Distinguished guests

Ladies and Gentlemen

Introduction

            I am happy to join you today at the launch of Credit Counselling Singapore.  It is a valuable scheme.

2          Whether to take credit and how to plan your finances are personal and family decisions.  But we know that we can do some things to help individuals make sound decisions on their financial commitments.  The first way is through education, to raise awareness amongst consumers of the need to plan ahead, and avoid spending beyond their means.  The second way is to provide credit counselling, to advise and assist borrowers on debts already incurred.

3          Many societies have seen a shift in social attitudes, with consumers being increasingly willing to spend on credit.  A study by the Singapore Department of Statistics (DOS) published in July 2004 showed that consumer credit as a percentage of GDP in Singapore nudged up from 10.7% in 1999 to 11.9% in 2002[1].  It is too early to say the trend will last.  But other countries have shown similar trends.  In the US, the figures grew from 16.7% to 18.4%, and in the UK from 12.9% to 15.1% over the same period.

4          However, in most countries, the greater usage of credit has not been accompanied by an awareness of the importance of prudent money management.  More consumers therefore get into financial difficulties including bankruptcy as a result of the improper use of credit.  This situation has prompted the establishment of not-for-profit credit counselling schemes in countries such as Australia, Canada, US and the UK.

Rationale for a credit counselling scheme

5          In Singapore, over the past few years, we have seen The Association of Banks in Singapore (ABS) set up the Credit Bureau to enable better credit risk assessment by banks, as well as a Consumer Mediation Unit (CMU) to facilitate settlement of customer disputes with banks.  These are useful institutional innovations, contributing to a sound credit culture.

6          However, these services are not set up to address the problem of unsecured borrowers defaulting on credit card and overdraft facilities.  We have to recognize that even with responsible lending and borrowing practices, and despite our efforts to educate consumers to be prudent in money management, there will be instances where consumers overextend themselves, or suffer temporary financial setbacks, and are unable to repay their debts on time.

7          Those of us who run Meet-the-People Sessions (MPS) are familiar with how easily families can run up their debts, and with the distress that results.  Often, people come to us too late, after legal action against them have commenced.  It is important to help individuals address the problems before they spiral out of control.

8          It is not uncommon that borrowers feel paralysed when faced with financial setbacks that prevent them from meeting their commitments.  Out of ignorance or despondency, or even pride, they fail to approach their creditors to work out a compromise repayment plan.  Their creditors may read their silence as evasion.  As a result, they file court action or bankruptcy proceedings.

9          Credit counselling schemes aim to pre-empt these actions.  They perform a unique role, currently not performed by other organizations.

CCS’ Approach

10        CCS aims to help consumers through a two-pronged approach.  First, CCS helps rehabilitate financially distressed debtors by providing them with credit counselling services.  CCS is also able to help creditors recover monies owed, thereby removing the need for expensive and embarrassing court action and bankruptcy proceedings.

11        With seed funding from Singapore Pools and the National Council of Social Services, CCS was established early this year as a result of an initiative by Dr Tan Cheng Bock and my other parliamentary colleagues under the auspices of the South West Community Development Council and Judges from the Subordinate Courts.  It has attracted support from MCYS’ Social Enterprise Fund and the Lien Foundation.  Distressed debtors who approach CCS, a not-for-profit social organization supported by the government and the banking community in Singapore, know that it will do its utmost to help.

12        CCS was started as a pilot project in August 2003.  Since then, CCS has handled over 150 cases and helped mediate repayment plans in over 50 cases[2].  In many of these cases, CCS negotiated successfully with the banks to avoid further legal proceedings against the debtors.  CCS has had a good start and I would like to commend the banking industry for its efforts in working with CCS to get the scheme off the ground.

13        CCS also conducts education programmes on proper use of consumer credit.  (These programmes are organized by CCS’ education arm, Credit Education Singapore (CES).)  One example is its ongoing collaboration with other agencies in the “Smart Money Management” programme.  CES has worked with Ngee Ann Polytechnic under the MoneySENSE national financial education programme to bring this programme to four secondary schools and more than 1,000 students within the South West District.  The programme imparts basic money management skills such as savings and budgeting and how to use credit responsibly.  Response to the programme has been encouraging and CES is looking to bring this programme to more secondary schools as well as primary schools in Singapore.  CES intends to partner MoneySENSE in its effort to bring these programmes to all segments of the population.

14        I hope that today’s event will highlight the importance of both credit counselling for distressed debtors and pre-emptive education to help educate borrowers in making sound decisions on their financial commitments.  In launching CCS, I would like to encourage the banking community to give the scheme its full and continued support.

15        We all have a stake in rebuilding the lives of those who have fallen into financial distress.  In helping individual families to pick up the pieces and move on, we will be preserving the sense of fortitude in our neighbourhoods and in society that keeps us looking forward and embracing change.

16        I am happy to formally launch CCS, and wish it every success in its endeavours.

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