debt Re-Examining The Debt Problem

 By Abdul Shariff Aboo Kassim

This commentary was also published in the Event Section of AMPlified, A Quarterly Newsletter by the Association of Muslim  Professionals   (AMP), April 2015, Issue 26.

Given the interest in the debt problem in Singapore at the national level, the annual Community in Review (CIR) seminar, organised  by the Centre for Research on Islamic and Malay Affairs (RIMA) in collaboration with its parent organisation, AMP, took on the  theme, Debt: A Clear and Present ‘Danger’ to Society?, this year. Held on 14 February at the Suntec Singapore Convention and Exhibition Centre, the seminar featured two panels comprising both academics and practitioners, who sought to discuss the macro- and micro-level perspectives on the severity of household debts and to highlight the challenges of affected families.

The macro-level perspective presented the view that the balance sheet of households are generally healthy. Additionally, based on the data released by the Monetary Authority of Singapore (MAS), only a segment of the population are struggling to meet their debt obligations – mainly those who have over-borrowed in the property market during periods of low interest rates and extended loan tenures. Such households will be saddled with financial trouble when interest rates rise.

CIR picProfessor Agarwal (left, standing) presented his insights
on the debt problem from the macro level.

Conversely, the micro-level experiences of institutions dealing directly with the cases of debt call for a broader understanding of the issue. For example, Mr Kuo How Nam, President of Credit Counselling Singapore (CCS), said that the organisation saw the number of clients counselled rising at an increasing rate over the last five years – from 1,066 clients in 2010 to 2,458 (with Malays forming 13% of them) in 2014. Similarly, Mr Christopher Chuah, President of One Hope Centre Singapore (OHC) also reported an increasing trend in the number of clients over the last four years – from 245 in 2011 to 526 (with Malays forming 10% of them) in 2014.

One of the speakers from the panel addressing the macro-level perspective, Dr Walter Edgar Theseira, Assistant Professor of Economics at Nanyang Technological University, argued that widely-reported macro-level financial statistics often show relatively little about what causes debt amongst low-income households, and whether measures can be undertaken to address them. He suggested that studies of debt amongst low-income households in Singapore may need to examine data sources outside the formal finance sector.

Dr Theseira’s co-panellist, Professor Sumit Agarwal, Vice Dean and Low Tuck Kwong Professor of Finance at the National University of Singapore, spoke about peer effects – ‘catching up with the Ongs’ or ‘status competition’ – being plausible in a densely populated country or city such as Singapore, which may push some consumers to spend well beyond what their budget is capable of allocating. Professor Agarwal also noted in his presentation that the monthly card debt (credit and debit) between April 2010 and February 2012 for the Malays was generally higher compared to other ethnic groups – with the card expenditure mainly being on services, mobile phones and car maintenance.

CIR speakersA group shot of panellists from the macro- and micro-level perspectives,
with Mr Azmoon Ahmad (second from the left), Chairman of AMP Group.

A key takeaway from the seminar was that the discourse on debt had been dominated by the macro-level perspective, which is useful only in explaining the overall resilience of the financial system. It is, however, less so for understanding low-income household finances, where there is a need to monitor the rising debt levels of such households, and whether there ought to be policy responses to the phenomenon.

Abdul Shariff Aboo Kassim is the Researcher/Projects Coordinator of Centre for Research on Islamic and Malay Affairs (RIMA). The opinions expressed in the article are his own.

 
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