Unsecured Credit, Moneylending & Protection of a Social Minimum in Singapore

Abstract

On 6 April 2015, the Singaporean Monetary Standards Authority (MAS) announced additional restrictions on theamount of unsecured credit Singaporean borrowers will be entitled to obtain from banks and other financialinstitutions. These restrictions will be phased in gradually over four years to allow people time to adjust to the newmeasures. The MAS restrictions are occurring at the same time as the Ministry of Law’s (MinLaw) implementationof a new aggregate borrowing cap on moneylending loans. The aim of these restrictions are to reduce the levels ofover-indebtedness in Singapore, which is a very worthy goal. There is concern however from some stakeholders thatthese limitations could have a flow-on effect to other areas, namely pushing vulnerable borrowers into moreexpensive or harmful forms of credit. As the MAS restrictions come into force, people may be tempted to move frommainstream unsecured credit to moneylending which is generally more expensive, but is not covered by the MAScap. In light of these issues, this paper analyses the current regime in relation to unsecured credit and moneylending.It considers the aims and potential unforeseen outcomes of the MAS and MinLaw restrictions, as well as the abilityof the borrowing limitations to stop over-indebtedness and protect a socially minimal standard of living forborrowers in Singapore.