Illegal money lending is as old as the history of money itself. Thinkers such as Plato, Aristotle, Thomas Aquinas, Karl Marx, Adam Smith and others consider it a grave vice in the society. It is considered as major vice due to the unjust interests associated with it. Illegal money lending is thus understood as a financial contract in which one person give somebody else a loan of a specified sum of money for agreed period with the concurrence that the lend amount will be returned with some interest. This vice exists because it is a convenient way to enable those with money and those without money to mutually benefit from each other (Hall, 2012). For example, those without money benefit from the wealth of those with money while those with money benefit from the interests paid. Society considers these kinds of dealings beneficial. The borrower has the privilege to utilize money that was not readily available to him or her in exchange for interest besides the principal amount. This kind financial transaction is not only beneficial to the two parties of the contract but to numerous people who directly or indirectly gain from the transaction. Illegal money lending allows some industries and commerce to thrive a fact that would not be possible without it. The objective of this report, therefore, is to investigate why illegal money lending exists in society. The report will further examine how Singapore views the illegal money lending and how as a country it should address the problem.
In this modern day, there is no society without people in financial difficulties. In the developed countries governments have established financial support systems. However, in the developing countries majority of poor people receive no financial support from the government hence left to implement survival strategies. Illegal money lending is one of such strategies. This happens because some people are disadvantaged such that they have no ability to access or transact a bank account (Barone, Cerqueti & Quaranta, 2012). Such segment of people utilizes illegal money lending services to fulfil their financial obligations. Involvement in illegal money lending is, however, crime and deviance in many jurisdictions. It is a deviance in because it is an act which violates stipulated and accepted money lending laws. It is a crime because it does defy not only the established laws but also breaks the enacted legislation (Downes, Rock & McLaughlin, 2016). Illegal money lending is constituted of lending money to borrowers without the prerequisite licenses. The regulations of such lending are not legal, hence unfair. For example, illegal loans attract unreasonable interest rates. Similarly, the means of demanding repayment are unlawful and scrupulous.
Different countries including Singapore, Hong Kong, U.K, and the U.S have enacted strict laws to curb illegal money lending. For example, in Singapore, money lending is governed by the Money Lenders Act of 2010 together with Money lenders Rules of 2009. These regulations are enforced and supplemented by other numerous legal notices, conditions, and rules. All these regulation are sufficient are intended to protect the low-income earners who needed to get small amounts of loans. Similarly, the enacted legislations are designed to provide a framework that ensures money lenders are regulated, and the borrowers’ interests are guarded (Gardner, 2016). In comparison, Hong Kong money lending regulations are aimed at governing the lending and borrowing activities, such that it encourage strong, healthy and competitive market. In the U.K on the other hand, money lending legislations are enacted under the background of providing affordable loans to low-income earners. The Financial Conduct Authority (FCA) is body mandated in enforcing the existing laws to curb illegal money lending. The law in U.K is thus clear that an illegal lender has no any legal right whatsoever to claim the debt. Equally, in the U.S the money lending is regulated through a federal law which is contained in Truth in Lending Act of 1968. In this Act, there should be full discloser of all the terms and conditions. Besides, the interest rate should be calculated in fairness without hidden terms. The legislation is thus intended at protecting the borrower from exploitation (Madinger, 2011).
In Singapore involvement in the illegal money lending is a crime under the Money Lenders Act of 2010 as well as under Money lenders Rules of 2009. According to these regulations, all money lenders in Singapore must have a licence to operate except those who are excluded or exempted. Some of the sources of money lending are illegal because they are sourced from illegal business such as drug trafficking, betting, poaching and illegal sale of weapons. Since it is not easy to deposit such huge cash got from such businesses it is thus channelled to illegal lending (Wai Ming, 2007). Since the first enactment of the Money Lenders Act of 1959 in Singapore, numerous amendments have been effected. Significantly, the Money Lenders Regulation of 2009 increased the criminal penalties for lending money illegally. The offence is thus punishable by a mandatory jail sentence and if harassment to the borrower is involved canning will be no option.
Illegal money lending is a consequence of the lack of legal lenders. As the last option, people within a given society seek financial refuge with illegal lenders. A study was done in Singapore to establish this established that illegal money lending is propelled by the absence of the legal lenders. Borrowers thus turn to illegal lenders after exhausting all other available options. Therefore, the primary stakeholders in illegal money lending are low-income earners and the entrepreneurs who seek to take advantage of their situations (Agnew, 2015). However, the research also found out that those involved in illegal business like drug dealing, black market, and weapon selling are also significant contributors in illegal money lending. On the other hand, those people who have been blacklisted by authorised creditors were also found to be significant participants in the illegal lending. Gamblers were also found to be prone to illegal money lending due to less paperwork involved as well as easy access to the funds (Banakar & Travers, 2013).
