Law Ministry invites proposals to pilot business models for moneylending

The pilot proposals must meet specific criteria which impose higher standards than the current legal requirements for licensed moneylenders.
The pilot proposals must meet specific criteria which impose higher standards than the current legal requirements for licensed moneylenders.PHOTO: ST FILE

SINGAPORE - The Ministry of Law (MinLaw) on Friday (May 11) invited proposals to pilot business models for moneylending, adding that the objective of the pilot is to better protect borrowers through business-led improvements in the moneylending industry.

All pilot proposals must meet specific criteria which impose higher standards than the current legal requirements for licensed moneylenders. These mandatory criteria relate to applicant profile, soundness and completeness of business model, participation in debt assistance schemes, customer acquisition and communication strategy, and professional debt recovery practices.

Applicants must have paid-up capital of at least $1 million, to ensure that they are of sufficient financial standing, as well as a track record in providing consumer credit, whether in licensed moneylending or in other sectors of consumer credit. All pilot proposals must comply with all relevant laws that apply to licensed moneylenders.

Under this pilot, business proposals will be assessed based on the effective cost of credit and credit policies, which include the criteria for assessing the credit-worthiness of each applicant, the criteria for deciding the quantum of credit that should be granted, procedures for processing and approving loan applications, and policies on the identification and management of problem loans and defaults.

MinLaw said that it will especially consider applicants with credit policies that rely on objective and quantitative evidence to ensure that each loan is sustainable. It will also recognise additional measures to ensure the health and sustainability of each loan, such as credit monitoring practices.

"Each successful applicant may be granted approval to implement its proposed business models in up to four locations for up to two years. Existing moneylending licensees may submit proposals under this pilot. If selected, they will be subjected to the higher standards stipulated in their proposal," it said.

MinLaw plans to issue moneylending licences for up to 16 outlets for the implementation of new business models under this pilot.

 

The validity of the pilot licence is expected to begin in 2019 and conclude in 2020, following which MinLaw will evaluate the results of the pilot and consider options for refining the moneylending regulatory regime. Interested participants can submit proposals on how they intend to conduct their new moneylending business models in Singapore by July 20, 2018.