Singaporeans and PRs have aggregate loan caps and self-exclusion framework for borrowing from licensed moneylenders to protect themselves and their families. But foreigners do not face the same restriction, and this has led to an increase in the number foreigner loan and problems that arises with it.
Foreigner Loans Increased 4.5X from 2016
Pastor Billy Lee, executive director of Blessed Grace Social Services said, “Many of these maids come with no money and a mountain of debt to their agents. By right they shouldn’t be borrowing any more money.”
This has led to problems for some employers as they are left to deal with the mess, which include harassments and unsolicited phone calls, left behind from their maid’s borrowing after sending them back home.
A Cap on Foreigner Loans in Singapore
The new cap on foreigner loan, implemented in Q4 2018, will affect foreigners holding any of the following passes: work passes, long-term visit passes, short-term visit passes, dependant’s passes and student passes.
The loans will also be capped based on the foreigners’ earning power.
Foreigners will also be able to protect themselves by applying for self-exclusion, which are already available to Singaporeans and PRs.
Foreigners who borrow from Unlicensed Moneylenders
To further reduce and limit the problems of borrowing, Ministry of Law has taken a hard stance on those who chose to borrow from unlicensed moneylenders.
All foreigners found guilty of this will have their work pass revoked, repatriated and barred from further employment in Singapore. Although employers can choose to appeal this on a case-by-case basis.
Education is Still the Most Important
Prevention is still always better than cure, and the ministries understand this.
So besides having these restrictions in place, the MOM and police will also step up education on the management and risk of borrowing from moneylenders for both foreigners and employers.
The rest of the moneylender restriction stays the same for foreigners — that includes the 4% interest rate caps on the loans and the sum of all permitted borrowing costs on any individual loan must not exceed 100% of the loan principal.
Our team here feels this is a great step in the right direction. Although most licensed moneylenders are already cautious when lending to domestic workers, having a cap in place will help inform those with less experience.