In Singapore, money lending laws are intended to safeguard the citizens against illegal money lenders. The victim in this situation is the borrower while the offender is the illegal money lender. Money Lenders Act of 2010 as well as under Money lenders Rules of 2009 are explicit that illegal money lending is a criminal offence which is punishable by law. Furthermore, illegal lenders operate without legal documents to make sure they target the low-income earners and the vulnerable in the society. As such, this category of people must be protected. From the enacted legislations borrowing money from the illegal money lenders is not a crime. The unlicensed lender only commits a crime. In many parts of Singapore, small business owners are the most venerable to the unlicensed lenders. This happens because the majority of small-scale business owners depend on individual lenders when their businesses are facing a financial shortage. Besides, these loans are easy to access and very little paper involved if any. Some victims of illegal money lenders have committed suicide after the interests have accumulated to very large amounts (Chia & Chia, 2012). These suicides result from the pressure the borrowers are put through by the illegal lenders. Hence, lending money at exorbitant interests and without legal licences as well as harassing people to pay the loans is a crime in many jurisdictions including Singapore.
Singapore society view victims of illegal money lenders as venerable people who require protection and help. The victims are further seen as people in great financial needs and who lack any other alternative to meet their financial needs. Money Lenders Act of 2010 as well as under Money lenders Rules of 2009 thus propose that victims of illegal money lending should be rehabilitated. Singapore government has thus invested a lot in counselling programmes and public education in an effort to reform victims of illegal money lending. It is agreed within Singaporean society that people who indulge in illegal borrowing are in great personal problems hence in need of help. According to the Singapore Parliamentary Debates, Official Report on 12th January 2010 thought the victims of illegal money lending may be punished for their role in perpetuating the vice; their punishment is highly dependent on their individual situation. Law, on the other hand, has been sympathetic to the victims of money lending. For example, in the case of Ng Teng Yi Melvin vs. Public Prosecutor the judged reduced the jail term for the accused from six months to four weeks on the ground that the offender was young and the first time offender (Gardner, 2015). Conversely, offenders are viewed as people who take advantage of the low-income earners and the vulnerable with society. As such, they should be punished severely. In the Money Lenders Act of 2008, section 14 any person who is involved in illegal money lending are guilty of a criminal offence punishable by law. If found guilty the offender will pay a penalty of not less than $30, 000 and not exceeding $300,000 or a term of imprisonment not exceeding four years and a canning of not to exceed six strokes. Besides, if any person is convicted of illegal money lending more than once, the fine amount remains constant while the imprisonment term is raised to a maximum of seven years and caning set not to exceed twelve strokes.
The law entails the spirit of eradicating the vice of illegal money lending in the society. This is manifested in the same section 14 of the Money Lenders Act of 2008 which make it a criminal offence any act to aid perpetuation of the illegal money lending. In this section an action to assist illegal money lending is defined to include demanding or collecting payment of the money lend on behalf of the illegal creditor, possessing, receiving, disposing of any funds, concealing or allowing your premise to be used for the purposes of illegal money lending. It also includes promoting/advertising or offering contact details of illegal money lenders to potential victims. Similarly, section 28 of the same act ensures social harmony. Hence it criminates any act illegal lender may use to intimidate a borrower. Any illegal lender who threatens, uses insulting or abusive words, writing, behaviour, or use any other visible representation commits a crime. Equally, any lender who may cause annoyance or cause alarm the borrower/surety or their family members shall be guilty of an offence under section 28 of the Act (Haq, 2016). If a person is convicted of a crime under section 28 of the Act, a person is reliable for the imprisonment of not more than five years or a fine of not less than $5,000 and not exceeding $50,000. Furthermore, if a person is convicted of more than once the imprisonment is set to be a minimum of two years and a maximum of nine years. The penalty is set not be less than $6,000 and not more than $60,000. The offender may also be subjected to between three and eighteen canes of strokes (Booysen, 2009). Besides, the court may decide to freeze all the money involved in the illegal lending as it deems it fit. It is evident from these acts that the law intend not only to cure the symptoms but the cause of the illegal money lending. However, curing the root causes of the illegal money lending demands more than court decisions. It requires political and socio-economic decisions. For example, it is the only parliament which has the mandate to decide how much the welfare sent to the poor should receive. Besides, Parliament decides the extent to which licences of money lending should be spread (Tremewan, 2016).
