In Hong Kong, domestic workers typically earn much more than they might be earning in their home countries. This sudden influx of perceived wealth can create an unhealthy relationship with money if a person isn’t disciplined with their finances and educated in how to manage their spending. 

Most people do not get taught financial literacy in school and one of the first lessons we teach at our Money Wise Migrants workshop is how to distinguish between a ‘need’ and a ‘want’. Many domestic workers don’t realise that they can achieve a lot if they plan long-term and save in the right way. 

Very often, they face temptation from cheap products or attractive deals - a keen observer in Central or Victoria Park on a Sunday would spot carefully marketed products in stores or informal vendors circling to different groups selling clothes, bags, jewelry, cosmetics and so on. At HK$20 here or HK$50 there, it becomes easy to overspend without realising it. 

Also, once they are in Hong Kong, domestic workers are considered to be comparatively wealthy by their families for whom the salary seems like a lot of money - this places added pressure on domestic workers, especially if they are the sole breadwinner. They are often unable to tell their families of the realities of their situation here, or they struggle with guilt from leaving their children. Therefore if the family requests gifts, it can be very hard for a domestic worker to say ‘no’ - another challenge we specifically tackle in our workshop Money and Family. Curbing your spending is hard for anybody but these skills can be learned.

Often, domestic workers sign high interest loans because they have no choice, or maybe because they don’t know whether the interest rate is actually high/legal or not. 

With no access to formal credit (bank loans) in Hong Kong, they often need to borrow from money lenders in Hong Kong. 

According to the Money Lenders Ordinance, borrowers can legally be charged up to 48% of annual interest on a loan by licensed money lenders. If it can be proven that they are a high risk borrower, they can be charged up to 60% of annual interest.

Also, money lenders make loans very easily accessible to migrant domestic workers in Hong Kong. Basic requirements are employment contracts and HKID. If they are good borrowers, they may be invited by these loan agencies to renew their contracts and apply for another loan. This could be very tempting to the workers, whether or not they really need the money. In our experience, many domestic workers only focus on the monthly repayment amount and underestimate the significance of the interest rate, often because they may not know how the calculations work.

If they have an existing loan with a money lender or if they’re not eligible to borrow for some reason, some domestic workers might turn to unlicensed money lenders or individuals to borrow money. In these instances, they can often be charged extremely high monthly interest rates (e.g. 20% per month) and might even be asked to provide their passports as collateral (which is illegal). 

Very often, domestic workers might see borrowing money as the only solution to urgent financial needs - financial education can equip them with the tools to plan in advance and prevent these situations from occurring.  

A 2017 impact study by the Chinese University of Hong Kong found that following our workshops, there was a 40% decrease in Enrich participants who reported taking on loans without first having a repayment plan. Learn more about our impact.

It can understandably be confusing to hear that your helper is short of money - after all, as her employer, you cover the main expenses of accommodation and food. However, domestic workers can still face many pressures on their finances which can lead to a shortfall each month, or severe debt at an extreme level. Here is where her money might go:

Family expenses

For most domestic workers, the main reason they are here is to support their family (often including extended family members) - 50-60% of their monthly salary can typically be sent home. 

Additionally, once they are in Hong Kong, domestic workers are considered to be comparatively wealthier by their families for whom the salary seems like a lot of money - this places added pressure, especially if they are the sole breadwinner. They are often unable to tell their families of the realities of their situation here, or they struggle with guilt from leaving their children. Therefore if the family requests gifts or more money for expenses, it can be hard for a domestic worker to say ‘no’ - a challenge we specifically tackle in our Money and Family workshop. 

Loan repayment

Money might also go on repaying debts - Mission for Migrant Workers estimates that domestic workers spend about 36% of their salary on loan and agency fees. Debt can be accrued for many reasons including recruitment fees, emergencies, major expenses or even holiday expenses. Loans can also be needed to cover finances lost due to investment scams, ponzi schemes or even friends’ or family member’s loans for which many domestic workers sign as guarantors (without always knowing the legal responsibility). 

A 2017 impact study by the Chinese University of Hong Kong found that following our workshops, there was a 40% decrease in Enrich participants who reported taking on loans without first having a repayment plan. Learn more about our impact.

Big expenses or emergencies

With poor future planning, many sudden or large expenses can also place a huge strain on domestic workers’ finances; for example, without an emergency fund set aside, they often have to take out loans if there has been a natural disaster or medical emergency at home. 

Others

Other regular expenses can include communication expenses, transportation costs, toiletries, clothes and accessories and even donations to charities or religious institutions. 

If you are concerned about your helper’s spending, consider sponsoring her to attend our financial and empowerment education programmes, or refer her to us for a confidential one-to-one financial counselling session to evaluate her finances and help her shape a plan to move forward.

