A loan shark is defined as someone who lends money at exorbitant rates of interest and often uses intimidation to recover the money. Loan sharks in Thailand are no different from those found in many other countries around the globe and given the low average salary income in Thailand and growing consumerism I suppose it is to be expected.
The Thai government in an effort to get people out of the grasp of the loan sharks initiated a refinancing scheme back in December 2009 to take on board loan shark debts and also pressure loan sharks into giving up their activities.
Initially the scheme saw around one million people register for help but since that date more than 400,000 have withdrawn their applications, 200,000 have entered into refinancing schemes and a further 400,000 are waiting for state assistance. ( Source: Bangkok Post 12/7/10)
Now given that most complaints lodged in a recent government survey, rather ambitiously called, in my opinion, “6 days, 63 million opinions,” related to informal debt(read loan shark debt), it begs the question as to why so many folk have dropped out of the scheme.
One possible reason is that the scheme is difficult to join. However the refinancing scheme is run by six of the state banks which include the Government Savings Bank so that shouldn’t really be a problem. Unfortunately this does not seem to have been the case with several complaints being made that some of the banks set different criteria to refinance loans from loan sharks. In one case a bank was insisting that a “government official” was required to act a guarantor for the loan. This is not in the actual rules which state that friends and family can fulfil the role of guarantor.
I also fancy that there might well be another reason that so many people have dropped out of the scheme, simply put, intimidation from the loan sharks.
Which makes me wonder why people go to loan sharks in the first place. My own experience from the UK suggests that it is often very poor people, possibly poorly educated and with no financial/credit history that make easy prey for these illegal lenders. I guess it might well be the same here too.
Take my Thai partners sister for example, she is 33 unmarried and poorly educated (she did not complete High School) she works in a fish processing factory and on a good day earns 300 Baht. Usually its nearer 150Baht. Which is somewhere around the minimum wage in Thailand. Giving her a disposable income of around 5000 Baht($160) a month. She does not pay rent and qualifies for free electricity and water(this is based on usage) and other family members often feed her.
But Pen, like many other young Thais, likes consumer goods, recently when she visited my home she turned up with the latest Nokia phone which retails for over 8000 Baht, needless to say she had borrowed the money to buy the phone from a loan shark who was now charging her 30% interest each month. Payments she can ill afford to make.
From time to time I help her keep the loan sharks from the door by lending her money, but I insist she repays me, although I do not charge interest and offer her very easy instalments in the hope that she might learn to manage her money in a better way. I have even suggested that she investigate the government scheme, but I know she won’t because like many Thais, including some who have used the government scheme, she will be seeing the loan shark again next time she wants something outside her budget.
Perhaps the way to deal with loan sharks in Thailand is better law enforcement rather than government refinance schemes, since there have been many in the past that have done little to address the situation.
Related posts:
Pingback: Thai Village Life