SINGAPORE — Unable to fulfil customer orders, one precision engineering firm is now seeing the backlogs snowball as flight cancellations and mandatory leave of absences wreck its work force.
An algorithm that reads your social media feed, gets a fix on your digital personality and analyses your
online interactions with friends and family may now be able to determine if you get a loan.
The Law Ministry selected six firms last month (including Minterest) to pilot new business models for moneylending while also temporarily lifting a 2012 moratorium on new licences needed to operate in the sector.
The idea of using personal data to forecast a person’s likelihood of default is being explored by some
licensed moneylending firms here in what is an industry first.
The Law Ministry selected six firms last month to pilot new business models for moneylending while also temporarily lifting a 2012 moratorium on new licences needed to operate in the sector.
Its moves come as personal loans are on the rise. Singaporeans accumulated nearly $60 billion of debt,
excluding housing, credit cards and car loans, in the third quarter of last year.
The key factor for moneylenders is the credit score, which is used to discern a person’s financial reliability based on his credit track record and income levels.
But determining risk of non-repayment, even with the already strong credit bureau that Singapore has, is not an exact science, say those participating in the trial.
Credit reports may not necessarily reflect a borrower’s immediate financial situation, such as when they
have lost a job recently, said our co-founder Ronnie Chia.
Psychometric analysis, which feeds on social media and other online data from borrowers, allows lenders to determine the character and personality traits of borrowers.
These are important indications of the willingness to repay loans, said Mr Chia.
Mr Jonathan Chong, IFS Capital’s vice-president of business planning and analysis, said lenders will be able to assess the borrower better and faster by considering these additional data points.
“With permission, we can overlay the digital footprint of a user, including social and professional
connections, with the personal and financial data to help us form a more holistic picture of the (borrower),” said Mr Chong.
A more positive credit score means a borrower will get a more favourable interest rate that reflects his risk profile, said Mr Chia.
But there are dangers in giving the computer full autonomy in deciding whether a person is likely to go into delinquency, given that the accuracy of AI-driven risk assessments is sometimes questionable.
United States-based non-profit organisation ProPublica found how risk scores produced by artificial
intelligence were unable to accurately tell if a defendant is likely to commit a future crime, even though
these scores are already used in US courtrooms to guide judges during sentencing.
Its 2016 study found that the algorithm, which was developed by a private company, was “remarkably
unreliable” – only one in five people flagged as likely to commit violent crime went on to do so.
It also found that the system unfairly pegged African-American defendants to be at a higher risk of
committing crime than white Americans.
And even when accurate, the use of credit scores to determine risk and reward can be controversial.
China’s newly deployed social credit system, for instance, has been decried as Orwellian by critics for
penalising everyday behaviour.
Chinese citizens have been barred from buying flight and train tickets or purchasing property in recent
months due to a low score from loan defaults or other activities deemed to be anti-social.
These dangers are why there is a need for the Law Ministry’s pilot, so that the personal lending industry
can find out what safeguards are necessary as it heads towards the adoption of AI and big data analytics,
said Mr Edmund Sim, founder of fintech start-up Credit Culture.
However, even detractors of AI cannot deny the superhuman efficiency of computer algorithms, big data
and machine learning employed in various industries today.
Humans can get it wrong even without AI, and they do so while incurring higher costs that will eventually show up on the borrower’s bill.
In a demonstration at his Craig Road office, Mr Sim showed The Straits Times how its credit scoring engine analyses and scores applicants for their creditworthiness almost instantly.
He declined to give specifics on the algorithms used as they are proprietary to the firm.
While accuracy is a concern, machine beats man on one key element – algorithms apply their standards
universally and eliminate any form of bias associated with human intervention, said Mr Sim.
“Technology can benefit consumers by making things simpler, cheaper and more transparent, allowing
them to make better informed decisions,” he noted.
“The question now is the extent to which technology can be used in personal lending.”
Six companies in Singapore will pilot new business models for moneylending, which would grant borrowers better terms if they repay their loans early or on time, said the Ministry of Law on Tuesday (Dec 11).
The new models will also include more comprehensive use of data to assess creditworthiness, as well as use digitalised processes to lower cost.
Of the six firms, three – Credit 21, Dey and Quick Credit – can apply to operate four moneylending outlets each. IFS Capital, Minterest and Xingang Investment are allowed to operate one outlet each.
“The six firms will be issued moneylending licences to operate the outlets they apply for, in a one-time lifting of the moratorium imposed on the issuance of new licences.”
