Pilot models for moneylending businesses will be set up with the aim of improving the way the industry is run, so that borrowers will be better protected.

Proposals for these pilots are being sought by the Ministry of Law (MinLaw), which has laid out criteria that impose higher standards than existing regulations.

The standards include requirements on applicant profiles, debt assistance schemes, customer acquisition strategies and professional debt recovery practices.

Applicants must have paid-up capital of at least $1 million to ensure they have sufficient financial standing. They must also have a track record in providing consumer credit, whether in licensed moneylending or in other areas.

Existing moneylenders can also apply to run a pilot. Pilot models will be assessed based on the effective cost of credit and credit policies, which include the criteria for assessing applicants and deciding how much to lend, procedures for processing loan applications, and policies on identifying and managing problem loans and defaults.

MinLaw said 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 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," it said.

MinLaw plans to issue moneylending licences for up to 16 outlets under this pilot.

The validity of the licence is expected to begin next year and conclude in 2020. MinLaw will then evaluate the results of the pilot and consider options for refining the moneylending regulatory regime.

Interested participants can submit proposals by July 20.