Singapore’s First Microloan Scheme Taking Off
Singapore, November, 17 2011 -
Singapore will soon see its first microloan scheme – to help low-income and unemployed Singaporeans venture into business. DBS Bank will help set it up with $5 million seed funding from the Tote Board.Supported by the Tote Board, SE Hub was set up in March this year to invest in and incubate social enterprises.
According to an announcement yesterday, the bank, through its POSB arm, will work with Tote Board and SE Hub Ltd to launch a pilot programme, the microcredit business scheme (MCBS), to provide business loans to low-income individuals.
Singaporeans who were previously unable to get a loan through mainstream channels can now get an unsecured loan of $5,000 to $50,000 through the MCBS. An applicant has to be a Singapore citizen, at least 18 years old, and earn less than $30,000 per year to be eligible for the loan. The initiative will start with $5 million seed funding from the Tote Board. Loan repayments will be injected back into the scheme to help new loan applicants, the announcement said.
Microloans are a new concept here and some of their features are different from regular bank loans. For instance, loan repayments will be in fortnightly instead of monthly instalments, said Fen Peh, a DBS spokeswoman. ‘It will help to instil discipline in budgeting and the borrower will not be overwhelmed by the repayment (amount).’ Interest rates charged on the microloans will start from 8 per cent a year, she said.
The scheme will be managed by the MCBS Programme Office, which resides in SE Hub and will be overseen by a loan management committee with representatives from POSB, the Tote Board, SE Hub and other private or public sectors. The committee will decide on the loan amount, disbursement and tenure based on the evaluation of the applicant’s business plan and credit information.
As the loan administrator, POSB will provide support on the loan structuring of the microloans and facilitate the flow of the funds, including loan disbursements and repayments. ‘This flexible scheme is designed to encourage discipline and self-sustenance whether it is for short-term business initiatives such as selling pastries during festive periods or to fulfil a longer-term business plan such as starting a retail shop.’ said Koh Kar Siong, head of POSB.
Loan applicants will have to provide a business plan. Once successful, applicants will attend a complimentary training programme, on the basics of business financial management such as cash flow and record keeping, and the concepts of loans and savings. Kuo How Nam, chairman of the loan management committee, SE Hub, said that the microloan ‘is envisaged to meet the objective of assisting low-income or unemployed Singaporeans with financing to start their business which would otherwise be unobtainable from traditional banking sources’. Mr Kuo said that applicants who may have difficulty articulating their business plans will get help.
Asked about the potential demand, Mr Kuo said nobody knows, because the scheme is new to Singapore though discussions to introduce it has been going on for some two years. ‘We think there’s a potential based on the success of microloans elsewhere,’ he said. The scheme would be seen as successful if it serves the objective of the low income to start a business or help increase their income, he said. It’s not a question of making profits on it. ‘Profitability (of the scheme) does not arise,’ he said.
The scheme starts on Friday. Those interested may obtain the application form from any POSB branches, the MCBS Programme Office at Singapore Polytechnic or download it from the MCBS website, www.mcbs.com.sg. They can also get information from selected voluntary welfare organisations or self-help groups regarding the scheme.