TL;DR – We bring you the skinny, the good, the bad and the ugly of the Grab Upfront Cash scheme.
We first read about how Ms Atikah Ahzamshah, a food delivery rider with Grab, took a cash advance of $1,380 from Grab to buy a return air ticket to Milan in a Straits Times article. Ms Atikah had requested an advance of about $1,470. A 6.5 per cent admin fee was immediately deducted. She is repaying the sum at the rate of $57 a week for 26 weeks.
Ms Atikah is just one of the the many Grab partners (that’s how Grab refers to its Grab drivers and riders) who has been offered the option of taking up an advance, which Grab refers to as “not a loan”, but an “early payment of future driver incentives for a one-time admin fee”.
Here’s the Skinny on Grab’s Upfront Cash Scheme
Grab offers an Upfront Cash Programme that lets selected drivers and food delivery partners an option to take a cash advance on their future earnings, and pay it back in weekly instalments.
Grab markets this as a way to help their drivers/food delivery partners with their financing needs.
Here’s how the Grab Upfront Cash scheme works at a glance:
- Drivers/food delivery partners selected for the scheme will be offered a maximum amount that they can apply for.
- This amount is based on factors such as one’s individual historical earnings and overall earning pattern.
- There is no interest charged.
- While there is no interest charged, a one-time administration fee which is derived from a variable percentage of the advance taken up will be charged when applied.
- It has been estimated that the said administrative fee can go up to about 8%.
- Upon successful application, the Upfront Cash amount less the administration fee will be disbursed into the applicant’s Cash Wallet, which can then be transferred to a bank account.
- According to information on Grab’s website, applicants can choose to repay the advance over a maximum of 52 weeks. However, all the Grab drivers and riders we spoke to indicated that they were offered a duration of up to 26 weeks for repayment.
- A fixed deduction will be made from the applicant’s earned incentives via their Cash Wallet every Monday until the Upfront Cash balance is fully repaid.
- In the event that the applicant’s incentives be insufficient, the deduction will then be made from any balance in the Cash or Credit Wallets and the deduction may also occur on a more frequent basis.
The Grab Upfront Cash scheme can be a good source of financial help, or even a lifeline, to some people.
In life, we sometimes will come across problems or obstacles, or we may even make some mistake that cost us dearly, financially. Or someone in our family may be in need of money, for instance a sudden illness or accident in the family, or a child needs money for his overseas exchange programme, or a child needs a new computer.
Where can people usually borrow money from?
Times like these means we are in urgent need of financial funds. And times like these may also mean some people may be desperate enough to seek drastic measures like borrowing from loansharks. So what are the options available to us?
- Borrow from family and friends
- Pawn or sell something valuable
- Take up personal loans or credit lines from banks
- Cash advance from credit cards
- Borrow from licensed moneylenders
- Borrow from illegal moneylenders
- Something more drastic or illegal
For people who come from poor background whose network of family and friends are also poor, the first options of borrowing and pawning are not practical.
Licensed Moneylenders and Illegal Moneylenders
In Singapore, banks dole out personal loans to the tune of 3.8-4% per annum. Loan quantums can range from $500 to the thousands or tens of thousands, and repayment periods can be between 1 to 7 years. However, for the personal loan to be approved at 3.8-4%, most banks require the borrower to have a minimum income of $30,000 per annum. When the borrower has only $20,000 per annum, interest rates go up as high as 9.8-10% per annum, reflecting the increased risk for the bank.
Other than the obstacle of minimum income requirement, banks will also require proof of income for the past two years, usually in the form of income tax documents or CPF statements. This can be hard for the self-employed and freelancers as many do not have a stable income over the year, or some may even under-declare their income for tax reasons.
In the event that borrowers do not meet the more stringent criteria of banks, there are also two other options that they may consider – 1) licensed money lenders or 2) illegal money lenders.
Licensed money lenders often see borrowers who have difficulties in acquiring loans from conventional sources such as banks due to their low income and lack of good credit history. The Moneylenders Act and Rules Singapore protects borrowers by imposing a maximum interest and late interest rate. They are not to go over 4% per month. If you earn less than $20,000 per annum, a licensed money lender can still loan you up to $3,000 and if you earn more than $20,000 per annum, you could get 2 to 4 times your monthly salary as a loan.
Unlicensed money lenders or more commonly referred to as “ah longs” can levy interest rates anywhere between 10-20% monthly. Rates increase once a borrower defaults and this often leads into snowballing debt. In 2015 and 2016, there were 3,806 and 3,388 cases of unlicensed moneylending and harassment reported.
With limited financing options for lower-income and also for self-employed people who may have problem furnishing proof of income, it’s not a surprise that many would find Grab’s Upfront Cash an easily accessible way of getting a loan.
