Will Singapore banks regret easy loans for coronavirus-hit businesses?
- Struggling businesses have taken out 2,500 loans since March and while there is a risk of default, analysts say the loans will prevent the larger calamity of businesses collapsing
- Also, banks are well-capitalised and regulated enough so bad loans won’t threaten their viability
Some loan sharks have been driven to desperation from a lack of business. Bogus advertisements for staff to enforce stay-home orders are actually requests for runners. Hundreds of dollars worth of food deliveries are sent to debtors as harassment.
ValueMax, one of Singapore’s biggest moneylending and pawning chains with over 30 outlets, said it had seen fewer clients borrowing money since the start of the city state’s partial lockdown, termed a “circuit breaker”, on April 7.
A ValueMax spokesman attributed this to government assistance schemes. One such initiative, the MAS (Monetary Authority of Singapore) Singapore Dollar Facility, allows banks to borrow at a near-zero interest rate.
This means banks can reduce the cost of loans to small and medium-sized enterprises (SMEs) and offer an interest rate of between 2 and 4.5 per cent per annum, down from up to 6 per cent previously. In contrast, licensed moneylenders can charge up to 4 per cent monthly interest.
