Foreign Domestic Workers Borrowing from Licensed Moneylenders

11 Mr Louis Ng Kok Kwang asked the Minister for Manpower (a) for each year in the past five years, among foreign domestic workers (FDWs) found to have borrowed money from licensed moneylenders, what is the median number of months between their first arrival in Singapore and the first loan they take; and (b) whether the Ministry can provide an update on whether a study has been conducted on this issue and, if so, what are the top three reasons for the sharp rise in the number of FDWs borrowing from licensed moneylenders.

The Senior Parliamentary Secretary to the Minister for Manpower (Ms Low Yen Ling) (for the Minister for Manpower): Mr Speaker, Sir, based on the available loan records from the Moneylenders Credit Bureau, which was set up in 2016, the median number of years between the foreign domestic workers' first arrival in Singapore and the time they took their first loan in 2016, is eight years. And for those who took up their first loan in 2017 and 2018, it is seven years and six years respectively. It means that the majority of foreign domestic worker (FDW) borrowers have worked in Singapore for some time.

MOM and MinLaw have studied the reasons for the surge in FDWs' borrowing in recent years. It is a combination of supply and demand side factors. First, it was observed that some licensed moneylenders (LMLs) have been targeting the FDWs through shopfront advertisements and readily extending loans to them. Second, some FDWs have been recommending loans to their fellow FDWs by word-of-mouth, WhatsApp or Facebook. Third, there are some FDWs acting as guarantors for fellow FDWs to obtain loans.

To curb the rise in borrowing by Work Pass holders, MOM and MinLaw had announced in October 2018 the introduction of aggregate loan caps, the self-exclusion framework and administrative penalties on Work Pass holders who borrow from unlicensed moneylenders. In July this year, just about two months ago, MinLaw announced further measures to stem the increase in moneylending activities targeting foreigners earning less than $10,000 per annum. The aggregate loan caps for foreigners earning less than $10,000 per annum were reduced and limits were placed on the supply of loans to foreigners. LMLs are also prohibited from displaying advertisements targeted at FDWs and from accepting foreigners as loan guarantors.

MOM and MinLaw are continuing to monitor the situation very closely. We are working closely with employers, non-governmental organisations (NGOs) and employment agencies to educate FDWs on prudent financial management and the risks and implications of borrowing money.

Mr Louis Ng Kok Kwang (Nee Soon): I thank the Senior Parliamentary Secretary for the reply. But could I ask, not the top three reasons of how they are borrowing but the top three reasons of why they are borrowing. I think there are some reports that say that they are borrowing because of family emergencies. I am just wondering how effective are our new measures will be. If it is for family emergencies and we block them from licensed moneylenders, will we not then push them to the unlicensed moneylenders that will put them in a more difficult position, the FDWs and the employers as well? That is why I think if we can study the reasons of why they are borrowing, I think then we can address the root of the problem and then come up with policies to address it.

Ms Low Yen Ling: Mr Speaker, Sir, I want to thank the Member Mr Louis Ng for his supplementary questions. At this juncture, let me share some numbers. We have been monitoring the numbers since we rolled out the measures announced in October 2018. Based on the data from Moneylenders Credit Bureau, from March 2016 to June 2019, the number of FDWs who took loans from licensed moneylenders in 2016 was 1,500. In 2017, it was 12,000. And in 2018, it was 42,000. And just in the first half of this year, it is 39,000. So, the spike has been from 2017 to first half of this year which really warrants the two rounds of measures.

The Member is right. The licensed moneylenders are allowed to lend money. So, there is an option for FDWs to borrow, especially those with genuine needs. And we did the study on not just the supply side consideration but also on the demand side. Some FDWs borrow because they need to send money back for their children's education, to pay for urgent medical bills, or to renovate or build houses and so on.

If you think about the numbers that I talked about, actually, in year 2016, it was quite stable, at 1,500. But it spiked seven times to 12,000 in 2017 and then 2018. The two Ministries studied it and we think that increased financial hardship does not appear to be a reason for the surge in the FDW borrowing. Nonetheless, we encourage our FDWs to maintain open communications with their employers to talk about their financial needs and also to plan their finances for rainy days.

In terms of the measures we highlighted in July, we have reduced the aggregate loan cap from $1,500 to $500 and we have also limited the number of foreigners that the licensed moneylenders can lend to in their loan book and so on. And we will continue to monitor the situation.

FDWs who need help, other than speaking to employers, we encourage them to also come forward to MOM and the NGOs, including the Centre for Domestic Employees or even the Foreign Domestic Worker Association.

Going back to Mr Louis Ng's question on why FDWs borrow, I mentioned that there are some FDWs with genuine needs. Our study also found that some FDWs are recommending their fellow FDWs to get loans and even going to the extent of being a guarantor for them to get the loan. When we did a survey amongst the FDWs who were standing there queuing up to borrow money, some of them did share that they were borrowing money to buy clothes, mobile phones or handbags. So, I think it is a combination of needs and wants.