Private Companies Provide Cash Advances to Their Employees as Exempt Moneylenders

3 Mr Yip Hon Weng asked the Minister for Law (a) how many private companies, including Grab, are authorised to provide cash advances to their employees as exempt moneylenders; (b) whether exempted moneylender schemes such as Grab's Partner Cash Advance programme which charges an interest rate comparable to that of credit card companies should be subjected to the same regulations for moneylenders; and (c) what measures are there to prevent companies from using "cash advances" as a means of engaging in moneylending activities with high-interest loans.

The Senior Parliamentary Secretary to the Minister for Law (Ms Rahayu Mahzam) (for the Minister for Law): Mr Speaker, at the outset, it is important to set out the framework that applies to the regulation of moneylenders in Singapore, as this is necessary to answer the Member’s question.

The Moneylenders Act 2008, or MLA, prohibits persons from carrying on the business of moneylending unless they (a) are authorised to do so by licence, (b) have been granted an exemption, or (c) are excluded moneylenders.

Moneylenders that are licensed can lawfully lend money to the public at large and must comply with the MLA and its subsidiary legislation.

An “excluded moneylender” is a person falling within a list of definitions in the MLA and includes any person that lends solely to that person’s employees as an employment benefit. The provisions in the MLA and its subsidiary legislation do not apply to excluded moneylenders. The Ministry of Law (MinLaw) does not regulate excluded moneylenders and does not maintain figures on the number of such moneylenders.

An “exempt moneylender” refers to any person that has been granted an exemption by MinLaw from complying with various provisions of the MLA and its subsidiary legislation, including the requirement for a licence to lend money. Exempt moneylenders can only engage in a limited scope of moneylending activities, such as lending to specific borrowers or for specific purposes. Lending by exempt moneylenders must be assessed to have potential benefits, such as providing an avenue of safe credit to meet a specific need, while also having sufficient safeguards in place to protect borrowers. There are currently 31 exempt moneylenders.

Before granting any exemption to any applicant, MinLaw carefully examines the proposed lending model to ensure borrowers get safe access to credit with adequate protection. The factors considered include the profile of the applicant, the purpose of the proposed lending model, the prudency of the lending practices adopted, whether there are safeguards in place to protect potential borrowers and the economic or social benefits arising from the lending model.

For each exemption granted, the key features of the proposed lending model, including the charges on loans, are incorporated as conditions to the exemption, which the exemptee is expected to comply with. In addition, exempt moneylenders, like licensed moneylenders, are required to observe borrowing cost restrictions, to prevent them from extending loans with exploitative interest rates. An exemption can be revoked for non-compliance with its conditions.

In this regard, GFin, a subsidiary of Grab, intended to implement its “Partner Cash Advance” programme for Grab drivers and delivery partners. As these persons are not employees of GFin, GFin could not be considered an excluded moneylender. Hence, GFin had to apply for an exemption to implement the programme.

In granting the exemption to GFin, MinLaw assessed that its proposed programme provided an alternative source of safe and sustainable credit to their partners who might not qualify for other forms of credit or who may be charged high interest rates due to their irregular incomes. Furthermore, GFin had incorporated sufficient safeguards in the programme such as developing an internal credit scoring system to assess the maximum amount of loan a partner could take and had put in place various initiatives to provide support for partners who face challenges in making repayments. Having weighed these considerations, MinLaw granted GFin an exemption in August 2022 for a period of three years.

Should MinLaw receive other similar exemption applications in future, the same framework in which we assessed GFin’s application will be applied to these applications.

Mr Speaker: Mr Yip.

Mr Yip Hon Weng (Yio Chu Kang): I thank the Senior Parliamentary Secretary for the reply. Learning from GFin, how can we better monitor and regulate the introduction of new initiatives and programmes that offer commercially high interest loans, which are just like licensed moneylenders?

Ms Rahayu Mahzam: As explained in my answer earlier, there is already a framework in place, which is the MLA, to regulate the practice of moneylending. So, if they do not comply, then, they would be in breach and that would be non-licensed, and there would be penalties that will be attracted.

In respect of programmes like these that have been put out by Grab, these are in a special category and they have to apply for exemptions. As I mentioned, there are rigorous criteria that we look through before that exemption is granted. The conditions are attached to the exemption and there is monitoring as to whether there is compliance and whether it is within a certain timeframe, after which they are either extended, with or without conditions, or not given further. I trust that addresses the Member's questions.