SINGAPORE - Grab has obtained permission from the Ministry of Law (MinLaw) to offer cash advances of between $1,000 and $10,000 to private-hire drivers and delivery riders, under a scheme that can run for up to three years.
The amount loaned to qualified drivers and delivery personnel under the Partner Cash Advance programme depends on their driving behaviour in the past three months.
They are charged a one-time fee at the start of the loan. The amount charged depends on how much is borrowed and the selected tenure – three, six or nine months.
Grab said that the typical rate is in the region of 1.2 per cent and maxes out at 2 per cent per month. The loan is repaid through weekly instalments deducted through the Grab app.
The tech company started rolling out the scheme in December 2022. More drivers and riders are being progressively added, it said, but did not give details such as the number of borrowers.
MinLaw told The Straits Times said that it received an application from GFin Services, a subsidiary of Grab, to be an “exempt moneylender” under the Moneylenders Act 2008 for the Partner Cash Advance initiative in 2022.
A ministry spokesman said the permission was granted after considering factors that include the need for the drivers and deliver riders to have access to safe credit, how Grab will assess a borrower’s creditworthiness, the rates that will be charged and safeguards put in place to protect the borrowers.
In general, companies are required to have a licence to lend money and those that have been exempted have to comply with certain rules. The exemption – granted for up to three years, as in the case of Grab – could be extended with or without additional conditions. Grab’s exemption began on August 2022.
Mr Ian Lim, who is a partner and the head of employment at TSMP Law Corporation, said that initiatives such as Grab’s show that the gig worker and platform industry is maturing and evolving to address the needs of its workers – as should be the case. He added that company loans to employees are not really that unusual, but they are less common in Singapore.
However, Mr Lim cautioned that gig workers may not always make the best decisions with the increased access to funds. They may be tempted to spend more than they would otherwise on non-essential purchases, which is probably not what Grab intends.
Associate Professor Walter Theseira, an economist at Singapore University of Social Sciences, noted that Grab’s offer is not the same as what other companies extend to their employees. He said that employers tend to charge interest below market rate as a form of goodwill – or fringe benefit – to their staff. Employers do not require a licence to do so.
Grab’s initiative is more of a financial service to turn a profit, since some of the drivers and riders may not otherwise have access to credit, he noted.
He also called for more institutional safeguards to protect platform workers.
The need for more support for gig workers in the long term was also raised by Ms Yeo Wan Ling, a director at the National Trades Union Congress who serves as an adviser to the National Taxi Association, National Private Hire Vehicles Association and National Delivery Champions Association.
She voiced concerns that the drivers and delivery riders may find it difficult to meet the weekly repayment deadlines in the event of an injury or illness. She said that the union and its associations have been working with organisations such as the Institute for Financial Literacy and Credit Counselling Singapore to share tips on managing finances and sensible money habits.
Dr Zafar Momin, adjunct associate professor at the National University of Singapore Business School, said that the move by Grab would reduce the financial uncertainty faced by the drivers and delivery riders. He believed this can lead to greater work satisfaction and productivity, and also motivate the workers to remain on the platform.
“As long as the scheme is administered properly and used for the right purposes, it sounds like a win-win situation for Grab and its workers,” he added.
Grab has said it considers the initiative as a part of its broader welfare programme, helping its workers have “better access to credit to manage cash flow needs” in an emergency or when they have to pay for big-ticket items.
While there are no late charges or compounding interest levied, the borrower will not be allowed to use Grab’s other financial products if there is a payment that is overdue.
The company said that arrangements can be made to help those who are not able to repay in time.
Broadly speaking, its top-most rate of 2 per cent is lower than what major local banks charge for credit card debt, which is set at around 26.8 per cent per annum, or around 2.2 per cent per month.
However, credit card repayment terms can include interest-free days of between 22 and even 55 days. After the window closes, compound interest is applied on the outstanding amount. Platform workers, however, may not qualify for credit cards offering such terms.
The features of Grab’s latest initiative are similar to one that it offered in 2020. The Straits Times reported in February 2020 that the programme was dropped roughly three months after MinLaw said that it was working with relevant agencies to determine the applicable legislation, if any, for the programme. Grab did not have the exemption to operate during that time.
Grab told ST that the earlier iteration of the programme was intended to be a test for a limited period of time for the company to come up with financial solutions for its workers.
In July 2021, Grab partnered with HL Bank to offer personal loans to its drivers and delivery riders. The company’s spokesman said that only 20 per cent of the loan applications received were approved.
https://www.straitstimes.com/singap...ffer-cash-advances-to-drivers-delivery-riders
