Consider a relief loan for needy workers

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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

How to make electronic medical records a reality

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Use techonology to improve bus information

Some people, especially the elderly, have poor eyesight. They may not be able to see the service number of the bus that is approaching the bus stop, until the bus is close by. By that time, it may be too late to signal for the bus to stop. The passenger will also have to strain the eyes to look out for the number of all the approaching buses.

I suggest that we use technology to solve this problem. The approaching bus can transmit its service number electronically to a display located at the bus stop. This display can display not only the bus number but also the main rout and destination of the bus. It will be a good service to the passengers and may encourage more people to take the bus.

I hope that the bus operators will take up this suggestion. Perhaps the Land Transport Authority can provide the encouragement by paying for the infrastructure cost.

Tan Kin Lian

We made mistakes on the economy

Who is humble enough to admit a mistake? Find out here.

Forum on Budget 2009

I presented this paper at the forum organised by The Reform Party.

Secure investments 'misleading'

Secure investments 'misleading'
By Samantha Washington
BBC Radio 4's Money Box

As guarantor, Lehman going bust did not result in compensation
Thousands of people who put their money into investments that promised their capital was secure face losing some or all of their money.

Article.

Choose your financial product carefully

Dear Mr Tan,
I have been curious about the development of banking industry and insurance industry for the past decade. Since the two industries evolve and expand their line of business, I can see the overlapping of the products offered by the two industries. I can choose an insurance company or a bank if I want to buy investment fund, securities bond or even insurance.

What are the main differences between these two industries? Maybe in terms of operational aspect, insurance companies tend to stick with agent-based customer management. However, I don't see much different in terms of investment product offering.

What do you think the competitive edge for both banks and insurance companies, in terms of service diversity, service level, financial power, reliability?

REPLY
It is more important for you to know if the product is designed to give good value to the customers. Unfortunately, many financial institutions design products to have big profit margin for their institutions, often at the expense of the customer. They pay high commission to their agents and distributors. The customer gets a poor deal, after deducing the expenses and profit margins.

It is better for the customer to invest directly in stocks and bonds, especially in low cost, diversified funds. Read my views in www.tankinlian.com/faq