Scheme helps the low-income tackle debts

Mary (not her real name) and her husband owed more than $1,000 in utilities and town council conservancy charges last July.

The 37-year-old part-time kitchen helper and her husband, a logistics worker, have two children and found it hard to pay off the arrears on their monthly household income of $1,500.

But a scheme that matches debt repayment dollar-for-dollar has helped them pay off the money owed and shown encouraging results in easing chronic debt.

The Family Development Programme was started in April last year by Methodist Welfare Services (MWS) for low-income families under three family service centres it runs. It matches debt repayment dollar-for-dollar, up to $100 a month.

In a study that MWS conducted of the scheme, it found that the 34 families given dollar-for- dollar help reduced their debt from a total of $256,000 to $175,000 over a year.

In comparison, another 34 families not given the funds had their collective debt increased by $18,000 over the same period.

Mrs Cindy Ng-Tay, assistant director of Covenant Family Service Centre and part of the team behind the study, said this hike came from penalty charges and interest on the debts. "It's a typical trend that they get more in debt if they cannot manage. The more alarming thing for me is that they have chronic debts and no savings, so they're very vulnerable."

The debt accrual is especially worrying, given that 94 per cent of the low-income families in the study have had debts for more than a year. Nine in 10 have less than $100 in savings.

While the study's results are preliminary, those on the scheme have found it helpful. For Mary, the fund matching motivated her to manage her money properly and make payments on time.

MWS plans to pump more resources into the programme. It is also keen to start a fund-matching scheme for low-income families to build their savings after becoming debt free.

Meanwhile, the new Strategic Research Partnerships of Social Service Research Centre at the National University of Singapore will start a study on low-income households and debt next month.

kxinghui@sph.com.sg

This article was first published on April 25, 2015.
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