Debated in Parliament on 7 Feb 2024.
Mr Yip Hon Weng asked the Prime Minister (a) in view of individual bankruptcy applications at an 18-year high and increased corporate insolvencies in 2023, whether this is a cause for concern to the Government; (b) whether the rise in insolvency is primarily due to struggles to service existing debts, or is it also driven by a higher risk appetite for new ventures; and (c) whether the Government is planning more services to address this issue, such as expanded debt counselling services or financial literacy programmes.
Sir, it is helpful to put the latest bankruptcy statistics into perspective.
Although bankruptcy applications in Singapore rose in 2023, not all applications resulted in bankruptcy orders. The actual bankruptcy orders were lower than the application numbers. The trend of bankruptcy orders has been largely stable over the recent years and it is also below pre-COVID-19 levels.
Likewise, while compulsory winding up applications did indeed pick up in 2023, the actual winding up numbers were lower and also below pre-COVID-19 levels, quite comparable.
Bankruptcy applications rose amid a challenging macroeconomic and financial environment for corporates and individuals in recent years. The higher global interest rates environment also caused domestic interest rates to rise sharply. Nevertheless, most corporates and households were able to weather the increases in borrowing costs and continued to service their loans.
There have not been any significant uptick in banks' non-performing loans (NPLs) for either households or corporates. Stress tests by the Monetary Authority of Singapore (MAS) also show that most corporates and household borrowers have adequate buffers to manage shocks to income and financing costs.
While the overall debt situation has remained manageable thus far, I fully agree with Mr Yip that it is important to keep an eye on this issue. One way is to educate Singaporeans on financial literacy and to help distressed borrowers manage their debt and also to avoid bankruptcy.
Our national financial education programme, called MoneySense, actively educates the broader public on money management skills. These include advising consumers to not spend beyond their means and reminding borrowers to prioritise paying off high interest debts, for example, your credit cards bills, to avoid high interest charges.
Borrowers in distress can also seek help from various avenues that are available to them. They can approach the Credit Counselling Singapore, which offers debt management guidance and helps individuals and businesses restructure debt or work out sustainable debt repayment plans.
Those who have unsecured debts with financial institutions may sign up for debt consolidation plan to restructure and consolidate their debts.
When a bankruptcy application is filed, the official assignee administers a debt repayment scheme to help eligible debtors whose debts do not exceed $150,000. These debtors can avoid bankruptcy by committing to the terms of a repayment plan with a creditor and repaying their debts over a period of five years.
Mr Yip.
I thank the Minister of State for his reply, and I am heartened to note that we are expanding some of these debt counselling services and financial literacy programmes.
May I ask, what is the estimated budget and timeline for some of these expansion of these services and financial literacy programmes? Will these programmes be targeted towards specific demographics or industries most affected by insolvency? And are there plans for preventive measures, such as early intervention programmes or credit score education, to address future risk?
Sir, the answer to Mr Yip's supplementary question is yes. MAS and the financial institutions as well as industry trade associations are all working together, not just to strengthen MoneySense and other financial literacy programmes, but also across the whole ecosystem. Financial institutions, trade associations, and I also believe, at the Ministry of Education as well.
PAPERCUTS