In 2012, a moratorium was imposed on new licenses for moneylenders. Since then, the number of moneylending outlets has decreased from 215 to 162 outlets.
“The six firms will be allowed to apply for licences for up to 15 new outlets in total, and this represents less than 10 per cent of the 162 outlets currently operated by the 157 licensed moneylenders,” said the ministry.
The licensee will be allowed to operate for up to two years from next year onwards. The ministry will then evaluate the results of the pilot and consider options for refining the moneylending regulatory regime, it added.
The firms, which were selected among 38 applicants, were chosen as they met a set of stringent mandatory criteria, the Law Ministry said.
These include the soundness and completeness of the business model, participation in debt assistance schemes, professional debt recovery practices, customer and communication strategies and effective cost of credit and credit policies.
They also have paid-up capital of at least S$1 million and a track record in providing consumer credit, said the ministry.
Read more at Channel News Asia.
To support monetary and financial stability in both countries, Singapore and Indonesia will be working out a US$10 billion (S$13.8 billion) package, comprising bilateral local currency swap and United States-dollar denominated repurchase agreements.
This was announced on Thursday (Oct 11) by Prime Minister Lee Hsien Loong who met with Indonesian President Joko Widodo at the third Singapore-Indonesia Leaders’ Retreat.
Both leaders discussed a range of issues, including the review of the double taxation agreement between the two countries, and how the pact will help provide the right infrastructure and incentives for business leaders to invest.
They also spoke about the uncertain external economic environment which has affected many financial markets. Mr Lee said: “We have tasked our two central banks, which means the MAS (Monetary Authority of Singapore) on our side and the Bank of Indonesia on their side, to work out and conclude a bilateral financial arrangement soon.”
MAS managing director Ravi Menon said both sides are having preliminary discussions and details of the US$10 billion agreement “should be out soon”.
He explained that currency swaps or the repurchasing of the US dollars by central banks only happen when either party requests for it, but the vast majority are usually standby arrangements that serve to instill confidence in the market.
The current instability in financial markets arising from the normalisation of US monetary policy has sent capital moving out of emerging markets, including Indonesia. That has sent the Indonesian rupiah tumbling to its lowest level in two decades.
“Some outflow of emerging markets is perfectly normal and to be expected. But you just want to make sure it does not become a snowballing effect, that it does not become overdone. The most important reason for doing this… to build confidence in the region in the current climate of financial market turbulence,” Mr Menon said.
He also added that Singapore wants to make sure Indonesia is well-placed to ride out this period of fund outflows due to Singapore’s investments and business interests in the country.
“Indonesia has been feeling a little bit more of the pressure in the currency markets. … This we regard as something temporary because of the temporary nature of the situation that emerging markets are facing. We are pretty confident that Indonesia will emerge from this well within a year,” Mr Menon said, adding that the macro fundamentals of Indonesia are sound and its policy responses are judicious.
Singapore also has currency swap agreements with the central banks of China and Japan, and these agreements are renewed every three years.
Mr Lee — who is on a two-day visit in Bali —and Mr Widodo also witnessed the signing of several agreements, including the bilateral investment treaty which sets out rules on how Indonesia should treat investments and investors from Singapore and vice versa.
In a joint press statement by both countries, Mr Lee said the bilateral investment treaty “will encourage greater flows of investments into Indonesia”. Separately, Singapore’s Ministry of Trade and Industry said it would give companies greater certainty and confidence, as their interests are protected.
Singapore has been the top investor in Indonesia since 2014, with US$8.4 billion (S$11.6 billion) invested in 2017.
Singapore’s trade with Indonesia totalled S$59.4 billion in 2017, making Singapore Indonesia’s third largest trading partner after China and Japan. Indonesia is Singapore’s sixth largest trading partner after China, Malaysia, the United States, Hong Kong and Taiwan.
This is the third Leaders’ Retreat between both countries. The previous one was held in Singapore on Sept 7 last year, commemorating 50 years of diplomatic relations between both countries.
Mr Lee said he had a “fruitful discussion” with Mr Widodo on how both countries can deepen cooperation.
For example, Mr Lee said both leaders talked about how adjusting incentives and rules, such as the minimum investment amount, can encourage companies to invest in the Kendal Industrial Park and Nongsa Digital Park.
Kendal Industrial Park, which was launched at the 2016 leaders’ retreat and located at Central Java, is a project by Sembcorp Development and PT Jababeka of Indonesia. It is supported by the governments of both countries.
Nongsa Digital Park at Batam was launched in March this year to develop Batam as a “digital bridge” between Singapore and other Indonesian cities.
