Thailand wants to hunt loan sharks

Prime Minister Abhisit Vejjajiva and his government have set up a new program to support families in debt. This program also limits recourse to loan sharks who charge abnormally high rates to debtors.

With average monthly salaries ranging between 10,000 and 15,000 baht, it is often difficult for some Thai families to finish the month or meet an exceptional expense without resorting to a loan.

One of the peculiarities of Thailand, often perceived as an archaism of its financial and banking system, lies in the persistence of usurers (loan sharks) who thrive on the backs of the most disadvantaged borrowers. The latter lends a certain sum of money with exorbitant interest rates. Generally, 10 to 20% of the sum borrowed is paid monthly. Loan sharks typically have no connection with banks or any official body.

Despite several successive campaigns to help people in debt, Thailand cannot eliminate the “loan sharks.”

The easiest prey is people in debt who need money fast. Rather than turning to a bank that will verify that the customer’s banking history is in order, these people will turn to a loan shark. This one will be more inclined to lend the desired sum of money without asking for anything. Then comes the repayment time, which becomes challenging to honor with very high-interest rates. In the event of non-payment, the loan sharks do not hesitate to use intimidation and force to win their case.

In an interview with the Bangkok Post, one of them tested

When the debtor neglects payment, I begin by doubling the interest. If they still don’t pay, I’ll send my staff to watch them outside their homes, government officials with whom I work part-time. We take photographs of the debtor to scare them into starting to pay.

If that doesn’t work, a note is written saying, “You owe me money, and you don’t want to pay it back. » Displayed at the person’s workplace to embarrass them.

If nothing works, I will send one of my agents to their home to confiscate a cell phone, a laptop, or a motorcycle or ask their parents for money.

In some cases, the sums borrowed are 2000 or 3000 baht, and small sums doubled or tripled because of the interest. A report from 2007 shows that 32% of Thais use the services of a loan shark, up from 26% in 2006. Another report states that more than 21% of households in Bangkok with a lower monthly salary at 15,000 baht owed money to loan sharks.

Many indebted households come from the countryside, especially in the northeast regions of Thailand, where wages are the lowest. These people are perfect prey for loan sharks, who do not hesitate to sixteen property or the house of a family if the latter cannot repay them. In some cases, loan sharks take interest directly from the bank’s salary, leaving only a few hundred baht for the indebted person to finish the month.

Shark loans in the government’s nets

To counter the harmful influence of loan sharks, the government has decided to set up a program to help people in debt repay their debts.

Divided into three stages, this program will allow the persons concerned to borrow money from the banks participating in the operation with minimal interest rates. The condition required to be eligible for this program is to have debt amounting to no more than 200,000 baht.

Seven banks are part of this program: Government Savings Bank, Bank for Agriculture and Agricultural Cooperatives, Government Housing Bank, SME Bank, Islamic Bank, Krung Thai Bank, and Small Industry Credit Cooperation.

Then, the repayment of the amount borrowed from the banks will be made monthly with an interest rate of 1%, a petite figure compared to the 20 or even 50% demanded by the loan sharks. Most repayments will be made over an eight-year term.

Finally, people enrolled in this program will be given a card that will allow them to continue to borrow from banks with the same interest rate but for sums not exceeding more than 50% of the amount initially borrowed. The card will allow them to borrow like this four times.

The government has released 20 billion baht (about 500 million euros) to help the banks participating in this operation.

In December 2009, Abhisit Vejjajiva launched a similar program. Nearly 1.2 million people had been admitted for a cumulative debt of 122 billion baht. According to the Prime Minister, 600,000 participants were able to repay their debts.

Contested measures

Regularly, the governments in place, like those of Abhisit Vejjajiva or Thaksin Shinawatra, launch operations to counter loan sharks’ activities and help people in debt. However, the number of people using the services of loan sharks continues to increase.

Members of the opposition are already contesting the program launched by the government, judging the initiative as more conducive to garnering votes for the next elections than to solving the problem definitively. Samphan Tech-think, a political scientist at Khon Kaen University, says the program is inaccessible for people unable to repay monthly. “I think the problem is not addressed at its root,” he says.

Wilaiwan Sae-tia, the Thai Labor Solidarity Committee leader, explains that “the loan shark problem is a vicious circle. How can the government ensure that people participating in the program will not return to see the loan sharks? »

Indeed, even if the government is trying to curb this problem financially, it has not yet announced any legal measures intended to combat the presence of loan sharks, which is well anchored in the economic landscape of Thailand.

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