So for people like Ms Atikah, the Grab Upfront Cash scheme can be a good avenue to tap into fast cash to either check off a holiday off a bucket list, to pay for a big ticket item, or to help a family member.
“This kind of micro loans very important for people with not much savings”
We spoke to 45-year-old Grab driver-partner, Mr Goh who is married with one child. His Grab earnings is about $1,500 per week and he was offered $5,000 advance. He did not take up the offer when he was offered since he did not need it. But a few months later, he applied for the $5,000 advance due to personal reasons. He’d shared, “It is not difficult to repay. Just continue driving lor. Sure can repay.”
Mr Goh thinks that it’s a good product that Grab is offering. “It is a good thing. Instead of illegal moneylender or going to the bank with tedious application, so troublesome. This is a lot easier. Lower rejection rate also, since Grab only offers to pre-selected drivers. It is a fantastic thing that Grab offers this. Maybe children need things for studies, school trip, or even if family sick. This kind of micro loans very important for people with not much savings.”
When we asked Mr Goh if his other driver-friends also took up the offer, he said, “Quite a number of drivers I know took it up. And no, I did not hear things like them using it for gambling or anything negative. Most needed the extra cash to buy things, mostly important things for the family.”
“I took up the Grab Upfront Cash three times.”
We also spoke with 52-year-old Mr A (who prefers to remain anonymous), who has been a full-time private hire vehicle driver with Grab for three years. Mr A is married with four kids. He has been offered the Grab Upfront Cash scheme three times and he took it up all three times. The amounts offered were different each time probably due to the fact that his earnings fluctuated, but the amounts offered ranged from $5,000 to $10,000.
Mr A’s first cash advance was $7,500 and he had used it to clear part of his credit card debt, incurred when he was running not-so-profitable coffee shop business before he closed it to become a Grab driver full-time. His second and third advance amounts were $5,000 and $5,300 respectively, and he had used the money for better cashflow to improve the family’s lifestyle since he does not have much savings.
Mr A is supportive of Grab coming up with this Upfront Cash scheme as he sees it as a good outlet for drivers with sudden cashflow needs. For full-time drivers who plan to continue to drive, he sees no big problem so long as they can remain committed to the job and be prepared to commit for 26 weeks or whatever the repayment period is. “Must commit, be prepared for 26 weeks. Dont ownself chut pattern. If you are committed to drive full-time, everyone can repay the advance. So far, no issue.”
“We all go into this scheme willingly, with our eyes wide open. You know what you’re getting in. So don’t make it sound like Grab forced you to take the advance.”
“I see it as a form of welfare from Grab”
Other than Grab drivers, we also spoke to Mr Lim, 36 and single and he is a Grabfood delivery rider. He currently earns about $1,200 a month, and has not been offered the Upfront Cash scheme by Grab. However, he thinks that “the scheme can be something useful.” If offered, he would consider it very seriously and use the advance to buy a Power-Assisted Bicycle (PAB).
“This cash advance scheme is a lot to do with self-control. I see it as a form of welfare from Grab. Nobody forces you to take it and to overspend. There are some companies that provide salary advance for their staff and to also to tie them down. It is not uncommon.”
Offering easy access of cash advance to vulnerable groups of people who might find it challenging to find alternative work and to people with little financial literacy and planning can be bad.
There are good reasons for the legislation to regulate money lending. To put it simply, the rules and the law are to prevent unscrupulous lenders from abusing borrowers, especially the more financially ignorant and vulnerable ones, and also to prevent irresponsible borrowers from over-stretching themselves.
In this case, Grab has structured the Upfront Cash scheme such that it’s not exactly a loan, but a “cash advance on future earnings”, and Grab is neither a bank (yet) nor a licensed moneylender, it is not under the Banking Act or Moneylending Act. This actually gives Grab more flexibility and freedom.
A somewhat related and interesting point is how advances are usually granted by companies to employees. But in this case, these Grab drivers and food delivery partners are freelancers and not exactly employees of Grab. However, what Grab is doing now is akin to them acting like employers but without the responsibility of one.
Back to the original point of how Grab can circumvent the law and offer upfront cash to selected drivers and riders, let’s first have a quick look at the profiles of private hire vehicle drivers and food delivery riders.
Who are the Grab drivers and food delivery riders? And how many?
Founded in 2012, Singapore-based technology company Grab is arguably Southeast Asia’s largest mobile technology company that offers ride-hailing transport services, food delivery, and payment solutions. In the space of ride-hailing, Grab is the market leader, and probably by a mile ahead of its competitors. As for food delivery, Grabfood should be the market leader too.