Media coverage of the illegal money lending became rampant after enactment of the Money Lenders Act of 2008. The launch of the media public campaigns has however aided in depicting illegal money lending as a societal and a national issue. The successful prosecution of the unlicensed lenders has also attracted critical media coverage on the national level. In the period between 2008 and 2012, there was more 1100 mention of illegal money lending mention in the national media. This represented an increase of close to 60% over the mentions that were done in the period 1995 to 2005. The increase in coverage is attributed to arrests of illegal money lenders as well as successful convictions and jailing of the illegal money lenders. Besides, parliamentary on the Money Lenders Act of 2008 attracted media attention. It is logical to think that extensive media coverage is a proxy to more general public awareness of the illegal money lenders (Jewkes, 2015). Besides, significant media coverage is limited to the successful conviction of the illegal lenders. Media coverage has not only been essential in creating awareness of the unlicensed money lending but has also assisted in enhancing confidence in law enforcement officers. Law enforcing officers have reported an increase in the number cases involving illegal money lenders following media coverage (Ganapathy & Kwen Fee, 2002).
Media coverage, however, has depicted illegal money lenders a criminal gang who target the vulnerable in the society. This is done through emphasising the high interest charged by the illegal lenders. Furthermore, media depicts illegal money lenders as exploitive and violent in their modus operandi. Similarly, members of the society are portrayed as people who have suffered collateral damage. The societal members are presented as victims who have been intimidated or who have experienced other criminal activity due to their dealing with illegal money lenders. Unlicensed lending is also associated with other criminal activities hence making the general public fear to fail a victim (Surette, 2014). In Singapore police force estimates that there are close to 1250 illegal money lenders syndicate nationwide. In comparison to other countries such as U.K, Germany, France, U.S, and Japan the incidences of illegal money lending in Singapore are higher especially in households with low incomes. However, a report by the Japanese Federation of Bar Associations 2012 indicates that the borrowing rate for the low-income earners is increasing by 20% across the jurisdiction. Following the analysis of illegal money lending in all these territories, it is evident that unlicensed money lending is not only related to poverty but other social ills such as drug abuse, terrorism, and illegal sale of weapons as well as other anti-social behaviours (Masciandaro, 2004). As a result of its complexity and mode of operation, illegal money lending is a dark figure of crime. Illegal money lending uses complicated syndicate in their operations hence difficult to apprehend the perpetrators.
Numerous theories have been developed to explain crimes in sociology. Different approaches have various foundations. Some are founded on the inequality and the environment while other theories focus on the social setting in which the crime occurs (Bailey, Lytle & Sample, 2014). Some of these theories include;
This theory holds that crime is unavoidable in the society despite the general consensus of the core values of a society and what is beneficial to the members of society. This happens because some people don’t agree with the society sentiments and thus tend to deviate from the set social norms. The theory further holds that a certain level of crime and deviance is inherent to a society and good for a healthy society (Rock, 2006). It is healthy because it is an avenue for some people to express their dissatisfaction/discontent (Yeo, 2016). Illegal money lending is thus an indicator of some elements of society that are malfunctioning. For example, in Singapore it communicates there lacks structures for low-income earners to access legal loans. Besides, government do not set aside sufficient fund for social welfare and to take care of the poor in the society. Using the functionalist theory, it is thus reasonable to argue that, illegal money lending exists to compensate for the lack of the proper financial structures to cater the poor and the low-income earners.
This theory is developed under the background that crime is natural to the society. However, in this theory, Merton attributes crime to lack of conformity in what cultural norms consider success and what an individual consider constitutes success. Social deviance thus occurs because of conflict between individual set success goals and the societal constraints (Wilkins, 1965). Furthermore, Merton argued that a balanced society makes every member of the society happy. If a society fails to be balanced and to make its members happy people struggle to find other ways of achieving success and happiness hence they tend to act against the set norms. Merton further postulated that there are five ways in which an individual react the social constraints/strains. These techniques include;
Strictly speaking, it is possible that some stakeholder in the illegal money lending falls within the five mentioned categories.
This theory draws a direct connection between crimes and environment as well as social disorganisation within a society. According to this theory, crimes are said to be rampant in societies that are economically poor, have large populations, which has high residential mobility, have multiunit housing, and have a high rate of dysfunctional families. This theory postulates that these factors deny members of such society ability to exercise social control. Furthermore, people residing in areas where crime is rampant lack the required skill to socialize their young ones against crimes (Fung, Ooi & Ang, 2011). This theory clearly depicts the environment under which illegal money lending thrive. In Singapore, unlicensed money lenders are rampant in the places occupied by the low-income earners who lack alternative lending avenues. Similarly, illegal money lending succeeds in communities that are economically emaciated.
