SINGAPORE: Six companies in Singapore will pilot new business models for moneylending, which would grant borrowers better terms if they repay their loans early or on time, said the Ministry of Law on Tuesday (Dec 11).
The new models will also include more comprehensive use of data to assess creditworthiness, as well as use digitalised processes to lower cost.
This is part of an initiative to better protect borrowers though business-led improvements, said the ministry in a media release.
Of the six firms, three - Credit 21, Dey and Quick Credit - can apply to operate four moneylending outlets each. IFS Capital, Minterest and Xingang Investment are allowed to operate one outlet each.
"The six firms will be issued moneylending licences to operate the outlets they apply for, in a one-time lifting of the moratorium imposed on the issuance of new licences."
In 2012, a moratorium was imposed on new licenses for moneylenders. Since then, the number of moneylending outlets has decreased from 215 to 162 outlets.
"The six firms will be allowed to apply for licences for up to 15 new outlets in total, and this represents less than 10 per cent of the 162 outlets currently operated by the 157 licensed moneylenders," said the ministry.
The licensee will be allowed to operate for up to two years from next year onwards. The ministry will then evaluate the results of the pilot and consider options for refining the moneylending regulatory regime, it added.
The firms, which were selected among 38 applicants, were chosen as they met a set of stringent mandatory criteria, the Law Ministry said.
These include the soundness and completeness of the business model, participation in debt assistance schemes, professional debt recovery practices, customer and communication strategies and effective cost of credit and credit policies.
They also have paid-up capital of at least S$1 million and a track record in providing consumer credit, said the ministry.