Consider a relief loan for needy workers

Read this article.

MANY businesses are suffering from a severe drop in consumer spending. They are not able to earn enough revenue to pay their wages and other expenses.

These businesses are not able to get the bank credit needed to tide them over until the economy recovers. The banks are reluctant to take the credit risk, even though the Government has agreed to underwrite 80 per cent of any loss.

The Jobs Credit scheme may help these businesses to reduce their operating costs by 5 per cent to 10 per cent, but will not be sufficient to stem the losses. These businesses will then have to retrench their employees.

Many thousands of employees face the prospect of losing their jobs in the near future. The $20.5 billion resilience package will not help them. Job fairs will also not help.

I suggest that a relief loan scheme be introduced. This scheme is to be administered by a government agency and will allow a worker who has suffered a loss or drop in earnings to apply for a loan to cover the shortfall (subject to a monthly cap).

This loan will be subject to an interest rate of 2.5 per cent and can be drawn for a period of up to 24 months. The loan has to be repaid from future earnings or withdrawal from CPF savings.

This is a loan, not an unemployment benefit. It will provide financial relief to affected people who will then not need to rely on credit cards or loan sharks and bear a high interest burden. It will also reduce the bad debt burden from the banking system.

There will be some abuse of this relief loan, but practical measures can be implemented to reduce the abuse. For example, the applicant may be required to sign a statutory declaration and get the endorsement of a responsible community leader.

Some people may not be able to repay the loan, no matter how hard they try. These cases can be investigated at a later date and a portion written off. It can be decided by practical judgment.

I hope that a relief loan scheme can be introduced immediately to alleviate the hardship and suffering of many families. It will also help to maintain a modest level of consumer spending and keep the domestic economy going as best as possible, until the global economy recovers.

Tan Kin Lian