Parliamentary Replies
Published Date: 17 October 2005

Reply to PQ on Consumer Debt and Bankruptcy Cases

Question No. 45 and 46
Notice Paper No. 150 of 2005
For Written Reply

Name and Constituency of Member of Parliament
Q45 and Q46 - Assoc Prof Ong Soh Khim

Q45: To ask the Senior Minister (a) what is Singapore's ratio of consumer debt and household debt as compared to countries such as United Kingdom, United States, Hong Kong and Japan; (b) what is the percentage of Singaporeans who are repaying at least one form of debt; (c) what is the percentage of Singaporeans in credit card debt; (d) what is the percentage of Singaporeans in housing loan debt; (e) what are the preemptive educational programmes to reduce the debt of Singaporeans; and (f) what are the help measures and repayment schemes available to Singaporean debtors to reduce bankruptcy due to these debts.

Q46: To ask the Senior Minister for the first six months of 2005, (a) what is the number of bankruptcy cases due to credit card debts; (b) what is the percentage of these credit-card linked bankruptcy cases in relation to the total number of bankruptcy cases; and (c) what are the profiles of these credit card debtors with respect to age, gender and educational level.

Mr Tharman Shanmugaratnam, Minister for Education and Deputy Chairman:

1. MAS' estimates show that Singaporean households' liabilities were about 85% in 2004, down from 96% of GDP in 2003.  This ratio was lower than that in the UK and broadly similar to the US, but higher than in Hong Kong and Japan.  [Household liabilities in the UK, US, Hong Kong and Japan are estimated at 91%, 83%, 60% and 64% of GDP respectively in 2004].

2.  However, it is not possible to look at household debt without looking at household assets. The higher level of household liabilities in Singapore generally reflects a higher level of household assets as well. In fact, taking both assets and liabilities into account, Singapore households as a whole have an estimated positive net asset equivalent to about 3.7  times of  GDP. This is comparable to most OECD countries. Basically, high household assets reflect our higher home ownership rates compared to  other countries. 

3.  The credit card charge-off rate, defined as bad debt written off as a proportion of average rollover balance, was 5.8% on average in 2003 and 2004 in Singapore. This was comparable to that in the US and lower than that in Hong Kong and Korea. [Charge off rates for US, Hong Kong and Korea during the period were 5.1%, 7.7% and 13.4% respectively]. 

4.  In the first 6 months of 2005, there were 1,759 bankruptcies. Of that number, 1,207 were consumers and the rest, businesses. 723 consumer bankruptcies were due to credit card debts, or 60% of all consumer bankruptcies. To put this in perspective, the number of credit card bankruptcies as a percentage of credit card users is extremely small, less than 0.05%. The majority of credit card bankruptcies were in the 31-50 years age group. 79% were male and 21% female. We do not collect data on their education levels.

5.  In Singapore, credit cards are generally used as a mode of payment, with only 17% of credit card debt rolled over for more than one month as at Q2 2005. The utilisation rate of credit cards has also fallen from a high of 24% of credit limit to 18% in Q2 this year.  

6.  The most effective solution to managing consumer debt levels is for individuals and households  to learn how to manage their finances. They have to consider if they can afford to service and pay off a loan before taking it up, and understand how getting into too much debt can affect their long term financial well-being.

7.  Though MoneySENSE, the national financial education programme, we are seeking to help Singaporeans acquire the skills and knowledge to better manage their day-to-day finances, make prudent investments and plan for their longer-term needs.  MoneySENSE has been working with industry associations to publish consumer guides and newspaper articles, as well as to organize events, to disseminate messages on prudent debt management. 

8.  There are specific programmes for specific segments.  For example, MoneySENSE is working with the Community Development Councils (CDCs) to run on-going basic money management workshops for low-income families.  In addition to basic savings and budgeting skills, the workshops provide tips on prudent debt management.  Ministry of Education (MOE) is infusing financial literacy concepts into the school curriculum. MoneySENSE is also working with private educational specialists to organize workshops and develop creative and fun activities to promote the teaching of financial literacy in schools.

9.  To advise and assist borrowers on debts already incurred, Credit Counselling Singapore (CCS), a non-profit organization, was launched on 14 October 2004. CCS helps consumers recover from serious debt problems by providing general credit management information, credit counselling and where applicable, helping them to work out a debt repayment plan.

10.  While there are credit counseling schemes in place and we are stepping up our financial education programmes, the key remains  for consumers to take personal responsibility for managing their finances and planning for the long term.

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