Good news for those who borrow from licensed moneylenders. There are now plans by Credit Counselling Singapore to introduce a debt restructuring programme. Working with the Moneylenders Association, this programme is slated to be rolled out next year. There is hope yet, for borrowers who have accumulated multiple debts.
At the moment, such debt restructuring programme is already in existence but only with banks. What it does is lay down rules of the amount a debtor should pay off, of his loan, every month, with a specified interest rate and stipulated time period. Without such a programme with licensed moneylenders, there are persistent issues with borrowers who turn to various moneylenders and accumulate multiple debts and end up being unable to repay the loans.
This should also be good news for licensed moneylenders though it may take effort to convince all moneylenders of the benefit of this structured programme. For moneylenders, debt amounts are usually smaller than those of the banks and debt collection from those who default on payments prove to be costly and inefficient considering the smaller amounts owed.
Without a structured programme to manage debt repayment within moneylenders, the current situation is that 10-20% of loans are usually written off with default rates of 30%. On the contrary written off debts from credit cards (banks) stand at a significantly lower percentage of 4-5 of average rollover balances.