GRAB’S new cash-advance scheme for its drivers and riders has been assessed by the Ministry of Law (MinLaw) to be a safe source of credit with sufficient safeguards, Senior Parliamentary Secretary for Law Rahayu Mahzam said on Wednesday (Mar 1).

She was responding to a parliamentary question filed by Member of Parliament (MP) Yip Hon Weng on the scheme’s regulation, which has stirred debate since January over the high administrative fee charged to gig workers for cash advances of between S$1,000 and S$10,000.

Mahzam said GFin, a subsidiary of Grab, had applied to MinLaw for an exemption to implement the cash-advance programme. Grab is not already considered an excluded moneylender under the Moneylenders Act, as its drivers and riders are not employees.

“In granting the exemption to GFin, MinLaw assessed that its proposed programme provided an alternative source of safe and sustainable credit to its partners, who might not qualify for other forms of credit or who may be charged high interest rates due to their irregular incomes,” she said.

“Furthermore, GFin had incorporated sufficient safeguards in the programme, such as developing an internal credit-scoring system to assess the maximum amount of loan a partner could take, and had put in place various initiatives to provide support for partners who face challenges in making repayments.”

Based on these considerations, MinLaw granted GFin the exemption in August 2022, for a period of three years. The ministry will tap the same framework it used in GFin’s case for any other similar exemption applications in the future, Mahzam added.

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The admin fee for Grab’s Partner Cash Advance scheme is typically set at about 1.2 per cent on a monthly basis, and is capped at 2 per cent per month, the company had previously told The Business Times.

Grab does not charge late fees or compounding interest and allows early repayments without penalty. Those who miss payments may be blacklisted from all GrabFinance products, but will not be disadvantaged in being assigned jobs.