Low-interest loan scheme could curb illegal moneylending

Having read the letters concerning domestic workers who turn to illegal moneylenders for loans, I can't see why they should be discussed as if they are a sort of special case (Educate maids on dangers of borrowing from moneylenders, by Mr Seah Seng Choon, May 21; Put a stop to maids borrowing from moneylenders, by Mr Koh Yee Boon, May 23; Financial education can help protect domestic workers, by Ms Jacqueline Therese Loh Tsi Jian, May 28; Find out why maids are having to resort to illegal moneylenders, by Ms Thian Si Ying, May 31; and How do moneylenders get maids' numbers?, by Ms Lynn Chua Li-Ming, June 1).

People who have low incomes, who, therefore, find it difficult to build up savings, and who have no collateral to secure loans from legitimate lenders often feel forced to resort to expedients that those in a more advantageous economic position would not consider.

The fortunate may be able to borrow money from family members or friends, or obtain an advance on their salaries.

The less fortunate may turn to illegal moneylenders. This is as true of low-income Singaporeans as it is of domestic workers.

There is no simple answer to this problem.

It would certainly help if these disadvantaged sectors of society, foreign and indigenous, had higher incomes that would allow them to save.

Sympathetic advice on money management could also be useful.

Probably all those with low incomes and facing a crisis would benefit from a scheme which provides short-term zero or low-interest loans of limited amounts to tide them over emergencies and spare them from resorting to illegal moneylenders.

A guarantor agency for such loans would be necessary if they were to be offered via the legitimate banking system.

Once in place, such a scheme could spare many people the trials of coping with payments to exploitative illegal lenders, and starve those lenders of their lucrative takings from the low salaried.

John Gee

A version of this article appeared in the print edition of The Straits Times on June 06, 2018, with the headline 'Low-interest loan scheme could curb illegal moneylending'. Print Edition | Subscribe