SINGAPORE - The majority of foreign domestic workers (FDWs) who borrow from moneylenders have worked in Singapore for some time before taking out their first loan.
According to loan records from the Moneylenders Credit Bureau, the median number of years between the workers' first arrival in Singapore and their first loan was eight years in 2016, Senior Parliamentary Secretary for Manpower Low Yen Ling told Parliament on Tuesday (Sept 3).
It was seven years in 2017 and six years in 2018, she said in response to a question by Mr Louis Ng (Nee Soon GRC).
Studies by the Ministry of Manpower (MOM) and the Ministry of Law (MinLaw) found three reasons for the increase in FDW borrowers in recent years, she said.
First, some licensed moneylenders have been targeting FDWs through shopfront advertisements, and readily extending loans to them.
Second, some FDWs have been recommending loans to their fellow FDWs by word of mouth or through WhatsApp and Facebook.
Third, there are more FDWs acting as guarantors for fellow FDWs to obtain loans.
The number of FDWs who have taken loans from licensed moneylenders also spiked significantly, from 1,500 in 2016 to 42,000 in 2018. In the first half of this year alone, the number was 39,000, Ms Low said.
Mr Ng also asked if factors like family emergencies are driving the increase in demand for loans.
Ms Low said increased financial hardship did not appear to be among the reasons for the spike.
Some do need the money for their children's education or to pay bills, but a survey conducted among FDWs queueing up to take out loans found that some of them were borrowing money to buy clothes, mobile phones and handbags, she said.
"To curb the rise in borrowing by work pass holders, MOM and MinLaw had announced in October 2018 the introduction of aggregate loan caps, the self-exclusion framework, and administrative penalties on work pass holders who borrow from unlicensed moneylenders," said Ms Low.
The changes were made in response to more foreigners borrowing from both licensed and unlicensed moneylenders, MOM and MinLaw said in a joint statement last October.
Voluntary groups told The Straits Times then that FDWs make up the bulk of foreigners in Singapore who take loans.
In November, Ms Low told Parliament that her ministry had no plans to introduce measures for FDWs or moneylenders to obtain employers' permission before loans can be issued. She said there were concerns that such measures could push FDWs to borrow from illegal loan sharks instead.
MinLaw also announced more measures to stem the increase in moneylending activities targeting work pass holders in July this year, Ms Low said on Tuesday.
The aggregate loan cap for foreigners earning less than $10,000 a year was reduced from $1,500 to $500 and limits were placed on the supply of loans to foreigners.
Licensed moneylenders were also prohibited from displaying advertisements targeted at FDWs, and from accepting foreigners as loan guarantors, Ms Low said.
"MOM and MinLaw are continuing to monitor the situation very closely, and are working closely with employers, (non-governmental organisations) and employment agencies to educate FDWs on prudent financial management and the risks and implications of borrowing money."