Written Answer by Minister for Law K Shanmugam to PQ on Regulation of Licensed Moneylenders' Loan Repayment Terms for Low-income Borrowers

07 MAY 2024

7 May 2024 Posted in Parliamentary speeches and responses

Question for Written Answer

Mr Kwek Hian Chuan Henry (Member of Parliament for Kebun Baru SMC):

Question: To ask the Minister for Law whether the Ministry will consider amending legislation and mandate licensed moneylenders to allow borrowers from low-income backgrounds and who have borrowed unsecured loans of less than SGD15,000 opt for partial repayment at any point during the loan duration, so as to facilitate repayment and avoid recurring interest and late payment fees.

Written Answer:

  1. The aim of our regulatory regime for licensed moneylenders is to maintain a balance between allowing individual borrowers reasonable access to credit while ensuring that borrowers, particularly lower-income borrowers, are adequately protected. Licensed moneylenders bear the risks of lending and are incentivised in a competitive market to negotiate restructuring of repayments, taking into account the borrower’s risk profile.
  1. Borrowers and licensed moneylenders are able to restructure loan repayments subject to mutual agreement. This can include earlier repayment of loan instalments to reduce the interest incurred, or extension of the loan tenure to reduce each remaining loan instalment and avoid late payment fees. Legislating to mandate specific arrangements is generally inadvisable. For example, mandating to allow early repayment of loans may benefit some borrowers, but may also result in moneylenders pricing in the early repayment risk. Mandating extension of the loan tenure may also result in moneylenders pricing in this risk and potentially constrict access to credit to borrowers with higher risk profiles.
  1. The Ministry has instead encouraged licensed moneylenders to, as set out in the Professional Service Handbook for Licensed Moneylenders, assist borrowers with financial difficulties by:

(a) restructuring the loan repayment to suit the borrower’s financial situation; or

(b) referring the borrower to a Social Service Agency for assistance in restructuring the loan repayment, or for consideration to be placed on a debt consolidation scheme.

  1. Borrowers who have queries on options available to them may also approach the Registry of Moneylenders.

Last updated on 07 May 2024