 in 2008 to 249 in 2011. Since the moratorium, the number of moneylenders has declined to 185, as of 1 June 2014. We also prohibited moneylenders from charging upfront fees and required moneylenders to disclose the Effective Interest Rate of loans to borrowers.

Our aim is to maintain a balance in protecting borrowers, especially those of lower income, yet ensuring that there is reasonable access to credit from licensed sources. The value of loans granted grew from $189 million in 2008 to $480 million in 2011. It declined to $346 million in 2012 but rose again to $478 million in 2013.

At this juncture, I would like to make a clarification. During my Ministry's Committee of Supply debate on 8 March 2013, we had said that the number of moneylenders fell from 249 in 2011 to 209 in 2012, and that the value of the loans fell from $480 million to about $260 million over the same period. I wish to clarify that the value of the loans granted in 2012 fell to $346 million, and not $260 million [Please refer to the Official Report of 8 March 2013].

As previously mentioned in this House, we are in the midst of reviewing our moneylending policies. We have set up an Advisory Committee on Moneylending to help us with this effort. It comprises economists, representatives from the financial industry, Moneylenders Association of Singapore and VWOs which counsel distressed borrowers, namely, Credit Counselling Singapore, One Hope Centre and The Silver Lining. As we undertake this review, I would like to reiterate the importance of finding the right balance between protecting borrowers and preserving their access to credit.

Thank you, Madam. I just want to thank the Senior Minister of State for her clarification. Just a quick supplementary question. Could you share with us the amount of licensed moneylending in relation to the total consumer credit market, say, over the past year? And how extensively would the Advisory Committee be engaging in terms of its key stakeholders, so that the balance between protecting consumer interest as well as access to credit is preserved?

For the first part of the question, I do not have the information with me. Perhaps, the Member could file a separate question on that. The second aspect of the question relates to the scope of the recommendations for the Advisory Committee on

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Moneylending. Essentially, the idea is to ask them to do an overall review because in the past couple of years, Members in this House had raised various questions on access to credit, on interest rates, how we can safeguard and protect borrowers, especially low-income borrowers. But, at the same time, you also do not want to prevent access to this kind of credit for those borrowers who cannot normally access the type of credit you can get from banks and financial institutions. The Committee will have a wide mandate and, in fact, if Members have suggestions or concerns, they should feel free to send their suggestions and comments to MinLaw for the Committee to look at.