Weigh consequences of tightening cap on loans

At first glance, changes to the cap on the amount a person can borrow from licensed moneylenders may seem beneficial to those who struggle with issues such as gambling addiction (Borrowers to face stricter cap on moneylender loans; Nov 7).

However, there is a real risk that the proposed restrictions will only drive more of those desperate for cash into the clutches of unlicensed moneylenders.

It is no secret that illegal moneylending is rife in Singapore.

These unscrupulous lenders may go on to harass the borrowers when debts are not paid, and even recruit them to carry out harassment activities against other debtors in return for "wiping out" their debts.

These unlicensed operators usually hide behind pseudonyms and complex networks and leave the unfortunate individuals to face criminal charges and even imprisonment for these harassment activities, further compounding their difficult circumstances.

I encountered many such cases when interning in local law firms.

Hence, any move to impose a tighter cap on the amount a person can borrow from licensed moneylenders should be carefully considered and debated.

Any move to impose a tighter cap on the amount a person can borrow from licensed moneylenders should be carefully considered and debated.

Alternatively, a loan facility administered by a government body could be implemented, which borrowers are likely to trust more and approach for assistance rather than private moneylenders.

Such government-administered lending could be combined with mandatory gambling-addiction or financial counselling, which is likely to be a more effective long-term intervention rather than mere legislative change to the amounts individuals can borrow.

Abirame S. (Ms)

A version of this article appeared in the print edition of The Straits Times on November 10, 2017, with the headline 'Weigh consequences of tightening cap on loans'. Print Edition | Subscribe