This theory hypothesizes that crime like conformity within a society is learned in the course of interacting with others in the society. As a consequence of interaction, an individual learns techniques, values, and motives, as well as attitudes for either conformity or criminal behaviour (Yeo, 2016). Learning to conform to social norms or learning illegal activities, however, happens within intimate groups. Besides, the theory notes that where delinquency rates are high young people are likely to be exposed to criminal activities early hence developing to delinquent behaviours. To understand criminals, this theory suggests a thorough investigation of the values and morals of his/her immediate personal, intimate group. In Singapore, there is a clear link between illegal money lending and some families. Just like drug dealing activities, illegal money lending is perpetuated by some families. This is a confirmation that crimes like conformity are learned through the same process.
This theory claims that a subculture is a different group from the central culture that has different values from those of the mainstream culture. Deviance in the society is thus a consequence of the subculture breaking from the mainstream culture (Greer & Reiner, 2014). Similarly, deviance also results from persons who try to conform to the norms and value of the formed subculture. Furthermore, this theory suggests that crime is a result frustration projected to an individual by the society. As a result, some people decide to defy social norms to achieve personal success and aspirations. The rejection of socially acceptable behaviours and values leads to criminal activities (Matsueda & Grigoryeva, 2014).
This theory seeks to explain crime in regard to the individual’s social interactions. If a given society lacks the proper systems to control people against crimes, the members of the society are likely to commit crimes because a human being has natural instincts to commit a crime. In this theory, therefore, a society must have the ability to control adolescents against adopting criminal activities (Muncie, 2014). If the control systems are lacking, inadequate, weak, or ineffective then society allow its members to digress from the moral and the legal norms. As a result, crimes do happen. Following the thinking promulgated by this theory, Singapore has enacted sufficient laws to curb the problem of illegal money lending. However, illegal lending is a complex syndicate crime that will take time to eliminate.
This theory hypothesises that crime is a result of weakened social attachment. The social attachment is however determined by the vigour of the social bond that holds society members together. Every society has four social bonds that glue its members together (Yeo, 2016). These social bonds include belief, attachment, involvement, and commitment. Attachment refers not only to the cultural and social standards but also to the interpersonal relationships. It is through attachment an individual learns what to expect from other or what is expected of him/her in a given culture. Commitment, on the other hand, refers to the individual appreciation of the social norms and the willingness to be bound by them. Besides, involvement refers to the levels an individual engage or feel connected to peer group.
This theory suggests that criminal behaviours are natural to a human being rather they are behaviours which people drift to back and forth. People have the ability to drift between varied values offered to them. In this theory, young people deviate from the social norms not because they are hostile towards them, but because they have excuses to justify their behaviour ((Yeo, 2016). Illegal money lenders fit the description of this theory. Illegal money shareholders argue that they engage in the business to compensate for the lack of legal money lenders within their environment.
From the analysis of reports on illegal money lending in Singapore as well as sociological theories explained it is evident that crime is related to economic deprivation. Therefore, the majority of illegal money lenders engage in business to make profit hence improve their economic status. In the Money Lenders Act of 2008 borrowers from illegal money lenders, should be punished for perpetrating a criminal activity. While formulating laws to curb illegal money lending Singapore parliament integrate theories such as reformative, deterrent, and preventive as well as retributive. The deterrent theory holds that a criminal should be punished with the intention of deterring him/her from repeating the crime. It is also intended to discourage other who may have intentions of committing a similar crime. Retributive theory, on the other hand, propagates the idea of ending crime entirely. Therefore, it is motivated by revenge and vengeance without consideration of social security or welfare. Conversely, a preventive theory set it objective as preventing crime rather than revenging it. Similarly, the reformative theory is aimed at renewing the criminal through the rehabilitation process (Schneider, 2014).
Conclusion and Recommendations
It is evident that numerous committed, zealous people are interested in money lending sector in Singapore. These individuals with the help of the government agencies are determined to annihilating the illegal money lenders. The government, on the other hand, must also be commended for the proactive measures it has taken to sanitize money lending industry. The enacted laws are sufficient in dealing with the unlicensed lenders in Singapore. Equally, the laws are in line with societal norms because they are aimed to punish and deter criminal who engage in illegal money lending. However, the advancement in technology has made unlicensed lender use digital platforms (Simser, 2012). Therefore, a law that will address illegal money lending online should be formulated to curb the vice. The government, on the other hand, must implement legal money lending systems that acknowledge and safeguard the low-income earners and the vulnerable, who at many times do not have any other alternative apart fro the illegal lenders to alleviate their financial challenges.
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