Why Credit Co-operatives in Singapore Could possibly be the First (And never Last) Place You Turn To
At some time in our lives, the majority of us will have to take credit. This may be a significant loan, like a housing loan for our home. There are also occasions where we might need loans that are lower in quantum and also over a shorter duration such as instruction loan to finance our tertiary studies, a renovation loan for the new house or perhaps a loan to help tide over a medical emergency.
For many people, the first place that we would think of whenever we need a loan would be the commercial banks. However, while banks are the 'default' choice for most people, they may not necessarily be the greatest places to turn to when you really need financing.
For example, banks sometimes include conditions and terms that won't always be ideal for borrowers. Some banks may offer loans which include prepayment penalty, which essentially means you aren't in a position to repay your loan earlier, even though you desire to to save on interest costs. Others may require a minimum loan quantum before you are even in a position to obtain your loan.
Beyond banks, some people also use other avenues to gain access to money. For instance, some people will use pawnshops if they have valuables that they'll use as collaterals. Those without valuables may turn to moneylenders, both licensed and unlicensed, in spite of the high rates of interest and the unfavourable terms that are being offered.
But are there alternative options that individuals in Singapore can turn to instead?
How Do Credit Co-ops Work
Credit co-operatives, or credit co-ops, for short, are financial institutions that are created, owned and operated by their members, who pool their resources to be able to help one another. Unlike commercial banks, a credit co-op is really a not-for-profit organisation having a social mission. Its main mission is to provide use of affordable financial solutions for its members, who are also its collective owners.
The proven fact that co-ops are not-for-profit make them unique institutions, and is possibly the reason why you seldom hear about them. They don't spend much on advertising campaigns, nor do they need to hit revenue targets for the sake of their share prices or exceed their profit targets year over year.
In contemporary Singapore, where banks largely dominate the banking and financial sector, it may be easy to disregard the value that credit co-ops are able to provide.
Credit co-ops are particularly important in countries or industries where folks are unable to easily obtain access to the lending options and services offered by banks.
Credit co-ops in Singapore were pivotal in providing our pioneer generation and those who came after them with credit along with other financial services.
A few years ago, I was discussing with my father on how to finance the renovation of my flat. Between giving their parents a monthly allowance, paying for household expenses and servicing their very own housing loan, I was curious to understand how my parents could afford their renovation. Like many other Generation X folks at that time, they did not have much money.
It works out that my father, who had been a worker of Singapore Telecom, took his renovation loan from the credit co-op.
My dad's credit co-op disbursed the loan amount required for the renovation, and monthly repayment for that loan was automatically deducted from his salary every month. Like many things in those days, it was simple and convenient. Most significantly, it was a financial solution that worked well.
Since then, the banking industry in Singapore is continuing to grow to provide a number of services that addresses Singaporeans' needs, including loans. Does that mean that co-ops are no longer relevant today?
Credit Co-ops Today
Like our reliable power grid, credit co-ops continue to serve their visitors well and reliably.
Here are three simple fundamentals that you should know about credit co-ops in Singapore today.
- They continue to be active in Singapore, more than 90 years later
- They are not-for-profit organisations with a social mission
- They are able to offer competitive financial solutions for example fixed deposits. These fixed deposits also have a tendency to offer more flexibility to members. For instance, the minimum amount required is generally less than what is required at banks while interest rates are also competitive.
Here are examples of credit co-ops which are still active in Singapore.
TCC Credit Co-Operative
Available To: All Singaporeans and Permanent Residents.
Probably one of the largest credit co-ops in Singapore, TCC Credit Co-operative (TCC) offers an extensive selection of financial solutions, which its members can tap on at competitive interest rates along with favourable terms and conditions.
Products offered by TCC include education, renovation and marriage loans, amongst others.
For example, the TCC education loan is provided in a flat rate of interest of just 2.2% per annum (p.a.). Which means that for every $10,000 you borrow, you pay an interest rate of just $220 per year.
For renovation loan, TCC charges a set rate of interest of 4% p.a. up to and including more $30,000 or six months of monthly salary, whichever is gloomier.
For marriage loan, rate of interest is at a flat 4.5% p.a. having a maximum repayment period of Three years.
Read much more about the full selection of financial solutions available from TCC here.
Straits Times Co-op
Available to: Employees of SPH Group, Times Publishing Group and Subsidiary Companies.
The co-op offers unsecured loans for members of as much as 2 times the total amount within their co-op savings account. For instance, if a member has $5,000 in savings, they are able to borrow as much as $10,000 at an rate of interest of 6% per annum.
Going Beyond Financial Solutions
As with all financial institutions, funds for loans can only be disbursed when there are deposits produced by other members.
For example, TCC offers its members a regular membership Checking account. This method of “saving” is similar to buying shares in TCC where Subscription Customers are paid an annual dividend in the surplus earned by TCC (usually between 3.00% to 5.00%).
The Singapore Teachers' Co-operative Society (TCOS), that is a co-op for people within the teaching profession including employees of the Secretary of state for Education, supplies a save-as-you-earn account that gives an effective rate of interest of three.08% per annum. The (small) catch here's that members need to commit to 24 monthly payments, having a contribution selection of between $20 to some more $500 per month.
Value Adding to Members in Different ways
Aside from receiving deposits and disbursing out financial solutions, credit co-ops also make an effort to value-add and reward their visitors in different ways.
1. Annual Dividends
Most credit co-ops give out annual dividends to their members. This dividend payout is dependant on the surpluses that the co-op earned in the past year. The amount paid to every member would be based on the number of shares a member owns.
Unlike shares which are traded on the stock market, most co-ops possess a limit around the amount of shares that the member can subscribe to.
TCOS allow members to buy up to 2,000 shares of the society, which at $1 per share is $2,000.
2. Common Good Funds
Common Good Money is designed to assist members in a few stage in their lives.
For example, TCC has a wide range of events where they'll give a gift to members via their Common Good Fund. Included in this are a hospitalisation grant, baby bonus, marriage grant and even funeral grant.
3. Education Scholarships/Bursaries:
To support members' children within their education journey, most co-ops offer educational scholarships/bursaries, that are given to members' children.
For example, AUPE Credit Co-operative, which is available to union members, gives study grants as high as $350 per year from primary school completely as much as university level.
Which Credit Co-op(s) Would you Belong To?
It could be useful to realize that there's two main kinds of credit co-ops in Singapore.
The first group are credit co-ops made for members in particular companies, group of companies or sectors. For example, credit co-ops such as the Customs Credit Co-operative (for employees of Singapore Customs) and Keppel Bank Co-operative (for employees inside the Keppel group of companies) are only open for employees of these respective organisations.
The second group of co-ops are intended to cater to a wider group of people. Co-ops like AUPE Credit Co-operative and TCC Co-operative fit in with this second category.
As long while you meet the requirements for joining a credit co-op, you might apply to be a member, much like my dad! And there's no stopping one from joining multiple co-ops.
With their members-first approach and social mission, credit co-ops can provide compelling financial services that you may consider first before going to a bank.