New moneylending regulations in Singapore

The Singapore Ministry of Law will implement the first phase of the Moneylenders (Amendment) Act 2018* and Moneylenders (Amendment) Rules 2018 to provide better protection for borrowers and strengthen the regulation of licensed moneylenders from 30 November. 

The new rules will introduce aggregate loan caps to limit the amount an individual may borrow from all licensed moneylenders combined. As announced on 4 October 2018, the following caps will apply to Singapore citizens and permanent residents, as well as foreigners residing in Singapore**:

To facilitate the implementation of the aggregate loan cap, a regulatory framework has been introduced for the Moneylenders Credit Bureau (MLCB). The new framework places obligations on the MLCB and licensed moneylenders to strengthen the confidentiality, security, and integrity of borrower data. This will better enable the MLCB to function as a central repository of moneylending data, and help moneylenders make more informed and responsible lending decisions, the ministry said. 

The new rules also provide for a self-exclusion*** framework, to help borrowers regulate their borrowing behaviour and participate in debt assistance schemes which typically require self-exclusion. Under the framework, licensed moneylenders are prohibited from lending to any individual who has applied for self-exclusion. Implementation of the self-exclusion system is on-going; more details will be available in due course. 

To prevent undesirable characters from entering the moneylending industry, the approval of the Registrar of Moneylenders will be required before any licensed moneylender can employ or engage any assistant in the business. The Registrar’s approval will also be required before anyone can become a substantial shareholder of, or increase his substantial shareholdings in, a licensed moneylender. 

In addition, it is now an offence for any licensed moneylender to enter into a loan contract that breaches regulatory caps on interest and fees. 

Legislative changes relating to the professionalisation of the moneylending industry will take effect in the first quarter of 2019. All licensed moneylenders will be required to be incorporated as companies limited by shares with a minimum amount of paid-up capital of S$100,000, and to submit annual audited accounts to the Registry of Moneylenders.

*The Moneylenders (Amendment) Act 2018 was passed by the Parliament on 8 January 2018.

**The aggregate loan caps apply to all holders of Work Passes, Dependent’s Passes, Student Passes and Long Term Visit Passes. Holders of Short Term Visit Passes (up to 90 days) will not be covered. 

***In a self-exclusion framework, someone can request that their name is added to a list of people who are excluded from an activity. In the traditional sense, they would be banned from borrowing money though the regulations could implement self exclusion differently - they could be allowed to borrow much less money instead, for example.

Harmoney shows off glowing first-year scorecard

The first-year success of peer-to-peer (P2P) marketplace Harmoney, New Zealand's only operating P2P lender, is showing pent-up demand for crowd-funded microloans.

The company launched on 10 September 2014 with NZ$100 million of committed lending capital from institutions including Blue Elephant Capital Management and Heartland Bank. Over its first year of operation, Harmoney has facilitated NZ$100 million of personal loans in less than 12 months, the company said. Harmoney has also created 65 new jobs in New Zealand, Australia and Fiji and is preparing to launch in Australia.

Harmoney brings lenders -  called investors - and borrowers together. Some 70,000 loan applications were received, valued at about NZ$1 billion, and 90% of the loans were funded by the marketplace within 24 hours, the company said. On the lender side, Harmoney welcomed 3,000 active individual investors with an average account balance of NZ$6,000. As a whole, investors earned total interest income of NZ$6 million, and the average realised yield was 13%. The platform also welcomed several large institutional investors including Marshall Wace and P2P Global Investments in its first year.

"There is strong and growing demand for higher investment returns and cost effective borrowing and a growing awareness of the benefits of P2P. We're proud to be the platform that facilitates people investing in people," says Harmoney CEO Neil Roberts.

"Kiwis, in keeping with their reputation as early adopters, are embracing Harmoney's P2P offering with enthusiasm. We are achieving phenomenal growth, and in 12 months have attracted 70,000 loan enquiries worth NZ$1 billion and welcomed 3,000 active personal investors to our marketplace, www.harmoney.co.nz. With the exception of China, this level of growth is unheard of, and reflects the hard work and experience of the team."

Harmoney's focus is on acquiring and retaining creditworthy borrowers, says CEO, Neil Roberts.

"The team wanted to limit the exposure to higher risk customers, so apply risk-grade lending limits, and only fund a fraction of the applications received. Using our proprietary scorecard lower risk 'A' credit grade applicants can borrow up to NZ$35,000, compared to just NZ$5,000 for an 'F' customer."

Harmoney's median customer has a C1 risk profile; considered a solid customer to finance. A typical C1 applicant has an unblemished credit history, is 45 to 49 years old and married with a mortgage.

Investors fractionalise their investments, a process that breaks a loan into $25 units called "notes". This approach allows investors to select how many "notes" they wish to fund in a particular loan, which spreads risk. Harmoney's individual investors currently fund 25% of loans available*, and have an average investment of NZ$6,000. Investors are able to achieve higher rates of return (target 12%).

Harmoney is focusing on making greater use of emerging technology, particularly mobile, developing channels to market, enhancing its online marketplace with new products for high net worth individuals, and growing even faster.

New Zealand is one of the first countries in the world to overhaul securities law and to allow for peer to peer lending platforms which can act as a challenge to traditional banking. P2P lending platforms operate with benchmark operational costs far lower than any main street bank and typically pass on the savings to lenders using the platform. The service providers are regulated, licensed and policed by the Financial Markets Authority (FMA).