Understandably, many individuals have been drawn to jobs in the gig economy, because after all, the flexibilities and opportunities in the gig economy have indeed allowed many workers, especially the lower-income ones to earn as much as the white-collar workers, even if without qualifications.
We know for a fact that there are about 45,000 private hire cars registered as at August 2019, and Grab has revealed that they have more than 10,000 food delivery partners on its platforms. But just what kinds of Singaporeans are behind these gig economy jobs?
Here are six main archetypes of people whom we think are more inclined to work in these jobs.
1.Single Mothers/Parents: A single mom’s parenting duties are no different than they are for a married one — except that more often than not, a single mom is on her own. She’s got to be financially independent and while caring for her child(ren). Hence, by becoming a Grab driver or delivery partner, it gives single mothers the flexibility they require – to spend quality time with her family, while being able to earn a decent income at the same time.
2.Ex-offenders: Former offenders may have been released from prison, but yet, they may still find themselves in a “second prison”. Landing a decent has proven tough for some as they face the invisible walls formed by social stigma, fear, and distrust. Ex-offenders can now find employment opportunities working as private hire drivers or delivery riders despite.
3.Those who are in between jobs: Sudden unemployment due to layoffs, injury or termination can be devastating and confusing – especially when you still have bills to pay. To this group of people, the best solution could be to seek temporary employment with Grab as food delivery riders or private hire drivers to earn some money and pass time in the interim. Again, it also offers flexibility for taking time to attend interviews, etc.
4.Part-timers and students: Some individuals may turn to the gig economy for extra money should they find that their full-time job isn’t enough to cover their basic needs and daily expenses. Increasingly, more and more students have also turned to delivery jobs to earn some spare cash – working hours are flexible and it does not really require specialist skills to do the job.
5.People who value flexibility and freedom: There is also a group of people who have reasonably high educational qualifications or high-value skillskets, and are able to work in industries with good career prospects, but yet prefer to work in the gig economy as this group of people likely value flexibility and freedom over a stable job with advancement prospects. Some also like that they can skip the Central Provident Fund (CPF) contribution and bring home more cash.
6.Individuals with disabilities: For people in this group, a job in the gig economy as a driver or delivery rider is often the only option for them. If not for the low barriers to entry and flexible arrangements, it would have otherwise been difficult for them to find and keep regular employment. #SayNoToDiscrimination #EqualEmploymentOpportunity
It’s safe to say that a significant portion of the above groups are people who would find it hard to secure personal loans from the usual (legal) avenues. While one can argue that the Grab Upfront Cash scheme can help these people, it is a double-edged sword.
What happens if they take up the cash advance, and then something happens that result in them not being able to continue with the Grab driver or food delivery partner jobs?
For instance, a Grab driver might run into an accident that results in him or her not being able to drive for a period of time? Or what about a change of law like the recent ban of PMDs on footpaths that affected the food delivery riders’ income?
The majority of these people would find it challenging to land alternative jobs that can pay as much, and what if they’re further burdened by the weekly repayments from taking up the cash advance? What if they have taken up the cash advance for non-essential items or spending when they are better off not spending that money? The easy access of fash cash dangling in front of them is too much of a temptation; what if they lack self-discipline and just take and spend the money just because it’s easy access?
Mind you, these people are possibly the vulnerable ones in the society, likely without much financial literacy to do proper financial planning.
Are we, then, helping them or doing them a disservice with the easy access to money? If it’s a genuine hardship case, there are other avenues to help them. Perhaps the last thing they need is the easy access to fash cash, like a young person taking the upfront cash to go on a holiday in Europe. Is it really necessary?
Do we really want to encourage people to spend “future money” and on non-essential things?
“My two friends took the cash advance and went gambling”
We spoke to Mr B (who prefers to remain anonymous), a Grab driver and he shared that he earns about $600 weekly and has been offered $1,500 under the Upfront Cash scheme. He did not take it since he did not need it as “I don’t want to get locked in by Grab with the weekly repayments when I’m just a part-time driver.”
He does not think well of the scheme. “Instead of positioning it as a loan, Grab markets it like those fancy credit lines from banks. I receive the notification said something like, ‘Want to buy the big ticket item you always wanted?’ and they keep planting all these ideas in your head to go get it.”
“The way they phrased the offer is also quite clever. They will never say it’s a loan, but they positioned it as though it’s your money already and you’re just withdrawing it in advance. It is probably very tempting for young drivers to see that they “have” $10,000 available to withdraw. And it’s very common for this Grab driver-friends to describe the advance as ‘withdrawing’ their money, so it’s like psychologically they don’t even think they’re borrowing or using an advance.”
“My two friends took the cash advance and went gambling.” We asked if it ended well for his friends, and Mr B said they lost the money through gambling, but had no problem paying back the advance in weekly instalments.”
