Webinar on “The Challenges of Low-Income Debt and Moneylending in Singapore”

In this webinar, Dr Jodi Gardner will consider a range of relevant issues including moneylending regulation, bankruptcy reforms, and open banking, highlighting what further steps can be taken to increase equality in Singapore’s financial market.

Webinar Series 2020-2021: Financial Transformation, Credit Markets and Household Debt in Southeast Asia

Friday, 5 November 2020 – ISEAS – Yusof Ishak Institute hosted a webinar on “The Challenges of Low-Income Debt and Moneylending in Singapore” which was delivered by Dr Jodi Gardner, a university lecturer in private law at the University of Cambridge, a fellow of St John’s College, Cambridge, and an adjunct senior research fellow at Centre for Banking and Finance Law (National University of Singapore). Dr Gardner held visiting positions at Princeton University, Columbia Law School, Max Planck Centre for International and Comparative Private Law, the Centre on Household Assets and Savings Management (University of Birmingham) and Griffith University, Australia.

Dr Jodi Gardner
Dr Jodi Gardner exhibited the large income inequality in Singapore using the ‘The Commitment to Reducing Inequality Index 2018’. (Credit: ISEAS – Yusof Ishak Institute)

Dr Jodi Gardner started off her presentation with a background on low-Income debt. She elaborated on the cases of inequality in Singapore. Low-income consumers face difficulties in accessing mainstream financing means, thus resorting to licensed moneylending and illegal lenders. Dr Gardner exhibited the large income inequality in Singapore using the ‘The Commitment to Reducing Inequality Index 2018’, where Singapore was in the bottom 10 countries in terms of reducing inequality, ranked 149 out of 157 countries.

Next, Dr Gardner went on to discuss the existing challenges in cultivating financial inclusion, namely: the nature of moneylending, illegal lending, open banking and bankruptcy regulations. Moneylending is an important area in relation to policy and impact on low-income borrowers but makes up only 1% of consumer credit in Singapore. She stressed the lack of other viable options available for low-income consumers. As for illegal lending, most people charged for moneylending offences were moneylending victims themselves. She opined that the legal regime was often treating the symptoms and not the cause of moneylending offences. Moreover, there has been a huge increase in illegal lending as a result of the economic consequences from COVID-19. Open banking is said to increase financial inclusion, but it is risky sharing consolidated financial data with financial institutions as well as non-banking entities such as FinTechs. Lastly, she explained how bankruptcy has an unintended consequence of ‘locking’ low-income people out of the system.

In closing, Dr Gardner shared potential financial transformation to alleviate the issues faced by the low-income bracket. She proposed four ways to go about doing so: social reform, bankruptcy reform and maximizing open banking opportunities. Her suggestions for social reform include helping people manage their finances better which would prevent them from getting into problem debt, providing assistance to those overly indebted to regain financial control, increasing government support to prevent people from turning to illegal lending, and education campaigns to educate people on distinguishing licensed moneylending from the illegal ones. Dr Gardner’s bankruptcy reform proposition involves increasing focus on financial education, providing pre-bankruptcy assistance and increasing the assistance available for consumers with small levels of debt. On open banking, she sees various opportunities to use it for good. However, she notes that it would be challenging for firms to monetise products that would be beneficial to consumers in the long run.

The webinar concluded with Dr Gardner answering several questions posed by the audience. Questions discussed included the role of regulators in increasing equitable access and stamping out predatory lending, the likelihood of digital bank license-holders in Singapore to cater to low-income or “small” borrowers and the use of Information Technology (IT) to help increase access to open banking and other FinTechs amongst the low-income families given their low digital capabilities.

60 participants attended the webinar. Dr Sandra Booysen (Associate Professor, Faculty of Law, National University of Singapore and Deputy-Director of the Centre for Banking & Finance Law) was the discussant, and Dr Nicolas Lainez moderated the session. The webinar is co-organised with CBFL/NUS. (Credit: ISEAS – Yusof Ishak Institute)