Community based loans

I have suggested a "community based" scheme to provide loans to families that are need money for their daily expenses due to loss of employment, high medical bills or other factors beyond their control. I have received some questions on how this scheme can operate. I will answer them:

a) Who provides the funds? The community (i.e. the Government)
b) Who bears the loss of bad debts? The community will have the right to place a lien on the assets, e.g. CPF savings, of the borrowers. If there are insufficient assets, the bad debts will be written off and will be borne by the community, i.e. the taxpayers.
c) Who decides on the people who should be granted these loans? Loan assessors working on the set of eligibility criteria.
d) What rate of interest should be charged on the borrowings? 1% to 3% higher than CPF interest rate.

This community based scheme will operate on principles that are different from commercial banks or loan sharks, and will still aim to make the borrowers responsible for repaying the loans. However, these loans should be provided at an affordable interest rate, so that the borrowers are not burdened with exorbitant interest payments.

This scheme requires responsible people to be loan assessors to carry out investigations into the financial situation before the loan is granted. The assessor has to interview the borrower and visit the family to make personal judgement (which is a skill that needs to be developed, as many Singaporeans prefer to decide on paper and avoid taking personal responsibility to make judgement).

This will provide an alternative to borrowing from loan sharks, leading to bankruptcy, petty crimes and other social problems.

Tan Kin Lian