Warning against loan sharks

According to a report from the Ministry of Interior, a growing number of Asian businessmen are involved in the illegal business of lending money to the needy but with high interest returns.

The issue was also featured in the March issue of the ministry’s 999 magazine, detailing the rampant underground lending among some Asian communities, and the growing number of loan shark victims at an alarming rate, with tens of millions of dirhams in circulation.

According to Asian community sources, the trend is more common among Afghans, Pakistanis and Bangladeshis now.

“It was rampant among Indians some years ago, but with the government back home introducing stringent policies, the menace is under control now,” said Shekar, a textile merchant on Hamdan Street in the Capital.

The old-time Indian trader, others who spoke to KT and the ministry report also suggest the sinister practices of loan sharks include keeping a stranglehold on the borrower and families back home.

S.A, a Pakistani expatriate from Khaibar Pakhtoonkhwa province, had to surrender his farm land documents against borrowing Dh10,000 from a lender here. “I desperately needed money and asked a lender but he asked for security that I did not have here. So I asked my brother back home to give our farmland documents to the lender’s business partner there. The interest he asked was hefty and I am still repaying it for the last several years. The original amount is still there because what I pay is going against the interest that keeps on increasing because of delay in repayment,” he said.

Lt-Colonel Awadh Saleh Al Kindi, Editor-in-Chief of 999, said: “The 999 magazine report fleshes out how an illegal market in loans turns borrowers into deep financial trouble. Unfortunately, many have fallen victims to loan sharks.

“They have borrowed money during a personal crisis or a business need and have since been trapped in a vicious cycle of never-ending payments and ever-increasing dues. We encourage these victims to come out in the open and seek proper help from the UAE authorities. And more importantly, we urge everyone to stay away from these loan sharks and where possible, inform the authorities about these individuals and groups so we can stop their insidious practices.”

The report also says while the laws in place in the UAE are tough against loan sharks with jail terms and hefty fines, more and more victims are still falling into their trap. “The authorities continuously encourage the victims to come out in the open but they are hesitant to do so because of the fear that they or their families back home will be harmed,” said the report.

One of the lenders, also from northern Pakistan, told Khaleej Times that he had made lending his business with dozens of clients asking money almost every month.

“I was a heavy vehicle driver earning good salary that I have saved. Now I’m lending that money to friends and other clients against interests. It is my money, if you need some of it, you have to give me some ‘Soudh’ (interest in Pakistani language),” said D. Khan, who now works in a farm in Ghantoot.

A large number of textile shops run their businesses on Hawala or Hundi (illegal money exchangers) and continue lending on hefty interests.

“These textile shops have textile products for display only for their trade licences. Their main business is Hawala and money lending,” said M. A. Baloch, a resident of Madinat Zayed.

Earlier, a number of legal money exchange houses and jewellery shops in the city used to give cash on credit cards registering them as purchases, but after levying a charge from the card owner. However, that has been controlled and stopped by the Central Bank and other concerned authorities.

A common strategy used by loan sharks is to confiscate the passport, ID card or property documents of the borrower.

Frank Cimafranca, Philippine Consul-General to Dubai, told 999: “A passport is government property, issued only to the person whose name and biometrics appear on the document. It is against the law to transfer the possession of a passport to anyone. A passport cannot become someone else’s property. If the passport holder declares it is lost, he can obtain another and the one used as cash loan guarantee will hold no value for the lender.”

Still, even if the borrower can report the passport stolen and get a new one from the embassy and get out of the UAE, the lender has enough muscle in the debtor’s home country to keep him or her on the griddle.

In spite of the repeated warnings from UAE authorities and Asian welfare groups about the insidious practices of loan sharks, the number of people approaching them continue to increase, partly because of the stringent lending criteria followed by the banks. Loan sharks fill the gap left by the banks because they don’t ask for collateral and they also provide funding for those in the lower income bracket.

nissar@khaleejtimes.com