SINGAPORE – About 160 foreign work pass holders – mostly foreign domestic workers – who borrowed money from unlicensed moneylenders and loan sharks have been repatriated since last October and barred from employment here.
Also, two maids are being investigated by the Ministry of Manpower (MOM) for acting as brokers for licensed moneylenders and profiting from it.
They may be charged under the Employment of Foreign Manpower Act for working illegally without a valid work pass. They can be fined up to $20,000 or sentenced to prison for up to two years, or both.
MOM revealed details of these enforcement actions in response to queries from The Straits Times, following an announcement on Monday by the Ministry of Law (MinLaw) of new measures to tackle the trend of foreign work pass holders borrowing money here.
New measures include further tightening of loan caps for low-income foreign workers, restrictions on foreigners as guarantors as well as limits for moneylenders on the supply of loans to foreign borrowers.
Last November, the Government had also introduced measures, such as new aggregate loan caps on what foreigners can borrow from moneylenders, and also the penalties in repatriating foreign work pass holders and barring them from employment here if they had borrowed from loan sharks.
But the number of foreign borrowers who take loans from licensed moneylenders has continued to spike this year to 53,000, up from 35,500 in the same period last year and 4,000 in the first half of 2016.
The number of work pass holders acting as guarantors also grew from about 50 three years ago to about 6,000 last year, said MinLaw, adding that some were found to have brokered loan applications for fellow work pass holders in exchange for money.
Such activities, as well as the demand from borrowers and targeted advertising by licensed moneylenders, were among the factors fuelling the growth in foreign borrowers, said MinLaw.
It said the new measures aim to strike a balance between calibrating the supply of credit and protecting borrowers, while recognising that some foreign work pass holders may have genuine reasons to borrow.
“The Government will continue to monitor the situation closely following the implementation of these measures. We are prepared to do more if necessary, including a complete prohibition on lending to foreigners,” it added.
On the trend of work pass holders acting as guarantors for each other, MinLaw said it has observed that in some cases the borrower and guarantor would split the loan amount between them.
In other instances, the guarantor may not be able to qualify for a loan as he or she may have exceeded the aggregate loan caps. The guarantor then rides on another borrower’s aggregate loan quota to take up a loan.
Credit Association of Singapore president Peter Tan said the need for guarantors is not a common practice and depends on the individual moneylenders and their risk appetite.
Giving loans to foreigners or taking up foreign guarantors always poses a flight risk, which some lenders are willing to bear, he added.
“We are providing a service. When people need the money fast we can do that, and some of these people are able to pay back without problem,” said Mr Tan, adding that borrowers, foreign and local, do have legitimate needs for taking up loans.
However, some those in the industry warn that stricter rules could have the unintended effect of steering foreign borrowers to loan sharks if they are unable to take loans with licensed lenders.
Pastor Billy Lee, executive director and founder of Blessed Grace Social Services, said that though the measures curb overborrowing for foreign domestic workers, there is still the worry that they may not think rationally when there’s an emergency.
“At such times, they may take the illegal way out without thinking of consequences,” he told The Straits Times.
To prevent such occurrences, Pastor Lee said parallel measures of help should be emphasised alongside the regulatory measures.
“Volunteer welfare organisations and employers should be aware of the vulnerabilities of these workers, educate them of the risks of borrowing from illegal moneylenders and prepare alternatives for them in case of emergency,” he said. Such alternatives include employers being open to advance salary payments and lending money to foreign domestic workers.
Pastor Jolene Ong, 56, chairman of Arise2Care Community Services, an organisation helping people to manage debts, said the danger of foreign domestic workers turning to loan sharks exists.
“But it can be countered with education for these workers: making them aware of the consequences of loaning money illegally, such as being deported and high interest rates,” she added.