Does Grab analyse the full credit history of a borrower? The Grab site indicates: “You don’t need to submit documents to apply for the Upfront Cash programme.”
Does Grab know how many other credit cards or how much outstanding loans a borrower has – which he or she is counting on his earnings to pay off?
What sort of financial consultation about his rights and responsibilities does a Grab partner receive before Grab issues the cash advance?
What happens if the driver defaults? Is there are internet payday loans legal in Washington a penalty? Would Grab charge new admin fees for extending the tenor of the cash advance?
Grab has said it would have a dedicated team to assist partners who fall short of their target incentive earnings and face problems in repayment but there are other scenarios that have not been addressed.
What if the Grab partner “quits” or can’t work anymore due to an accident or other unforeseen circumstances? Would Grab employ a debt collector if someone truly cannot pay off the cash advance balance?
How will Grab enforce a borrower paying off the account balance? Is there a loan forgiveness programme that a driver can apply for? My list of questions goes on.
The problem with Grab’s new programme is that it is currently framed as an upfront cash advance or an advance payroll scheme, which many firms in the US offer, but sounds a lot like a loan scheme.
One could even argue that charging admin fees (of up to 8 per cent) is in essence requiring borrowers to pay interest upfront.
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But there are good reasons why this kind of lending happens within a regulated framework. In fact the Ministry of Law has imposed new regulations, a new self-exclusion system and fresh caps on loans for moneylenders last year.
I do want to give Grab the benefit of the doubt since they have indicated that the programme has been limited to a small group of partners.
As someone who has been involved in social entrepreneurship programmes, I fully support the growth of a company like Grab, which can serve unmet needs by leveraging the use of technology and data, and has plans to pursue a digital banking license.
But as a caring society, we ought to watch out for one another, especially those who work in the gig economy.
The Ministry of Law has said they are seeking further information on the programme and will work with relevant agencies to ascertain the applicable legislation if any.
This attention from authorities is welcome. If this is in fact a loan, Grab ought to be regulated the same way as other licensed lending firms.
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While authorities’ wait-until-complain approach has erred on the side of being pro-business, and has been applauded by start-ups and companies trying out new business models to serve society in new ways, the worry is whether such a policy towards disruptive businesses with huge market share and influence over many workers’ lives needs a rethink.
If a firm with big FinTech ambitions can get away with moneylending functions without requiring a license to operate, it is unclear what sort of a precedent Singapore, as a financial hub, is setting.
Jonathan Chang is an investor in startups, advisor to governments, and lecturer in entrepreneurship and innovation. He has been awarded a Social Entrepreneurship Fellowship by raiSE (Centre for Social Enterprise).
For now, Grab says it’s only offering the Upfront Cash programme to a small group of partners selected for their good historical earnings. But there are uncertainties and unanswered questions over Grab’s calculations over how much of a loan to provide.