Letter of the week: Help needed for small firms, individuals with credit woes

A view of the Singapore skyline on Jan 3, 2020.
A view of the Singapore skyline on Jan 3, 2020.ST PHOTO: LIM YAOHUI

While it is appropriate that the Government will provide help to firms adversely affected by the coronavirus outbreak, there are many firms and individuals who may not be directly employed in hard-hit sectors that will also need assistance (Targeted help for transport, tourism sectors in Budget, Feb 2).

Already, people are cutting down on gatherings such as eating out, and other social and sports activities.

Service providers, many of whom are part-timers and gig workers, will see a reduction in clientele, and the knock-on effects of reduced spending and income will be felt widely.

Unfortunately, when enterprises and individuals are unable to make payments or instalments, credit facilities are frozen and demands for full payment are made.

This was what happened during the severe acute respiratory syndrome (Sars) outbreak, which worsened the plight of many borrowers.

In a multi-creditor environment, there is little incentive for lending institutions to cooperate, particularly if the borrowing enterprise is small.

It is even harder to persuade lenders to provide new credit and fresh funds to keep an enterprise going when it is already struggling to pay existing debts.

Faced with declining revenues, many individuals have had to draw down on their savings and resort to borrowing from friends and expensive sources such as credit card facilities.

Indeed, there was a surge of personal delinquencies and bankruptcies after the Sars period which gave impetus to the formation of Credit Counselling Singapore (CCS).

Even after Sars was over, during the following few years, CCS saw many individuals who were still struggling to pay off debts incurred during Sars.

What is urgently required is a coordinated approach by all creditors to participate in an assistance programme that would cover existing loans and include elements of a debt repayment moratorium, reduced or rescheduled loan instalments and fresh new credit for working capital.

The Government could underwrite such new working capital loans to save viable enterprises and to preserve jobs.

Assistance should be extended to individuals whose income is reduced and who are unable to pay their existing housing and other instalments.

Such fixed outgoings could be rescheduled and repackaged to a more affordable level until their income improves. Lenders should be sympathetic and alleviate the difficulties of affected individuals during this difficult period.

Kuo How Nam