PAWNBROKERS (AMENDMENT) BILL

Order for Second Reading read. 3.15 p.m.

The Minister for Health and Acting Minister for Social Affairs (Dr Toh Chin Chye): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

I ought to inform the House that the Bill has nothing to do with health but I am taking this Bill as acting Minister for Social Affairs who is on leave prior to leaving for Jakarta as Ambassador.

There were misgivings when the Bill was first published. However, as a prelude, let me mention that between 1952 and 1966 seven pawnshops went bankrupt. Their total declared assets at bankruptcy were only $1,678,498 while $5,914,294 were owing to 1,551 depositors. The causes of bankruptcy ranged from using funds in the interests of the principals of the pawnshop companies, poor management, paying of high interest rates or using depositors' money in uncertain business ventures other than the pawnbroking business.

There are now 55 pawnshops with about 16,000 depositors. At the end of March 1977 their combined fixed deposits amounted to $79 million. It is hard to believe that with rising GNP per capita Singapore citizens are becoming more and more insolvent. The liquidity position of pawnshops can be seen from statistics collected for the years 1974-76.

The average amount of loans issued in pledges varied from $15 million to $18 million per month or an average of $16.6 million per month. On the other hand, income received from pawners including payment of interest, public auction and sale of unredeemed pledged articles varied from $13 million to $22 million per month or an average of $16.73 million per month.

This is the alarming part of the pawnbroking business. The fixed deposit is obviously too large and more than adequate for the purely pawnbroking business. It must be assumed that a substantial sum is being diverted to other types of financial activities. In other words, some pawnshops are functioning as finance companies but do not offer security to depositors.

There are two alternatives to solving the problem relating to deposits.

(a) Pawnshops that wish to take on the functions of finance companies by accepting deposits can do so by registration under the Finance Companies Act.

(b) Pawnshops will be allowed a grace period of 2 1/2 years to wind up that part of their business involving acceptance of deposits from the public. This can be done by reducing their fixed deposits by 10% every three months during the 2 1/2 year period. No new deposits will be allowed during this period but renewal of existing deposits during the grace period can be permitted provided the total amount of fixed deposits does not exceed the level as required by the phased run-down.

The Government has no intention to stop pawnshops servicing those members of the public who are in need of small loans. This aspect of the business can be carried out with lesser capital as the loans given are only 50%-60% of the value of articles pledged. Pawnshops with a history and good standing will not disappear. In fact, their business will increase as the pawnbroking business is brought under control.

The other amendments to the Bill are minor and deal with the administration of the Pawnbrokers Rules such as substituting an office of a Registrar for the Pawnbrokers Licensing Board. They are clearly spelt out in the explanatory statement at the end of the Bill.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Toh Chin Chye].

Bill considered in Committee: reported without amendment: read a Third time and passed.