‘Common’ for maids to take loans; limits could solve ‘problem of overborrowing’
SINGAPORE — She had family members who were jobless. Her two brothers were badly injured in an accident, with electricity bills needing to be paid. She had nieces and nephews who required money for their studies. Her sister was on medication and that needed to be paid for, too.
SINGAPORE — She had family members who were jobless. Her two brothers were badly injured in an accident, with electricity bills needing to be paid. She had nieces and nephews who required money for their studies. Her sister was on medication and that had to be paid for, too.
Desperately needing money to deal with her family emergencies back home in the Philippines, Jane (not her real name) borrowed more than S$7,000 from seven moneylenders, some of them unlicensed ones. The amount is almost six times her monthly pay of S$1,200.
But she had trouble repaying her debts, until loan sharks threatened to burn her employers' house down.
“We know of course (that we need to return the money) but at that time, we need to solve our problems. So we don’t care,” the 37-year-old foreign domestic worker said.
Her difficulty in repaying her loans led her to Blessed Grace Social Services, a charity that helps Filipino domestic workers who are mired in debt.
The number of low-income foreigners here who are borrowing from licensed moneylenders and chalking up debt has grown sharply, a trend that is worrying the Government.
On Monday (July 15), the Ministry of Law lowered the maximum amount that these workers can loan from licensed moneylenders from S$1,500 to S$500. The ministry also imposed new restrictions on licensed moneylenders in a bid to stem the tide.
Organisations helping these foreign domestic workers said such borrowing activities are very common among maids in Singapore.
However, many are not aware about the risks of taking such loans, said Pastor Jolene Ong, who started Arise2Care Community Services — an organisation that helps workers here negotiate better repayment terms.
“They are not fully aware about legal moneylenders, of how they calculate, the loan tenure, how they are going to pay back. All they know is, ‘Friend recommend me then I go,’” Ms Ong added.
For Jane, it was her cousin who told her where to get loans. “Everyone say here have, there have, everywhere have,” she said.
For some of the maids who have sought help at Arise2Care, Ms Ong said that some loan agreements require them to pay their dues before their salary comes in at the end of the month.
“So they are stuck. They are so afraid that the moneylender will send a demand letter,” she added.
Hence, Pastor Billy Lee, executive director of Blessed Grace Social Services, said that education efforts need to accompany the new restrictions.
These include teaching foreign domestic workers how to “differentiate between licensed and unlicensed moneylending”, as well as educating employers on how to be “more open to lend money to their helpers” when they need it, he said.
The reduction of loan limits from S$1,500 to S$500 will definitely make repayment easier, said both pastors, with Ms Ong believing that it will “solve the problem of overborrowing”.
However, Mr Lee said that it might not be effective in reducing the demand for borrowing.
Ultimately, it is their low wages, peer pressure and untimely payment from employers that push many to borrow, according to a survey his organisation conducted.
One licensed moneylender, who wanted to be known only as Mr Ong, said that they are an important resource for foreigners who genuinely need to send money back home as many employers are not willing to lend them.
“Some get sent back to their home country (for asking for money) and some also don’t dare to ask. Even asking for an advance, a lot of employers turn them down,” he added.
TOO SUDDEN AND TOO ABRUPT
Licensed moneylenders TODAY spoke to said that their businesses will be impacted by the new regulations.
Mr Peter Tan, president of the Credit Association of Singapore, said that some members of the industry body felt that the road ahead will be “tough” and that they may have to wind up their businesses.
“They find it not sustainable,’ he added.
The licensed moneylenders interviewed by TODAY added that their bottomline will definitely take a hit once the new regulations come into effect.
While they understand the Government’s intentions to curb excessive borrowing by foreign workers, some licensed moneylenders felt that the changes were “too sudden” and “too abrupt”.
Mr Ong said that they should be given three to six months to make adjustments, such as loan tenure agreements with their existing customers.
A cloud of uncertainty also hangs over borrowers, with Mr Ong fielding non-stop calls from customers since the news broke, with many asking, “how now?”
About 40 to 60 per cent of Mr Ong’s customers are foreigners.
Industry players also believe the huge restrictions will push more genuine borrowers to unlicensed moneylenders.
“Do you think S$500 is a lot of money by today’s standards? The loan sharks are the ones rubbing their hands with glee,” said Mr Tan from the association.
Alluding to the same sentiment, another moneylender, who wanted to be known only as Mr Tan, said that the new regulations are akin to the sudden banning of cigarettes.
“It’s just like saying, ‘Tomorrow we are going to ban cigarettes.’ Those people who need cigarettes will still look for cigarettes,” he said.