“What if the trip fares drop even more? Then we’ll all be stuck”
Mr Chua, 39, is a part-time food delivery rider. He is aware of the Upfront Cash scheme, but has not been selected for an advance. He shared with us that he is also not interested.
“I think the admin charge of 8% is quite high. My friends and I are the older group of riders, so most of us already have unsecured credit facilities with bank or we have our own savings. It doesn’t make sense for us to pay admin fee for advance of our future earnings.”
“The cash advance will probably be appealing to those younger riders who don’t have strong financial literacy and need quick cash. But once you have this cash advance with Grab, what happens if you default on your payments? And who knows? what if later the trip fare drop even more? How are the riders going to pay back the cash advance?”
“I just don’t want to get stuck in a situation like this since we’re just partners and not employees of Grab. Not covered under employment act on “salary deduction” and who is to know if we can keep earning the same for 26 weeks?”
Labour MP who is also NTUC’s Assistant Secretary-General Zainal Sapari shared an email that a Grab driver sent him after Straits Times published the article about the Upfront Cash scheme.
“FORCEFULLY, they are not only monopolizing the market, but also the lives of the drivers.”
The Grab driver shared with Zainal that he has been driving with Grab for three years and he took up the Upfront Cash offer only to be hit with Grab’s notification that they would be lowering and replacing certain incentives. The Grab driver said these changes in incentives translated to a rather significant 30% drop in the drivers’ income.
In order to meet the weekly repayment of his cash advance and also to make a living, he claimed that he has been driving seven days a week. He’d said in the email, “Since Grab knows that drivers are mostly staying with them due to the incentives, they had to find another way to make sure when the drivers are no longer incentivised, they will still have no choice but to drive with Grab”, effectively saying that Grab is using the Upfront Cash scheme to unfairly retain the drivers.
He also shared about how there’re different tiers of drivers in Grab, and the top level drivers enjoy priority bookings, and how he has not been able to hit the top level yet, but the higher incentives in the past helped to make up for the poorer fare assignment and few priority booking. With the incentives removed and changed, drivers like himself are actually being penalised unfairly, and they don’t really have much choice since Grab is practically monopolising the market.
Here’s the screenshot of the driver’s email.
Labour MP Zainal reminded drivers and riders to exercise caution,
“While this scheme can be useful to the borrowers in need of immediate cash assistance (compared to borrowing from loan sharks), borrowers must still beware of the risks involved because their future earnings can fluctuate. GRAB claimed that they will be selective and provide assistance to those who may run into difficulty in servicing their loans. I hope the penalties or interest for late payments are not severe to the point of causing the original loan to balloon out of control like those offered by money lenders.”
There are some netizens who advocate that this Upfront Cash scheme by Grab is not bad, and it offers an additional source of access to fast cash for some people.
They also pointed out that Grab merely offers the option to selected drivers and food delivery partners, and it’s up to the drivers and partners to accept. No one is forcing them to take the advance, and that we should all be adult enough to deal with our own finances.
But the problem here is that this is not an equal relationship.
Grab has and it does exercise control over the drivers and the food delivery partners, even though Grab is technically not their employer. It does not have to carry out the responsibility of care for their drivers and riders, and yet it has control over them in at least these areas:
- Penalties if they did not accept jobs
- Termination if workers flout certain limits (such as rejecting jobs, cancelling orders)
- Pricing of incentives, surge, fare calculation, delivery fees (without consulting partners)
- Ability to change size /perimeter of zones without consulting partners
- Partners need to bid/input their working hours and fulfil them (or risk being penalised)
- Partners need to pay to get the Grab kit
Labour MP Zainal summed it up quite well when he was responding to a comment on his Facebook post that we should not be blaming an external party (Grab) for someone’s own handling of his personal finances.
He said that he hopes that Grab is not a “modern slave master using digital as a cover”, and we need Grab to be “transparent and not change the rules according to their whims and fancies.”
“I agree that the GRAB driver has a choice but, I am surprise that you do not think this is a cause for concern. In giving the loan, GRAB is charging an admin fee of up to 8% (GRAB wins). When a driver takes a loan with GRAB, they lower the incentives unilaterally and saves cost and makes it harder for the drivers to earn good income. (GRAB wins). Because the loans are offered to their good drivers, GRAB is able to retain these workers and by manipulating the incentive schemes, these workers have to work longer because of less incentives (GRAB wins) again.”
“Should we blame `external party’ – my answer is yes if they are not transparent and change the rules according to their whims and fancies. That is why I am worried because someone texted me and opined that GRAB is akin to a `modern slave master using digital as cover’.”
(Featured image via)