Both countries are also looking to develop a fellowship programme for regional leaders in Indonesia, which will be called the Rising Fellowship. Mr Lee said he hopes young leaders from various Indonesian provinces can come to Singapore and learn from one another.
Mr Lee also offered his condolences on the recent earthquakes and tsunami which devastated Central Sulawesi. A 7.5 magnitude earthquake and a tsunami struck the Indonesian island on Sep 27, leaving more than 2,000 people died.
In addition to deploying two aircrafts to send humanitarian assistance and assist with rescue efforts, Mr Lee said that many Singapore groups and non-governmental organisations have been actively fundraising to support relief efforts.
“Singapore stands with Indonesia during this difficult time. We are confident that these affected areas in Indonesia will make a quick and strong recovery,” he added.
On Thursday, a magnitude-6 earthquake struck off the Indonesian islands of Java and Bali, killing three people in Java and damaging some buildings while causing panic among residents.
Tremors were felt in Bali, where the Singapore-Indonesia Leaders’ Retreat is held concurrently with the annual meetings of the International Monetary Fund and World Bank.
Writing on Facebook, Singapore’s Defence Minister Ng Eng Hen, who is part of the high-level delegation accompanying Mr Lee, said he was woken up in his hotel room by a brief tremor but “apart from the lampshade swaying, everything else seemed fine”.
Small- and medium-sized enterprises were awarded about one-third of the S$2.4 billion in ICT tenders awarded by the Government in Financial Year 2017.
There are opportunities for small- and medium-sized enterprises (SMEs) in Singapore to be had as the Singapore Government revealed a S$2.4 billion to S$2.6 billion IT spending budget for the new financial year.According to the Government Technology Agency’s (GovTech) press release on Thursday (Jun 7), these SMEs accounted for almost two-thirds of the total number of ICT contracts awarded by the Government in Financial Year 2017. In dollar value, they were awarded about S$800 million of the S$2.4 billion set aside for that period.
Of the forecasted budget, 33 per cent will go towards keeping the lights on for existing IT systems such as a PC bulk tender for leasing of personal computers and buying of printers, GovTech said.There will also be a bulk tender to qualify a panel of companies to provide resources to support co-sourcing of projects with GovTech.The bulk of the budget, or 44 per cent, will go towards supporting transformation projects such as the National Digital Identity system as well as smaller scale projects like the Singapore Tourism Board’s Singapore Visitor Centre system. The latter empowers frontline officers with visitor information and services and the ability to provide tourists with tailored recommendation, GovTech said.Another 23 per cent will go towards growing the ecosystem, such as through a bulk tender for robotic process automation. This tender will support the implementation of such automated processes in Government agencies via a panel of companies qualified to provide the software tools and professional services needed, the agency explained.The plans were revealed just days after Deputy Prime Minister Teo Chee Hean launched the Digital Government Blueprint that, among other things, spelt out the key performance indicators public agencies should work towards to in the next five years.Some of the initiatives include having electronic payment and digital signature options for all digital services provided by the Government.
The decisions you will take in your 20s can have a significant impact on your personal finance at a later stage. Read on to know about the mistakes that can be avoided in this age bracket to have a healthy Credit Score.
The twenties is an ideal age to decide the course of your financial goals. This is the best time to pick up investments that yield good results at a later stage or buy a Health Insurance cover at a lesser premium. Hence, the decisions you will take in your 20s could have a significant impact on your personal finance and this includes your Credit Score too. A healthy credit score can help you bag the best deal in terms of loans or other financial transactions whereas a low score may affect your loan possibilities. So for people in this age bracket need to be aware of the credit score worthiness and the mistakes they can avoid to keep their credit score healthy.
No Debt = Good Credit Score
A common misconception among most first-time or young professionals is that no loans or debt can get them a good credit score. This line of thought often leads them to make cash purchases and keeps them away from Credit Cards. For credit rating companies like CIBIL, no loans/debt actually equals a bad credit score. Since the credit score of a person is rated based on their historical ability to pay off a loan, the absence of any credit history stops companies from determining whether you have the capacity to pay off a loan.
Applying For Too Many Credit Cards
While having no debt may not get you a good credit score, applying for too many credit cards can also have a detrimental effect. Whenever you apply for a credit card, the company sends an inquiry to CIBIL asking for your credit history. When CIBIL notices that there have been multiple requests within a short span of time, they’ll identify you as a person who has a lower ability to make payments and hence requires multiple lines of credit. So, do not fall prey to the lucrative offers from credit card companies and avoid applying for multiple cards.
