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SAGE Talk: Borrower Behaviour – Culture and Debt

Reminiscences of CCS first Chairman. This is the fifth of a series of articles by Mr Kuo How Nam (founding member and former Chairman of Credit Counselling Singapore). How Nam’s articles are scheduled to be published on first Fridays of the month.

I have been asked often about the racial characteristics of debtors coming for assistance. MAS regulations stipulate that credit cards can only be issued to individuals who earn at least $30,000 per annum. People who earn $120,000 per annum or more, are exempt from this limit. So, we would expect that income, rather than race, would be an important factor in the debt profiles.

Generally, the racial composition of distressed debtors follows that in the general population. Singapore Citizens makes up slightly more than 80% of distressed debtors coming to CCS. Permanent Residents are another 13%.

There are differences in the amount of debts owed by different races.  The average debt size of the Chinese is around $100,000, Indians $92,000 and Malays at $54,000.  The debt size could be skewed by a larger number of self-employed and businesspeople in the Chinese group who generally owe more as their businesses run into trouble and they tap credit card lines to survive.  The average debt size for self-employed debtors is $135,000 compared with $92,000 for salaried employees. Gambling is also more prevalent among the Chinese and gambling debts are generally larger.  Our largest gambling debt was over $1.7 million debt for a single individual.

What is interesting is the country of origin of debtors.  As expected, Singaporeans and Malaysians form the biggest groups with a share of 76% and 9%.  10 years ago, people from the Philippines formed the third largest group with a share of around 6%, followed by India (3.8%), others at 3% and China at 0.56%.  We saw the Indian group increasing and presently Indian debtors form the 3rd largest debtor group, followed by the Philippines.  This could reflect more Indian expatriates coming to Singapore in recent years, but we have not verified this.

The reasons for debts differ.  The main cause of debt commonly cited by Singaporean and Malaysian are lifestyle spending - like travelling, entertainment, and consumer items.  For the self-employed, big debts are due to business difficulties.  Indians and Filipinos cite family support and responsibilities as the main cause.  There is tremendous pressure on them to assist their families in their home countries, providing for housing, maintenance and medical support for parents and relatives.   For Indians, there are obligations to even help with their sisters’ weddings expenses.  Filipinos have a cultural value, "utang na loob", which obliges the individual to help family members in need.   An often-cited cause is also “frequent home visits with expensive presents”.

It is also interesting to note the relatively low number of debtors from China.  One would expect that the Chinese expatriate working population in Singapore to be the largest one, but this is not reflected in the debtor numbers.   Perhaps they are not as well represented in formal employment unlike Indian and Filipino holders of regulatory work permits.  They could be more debt adverse or have access to other forms of credit.  Or alternatively it could be simply a case where they are not aware of CCS services.

As a foreign national living and working in Singapore, if you are facing difficulties with debt payment obligations to Singapore local banks or financial institutions , you can seek assistance from CCS. Register to attend our weekly Debt Management talks (conducted both over Zoom and in-person at our office), where you will learn more about what to do when, how to communicate with creditors, what are the common collection actions creditors can take, what are the various debt settlement options are and what is the CCS Debt Management Programme. Click here for schedule.

After attending the talk, you can submit a request for one-to-one credit counselling. Details on the counselling session and instructions on how to arrange for an appointment will be explained during the talk.

This article was contributed by Kuo How Nam.

Published 4 November 2022.