Thailand a happy hunting ground for loan sharks

[webfact]

EDITORIAL
Thailand a happy hunting ground for loan sharks
The Nation

A toxic mix of inequality and lax financial discipline has left too many citizens prey to illegal lenders

BANGKOK: -- The problem of illegal money-lending is in the spotlight again after a middle-aged woman from Lop Buri set herself ablaze while filing a plea for help at Government House over a debt of about Bt1.5 million she owed to a loan shark. She suffered severe burns and is still recovering.

The act of self-immolation made headlines and prompted the authorities to take action. Senior local officials reportedly sought a meeting with the loan shark, who subsequently offered to write off the debt. But this was hardly a happy ending to the story, considering the terrible injuries the woman is enduring because the authorities were too slow coming to her aid.

The fact is that this case is just the tip of the iceberg. The problem of illegal lending is a deep-rooted and long-standing one in Thailand. Most complaints filed at Government House involve large "black-market" debts with exorbitant interest rates of up to 20 per cent a month. Debtors who fail to make payments are often attacked by hired collectors.

It can be a risky business for lenders, too, since it's not unusual for customers to simply abscond without paying up. However, profits from the high interest rates make it an increasingly popular business.

Illegal moneylenders advertise aggressively to get new customers, distributing flyers door-to-door in housing estates and pasting them on utility poles and pedestrian flyovers. Their prime target is people who find it difficult to get loans from banks.

Governments over the years have come up with various measures to ease that difficulty and also help debtors repay their due, including helping them refinance loans with state-owned banks. The latest plan, from the Finance Ministry, is to "bring the loan sharks into the system" by giving them "nano-credit" licences. The licences would allow creditors to loan up to Bt120,000 per borrower and impose an interest rate no greater than 36 per cent on loans.

Refinancing measures and the nano-credit scheme are positive moves to ease the burden on small-time borrowers. However, they do little to tackle the problem of illegal money-lending at its core. The goal should instead be to encourage people toward self-sufficiency by making and saving money so they do not need to rely on lenders.

Bank of Thailand Governor Prasarn Trairatvorakul suggested recently that the problem could be resolved through job creation and improving wealth distribution. The public could also be offered education on how to best manage their savings and finances. "Measures such as lower interest rates and micro-finance improve borrowers' ability to repay their debts only in the short term. It's like taking a painkiller from time to time - but you can't take painkillers every day of your life," said Prasarn.

The authorities alone can't tackle the root cause of the misery caused by this illicit business. Some of those targeted could help fend off the loan sharks by tightening their own spending habits and thinking more carefully before borrowing. Meanwhile the authorities can do more to ensure that wealth is redistributed more fairly and that fewer low-income earners are left prey to the illegal lenders.

Source: http://www.nationmultimedia.com/opinion/Thailand-a-happy-hunting-ground-for-loan-sharks-30246086.html


-- The Nation 2014-10-23

[Somtamnication]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

[MJP]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

Not excusing LOS but look at payday loans in Blighty if you want to see loan shark interest rates. Multiple thousands of percent APR.

I know money doesn't necessarily bring happiness but having none can certainly bring misery, regardless of ones geographic location.

[apetley]

Daily rates here in the village of between 20 and 50%. The lenders operate with full knowledge of the police. One I personally spoke to said he makes a monthly payment to them to be able to do business. Can't see it stopping anytime soon myself.

[ChrisY1]

This will never stop whilst the authorities continue turning a blind eye.....or more likely, continue making money from loan sharking!

[kurnell]

I was thinking of offering rural people micro loans at a fair interest rate. I expect the loan sharks would likely not be happy.

[recycled]

Can't or don't want to stop Loan Sharks, Government and private corruption, lottery and tourist scams, police Mafia, thefts, assaults, murders, human trafficking, illegal logging, illegal drug; the list being endless. Then tell me General/PM, is this just plain old egocentrism. You and your Government have little credibility in the real world, and have become a laughing stock within the international community. The country is fast draining away and the plug will not go back in the hole.

[chainarong]

Unless there is a marked increase in penalties a real genuine effort by the RTP to pursue loan sharks and most important , regulations that prevent anyone loaning money without a financial background and being registered, you are wasting every-ones time, most of the blame can be laid at the feet of successive administrations including the present one , they are remiss of having immense investment of international manufacturing coming into the country, but the balance is all one sided the flow on effect for disposable income has not flowed through to the population, one of the reasons Thailand moral structure is nearly non existent.

[northernboy]

The loan sharks are a symptom of the problems in Thailand.

The lack of basic finical education of many people. The greed of these people to buy things because others will look at them as richer or better people. The ignorant belief you can borrow your way out of a problem.

The banks are not encouraged or made to offer far priced small short term loans.

The government laws that make individual private lenders criminals for even offering loans out at bank rates. So of course rates must be higher to pay not to be arrested.

Sorry Chiangarong it is not the fault that loan shark fill the gap that the government and financial industry creates it is the fault of the government not to demand the very profitable and protected banks to truly help the less wealthy Thai a opportunity to borrow at a fair rate. "Marked increase in penalties" will only mean higher operating expenses in doing loan business so higher rates are then needed.

The first thing to do is teach people that money is power and to respect it and use it wisely.