Closing Your Credit cards After Repayments
Millennials often use credit cards for big purchases like buying home electronics or automobiles. After they pay it off, they make the mistake of closing the cards, which can affect the credit history. A healthy credit score will typically have a long-term credit history. Closing the card relinquishes that record and lowers the average credit score despite timely repayments and clearing off the debt. So, it is better to retain the card even after paying off the debt.
Being A Guarantor For Someone’s Loan
We often make emotional decisions when we’re young. Being a guarantor for a friend or relative is one of them. When you sign up as a guarantor, you become responsible for repaying the loan in case they default. If you’re unable to pay off the loan, your credit score is bound to be severely affected.
Living Off Your Credit Card
In your early and mid-20s, when you’ve just started to get that taste of independent life, you’re likely to be a spendthrift. Your purchases are often based on your credit card limit and you tend to forget about the repayment clause before the due date. In case you fail to make the payments, your credit score will drop. But even if you do pay up on time, it’s still likely to indicate that your lifestyle is debt-heavy and can affect your credit score. You can control your unnecessary expenses and prioritise your spending based on your needs.
Missing EMI payments or credit card payments will not only attract late fees and interests but also adversely affect your credit score.
For youngsters in their 20s, it is important to enjoy life along with making financially sound decisions that can help them throughout their life.
This article was written by Adhil Shetty.
Common Business Loan Application Mistakes to Avoid
1. Failing to have a clear picture of your business’s financial situation
2. Not knowing your credit score
3. Having a poor business plan
4. Failing to have a clear idea of what the loan will be used for
5. Applying for the wrong type of business loan
6. Selecting the wrong lending institution
7. Not reading the fine print
This article was contributed by a guest on Invest Openly.
Peer-2-Peer platforms offer access to first-time loan applicants, small business owners or SME employees to get credit on easy terms when required.
In layman’s terms, Peer-2-Peer (P2P) lending and borrowing is like a digital marketplace for loans. Hence usually it is known as ‘marketplace lending’ or often gets confused with crowd-funding. Instead of applying for a loan with a bank, NBFC, private finance company or any other loan institution, you can request a loan from regular people like you and me (therefore, the term Peer-2-Peer).
Most of these loans are unsecured for a large number of people who are underbanked or thinly banked. Most of the financial institutions stay away from giving loans to first-time loan applicants, small business owners or SME employees, women or people living in negative pin-code areas. Peer-2-Peer platforms offer access to these very groups of people to get credit on easy terms when required.
The actual logistics of Peer-to-Peer can be a little more complicated in India, but some platfoms like ours allow the borrower to download the app, fill the application form and apply for the loan. As a borrower, you have to fill a quick online registration form and pay the upfront registration fee which is refundable. Then proprietary credit assessment is done and a brief commentary of why you want a loan is shared with the lenders. The app requires the loan applicant to submit bank statement, upload basic KYC documents like PAN card, Aadhaar card etc. The proprietary algorithm assigns the loan interest rate and tenure to post the loan on the marketplace for lenders to assess and invest.
Lenders on the Peer-2-Peer marketplace are able to browse loan requests of multiple applicants. Each loan request offers relevant information about the borrower to the lender such as income, credit history, reasons for loan etc. If the lender likes the loan applicant’s profile then they can fund a certain portion of the loan. Partial funding enables lenders to diversify their investments and hedge potential risks. Once the transaction is completed, the loan applicant repays the loan in the form of equated monthly installments or popularly known as EMIs.
Is Peer-2-Peer Loan for You?
P2P lending and borrowing is not for everyone. Like any other financial investments, it has its risks and payoffs.
A major benefit of taking a Peer-2-Peer loan in India is that it is paperless, transparent and fast. The rate of interest is traditionally lower than NBFCs or other finance companies. The application process is faster and convenient with minimal documentation. Platforms like this perform a soft credit check and allow the borrowers to explain the reasons that led to a bad credit in the past. As long as lenders show confidence in the borrowers’ ability and intention to repay the loan, the borrower will get the loan. These loans are given without collateral based upon the creditworthiness of the borrower alone. However, the borrowers cannot expect a guaranteed funding. They can attract penalties if the EMI repayments are late and attract huge payments in case of a default.
Lenders on the Peer-2-Peer platform in the past few years have seen an average return between 12% and 18% annually. Also, it is a form of passive investment tool that offers great returns against the cash parked in savings accounts. By allowing lenders to invest in loans across a broad range of loan applicants for small amounts of fund, Peer-2-Peer investments offer an in-built mechanism to diversify.
This article was written by Priyanka Singh.