Domestic workers can face financial difficulties for many reasons. According to our research, 83% of Hong Kong’s migrant domestic workers are in debt. Often, the debt cycle starts with recruitment. For newcomers, upon arrival in Hong Kong they may already be in debt due to very high fees charged during the recruitment process (training, placement fees, etc.). They may be forced to take loans with high interest rates to repay these costs. With no access to formal credit (bank loans) in Hong Kong, helpers may resort to (licensed or unlicensed) money lenders. Through Enrich participants, we also sometimes hear that an employment agency may bring them to a loan company as soon as they get here to sign a loan contract to cover recruitment fees - this is essentially money which they don’t actually receive but which they are compelled to pay back for 3-6 months. Often they are not even given certified documentation for their loan.

Also, money lenders make loans very easily accessible to migrant domestic workers in Hong Kong. Basic requirements are employment contracts and HKID. If they are good borrowers, they may be invited by these loan agencies to renew their contracts and apply for another loan. This could be very tempting to the workers, whether or not they really need the money. 

Repayment of these loans can take months and sometimes years, depending on the size of the loan, and can involve bullying and threats from loan sharks. 

Lack of financial literacy is a huge factor in indebtedness - for example, unaware of the legal responsibility, many domestic workers sign as guarantors for a loan contract. These guarantors can often end up paying for the remaining repayments due because the principal borrower has failed to fulfill their obligation. 

Additionally, emergencies happen such as medical emergencies or natural disasters - without an emergency fund in place, many domestic workers have to resort to loans in these situations.

In the meantime, domestic workers are also expected to send money home as soon as they arrive in Hong Kong; most support at least 4-5 family members and often do not feel they can tell their families about their financial situation here. 

Financial education is preventative and can provide future protection for your helper and even yourself as an employer! Learn more about our impact and how you can sponsor your helper to attend our courses.

It’s great that your helper feels she can talk open up to you about her finances - it isn’t the easiest thing to talk about! If your helper needs to take out a loan from a money lender, there are several questions you can ask her to help ensure the loan terms are fair before she signs a contract. 

Firstly, we advise exploring several options and choosing a loan company which she feels comfortable with and which offers her fair terms. We encourage her to consider lending from an ethical source. Do not borrow from unlicensed money lenders as that can leave her unprotected and vulnerable. Before signing a loan, ask her to consider the following questions:

• Is the loan for a ‘need’ or a ‘want’?

• Is the lender licensed? Unlicensed money lenders give illegal loan terms.

• Will she receive certified documents (e.g. contracts, receipts, statements) for her records?

• Does she understand the loan terms? Can she afford the monthly repayment and the late payment fees?

• Will the lender keep her passport? It is illegal for anyone to do this except for her and the authorities.

If you are concerned about your helper’s financial well-being, you can make sure she gets professional advice. Sponsor her to attend a confidential one-to-one financial counselling appointment with us to evaluate her finances and create a plan to move forward.

Send proof to the loan company that the domestic worker no longer works at that address. The “proof” they need to see is a letter of termination or the notice from immigration saying that they have received notification of the termination. 

You should also make sure that you record having sent that notification to the loan company, so it is recommended to either send it via email or have the letter delivered via registered post.

If you are considering terminating your current helper because you are being contacted or harassed by collecting agents or loan sharks, know that termination doesn’t have to be the first option - and it would not necessarily stop the loan company contacting you. Consider registering your helper for a confidential one-to-one financial counselling session with us to evaluate her finances and identify a way forward.

It is ultimately up to you to decide if you are willing to loan your helper money. Whether or not you are willing to lend to her, you can make sure she gets gets access to professional help in order to address the core issue of financial management. This would give both her and yourself peace of mind, knowing that she has the tools to be financially stable. Managing money is hard for everybody but these skills can be learned. As an employer, it is important to remember that you are not her financial advisor. 

Have a discussion with your helper about the reason for the loan. Is she comfortable telling you why she needs the money? Is it for a ‘need’ or a ‘want’? What would her options be if you were not to lend her the money?

Here are some things to consider when making this decision:

If you do decide to lend money 

• Set up a written agreement about the amount, how she will be paying for it, the length of repayment time and how much will be repaid per month. 

• Note that repayment cannot be deducted from her salary and must take place in a separate transaction, i.e. you must pay her her full salary each month. 

• As part of the repayment agreement you can recommend that your helper attends financial education workshops at Enrich.

If you decide to not lend money

• You can still support her by providing her information. If she decides to borrow from a money lender, you can encourage her to check the following before signing a loan contract:

  • The total loan amount, interest rate and repayment schedule

  • If she can afford the monthly repayment and late fees

  • If the lender is licensed with the Licensed Money Lenders Association. Warn her against borrowing from friends/illegal lenders which will leave her unprotected

  • If she will receive certified documentation.

  • If the lender wants to keep her passport - no one is allowed to keep her passport except for herself or the authorities.

Regardless of your decision, you can ensure that your helper gets professional advice, either through our workshops or our one-to-one financial counselling sessions to discuss steps forward and learn about debt management, goal setting and budgeting. You can even sponsor her to attend our courses.