[timber]

This is a part of rural society throughout Thailand. The only ones that will ever have an impact is the current government, and

after they are gone there will be no chance of doing anything about this. Many significant members of the local community play a part in it.

[shaggy28303]

Simple, enforce the current law and arrest these butt heads for loan sharking, but because the law is on the side of the money making its only natural for them to try and make it a legal business for them

[Assurancetourix]

I was thinking of offering rural people micro loans at a fair interest rate. I expect the loan sharks would likely not be happy.

I agree with u but have every second a look behind u ;

a life is cheap in Thailand...even they say they are bouddhist

[fatfather]

I was thinking of offering rural people micro loans at a fair interest rate. I expect the loan sharks would likely not be happy.

I agree with u but have every second a look behind u ;

a life is cheap in Thailand...even they say they are bouddhist

Did it and still do it at an interest rate of 15% per year. That's legal and a nice return. Choose your clients wisely and you'll have no problems because the locals appreciate your business.

Fatfather

[nong38]

There is no financial education in Thailand, there is no guidance of how to handle money, save for a rainy day etc etc.

But, people who have no assets to put up as surety for a loan at a bank have only one place to go and they pay for it because they have no surety.

They know, it spretty simple, how much they are borrowing and how much and when they have to make a payment and yet they seem to make no provision to make the repayment.

Whilst it is very sad to hear of a death in any circumstance in the cold light of day, she borrowed money she probably knew she would have difficulty paying back and this was the only way out.

I have personally loaned small amounts ( no more than 10000bts ) to 4 Thais, they all start by paying back as agreed, then all started to default, I did eventually get the money back but it was hard work.

I still get people locally come and say to wife "I want to borrow some money, I have no money." My reaction now is "if they have no money, how will they pay me back? I have no money to lend." That 3 weeks previously they had just sold a car and now have no money says everything you need to know about how Thais deal with money.

The so-called loan sharks are there to service people who have little money or cannot go through the normal channels to borrow money, its part of life here,people do not have to eneter into the agreement with the lender, they do have a choice, they can say NO.

[Baerboxer]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

Loansharking was pandemic in parts of the UK in the 60"s and 70's. Largely eradicated. But Thailand will have to go through all the changes needed to facilitate that eradication.

Depends whose really making the profits and who wants to keep a very large pool of impoverished labor.

[Travelman868]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

Not excusing LOS but look at payday loans in Blighty if you want to see loan shark interest rates. Multiple thousands of percent APR.

I know money doesn't necessarily bring happiness but having none can certainly bring misery, regardless of ones geographic location.

How dare you badmouth Wonga there is nothing wrong with making a profit and 4400% is reasonable so sayeth the Tories but UKIP have the answer. Well they

had the answer but the Tories just stole it and now have a limit on interest rates. (I think from January)

However the UK still does not have a Usury law unlike our German friends.

Thailand unfortunately has the same problem as the UK, in that people borrow money and do not worry about paying it back until someone threatens

to break an important part of their body. While I do not like violence I dislike debtors more.

[Bluespunk]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

Not excusing LOS but look at payday loans in Blighty if you want to see loan shark interest rates. Multiple thousands of percent APR.

I know money doesn't necessarily bring happiness but having none can certainly bring misery, regardless of ones geographic location.

How dare you badmouth Wonga there is nothing wrong with making a profit and 4400% is reasonable so sayeth the Tories but UKIP have the answer. Well they

had the answer but the Tories just stole it and now have a limit on interest rates. (I think from January)

However the UK still does not have a Usury law unlike our German friends.

Thailand unfortunately has the same problem as the UK, in that people borrow money and do not worry about paying it back until someone threatens

to break an important part of their body. While I do not like violence I dislike debtors more.

Can't say I agree.

I definitely dislike violence more.

Especially when it is carried out by those who put the debters in debt in the first place.

[Baerboxer]

Loansharking is pandemic in Thailand. It will never be eradicated. This is purely a pr campaign only.

Not excusing LOS but look at payday loans in Blighty if you want to see loan shark interest rates. Multiple thousands of percent APR.

I know money doesn't necessarily bring happiness but having none can certainly bring misery, regardless of ones geographic location.

How dare you badmouth Wonga there is nothing wrong with making a profit and 4400% is reasonable so sayeth the Tories but UKIP have the answer. Well they

had the answer but the Tories just stole it and now have a limit on interest rates. (I think from January)

However the UK still does not have a Usury law unlike our German friends.

Thailand unfortunately has the same problem as the UK, in that people borrow money and do not worry about paying it back until someone threatens

to break an important part of their body. While I do not like violence I dislike debtors more.

The UK did have a Usury Act from 1651, amended several times and then repealed in 1854.

There is plenty of legislation governing consumer credit agreements. Be interesting to see if someone refused to pay on payday loan interest, and argued that the consideration in the contract was not fair, reasonable and equal. Don't know how that would go.

It would seem easier to simply of the Usury Law in place.

The problem with loan sharks is they operate outside the law, exploit the vulnerable and use violence. I don't like fraudsters and people who borrow money with little or no intention of paying, or knowing full well they won't be able to. But, violence is never acceptable by these sharks.

[astral]

Nothing new here

When I wanted to help a Thai buy land some 20 years back

one of the people we visited was a loan shark

He had a pile of land deeds just waiting to be bought.