SINGAPORE - I was shocked to learn that licensed moneylenders charge interest of between 150 per cent and 420 per cent per annum on loans ("So easy to borrow money"; last Sunday).
What societal or market needs do licensed moneylenders serve?
Understandably, unsecured loans demand higher interest rates to cover the risk and cost of defaults.
That said, can loans with such high interest rates be repaid by a typical borrower?
Someone earning $4,000 a month and needing to borrow $10,000 (with interest of 30 per cent per month) for an emergency would face a monthly instalment of $3,000 per month.
Given the cost of living, is it reasonable to expect such a loan to be repaid?
The high interest rates charged by licensed moneylenders may play a significant role in forcing borrowers to default on their interest payments.
As the Law Ministry mulls over aligning its rules on licensed moneylenders with those of the Monetary Authority of Singapore, I hope our policymakers will give due consideration to how the updated policy is guiding licensed moneylenders towards serving their intended purpose.
Terence Teo Ling Kai
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