JEDDAH, Oct 31: This year three peak shopping seasons (Eid Al-Fitr, Ramadan and back to school) fell within a period of two months. All that shopping has left many empty pockets among the Kingdom’s expatriates — except for loan sharks.
In the Kingdom, both predator and prey are usually non-Saudi. There are not many places where low-income foreigners can get loans nor are there many legal possibilities where the affluent can make substantial profits.
Loan sharks operate illegally and will lend money to people when no one else will.
Lend money, yes but — and there is a very big “but.” The loan must be repaid with an extremely high rate of interest. The high interest makes it very difficult to repay the loan. And of course since the whole operation is illegal, things can get really nasty if the borrower falls behind with repayment.
Loan sharks use threats and violence to frighten people into repaying the money they have borrowed. Hollywood has traditionally — and with some accuracy — portrayed loan sharks as money-hungry gang lords who won’t hesitate to kill or maim if repayment is delayed.
For every loan, the loan shark too requires collateral, but most people who turn to loan sharks can’t produce the collateral that legal moneylenders such as banks require. The victims don’t know that there are different kinds of collateral and they still have to provide the lender with some — unless the lender’s name is Mohammed Yunus who has just won the Nobel Peace Prize. For fast cash, people probably go to close relatives and friends; the less fortunate, however, end up paying incredibly high interest rates and get hurt in the process.
One Jeddah-based Indian loan shark says he makes quite a large sum from interest which he calls “commission.” He charges commission on what he lends to members of his own community.
“Eid and Haj are the best times for me,” he said. “That is when a lot of expatriates look for loans. They send the money home to their families. I look at the loans as a short-term investment. I have no other way to make money, do I?”
The stock market is a possible option now that expatriates are being allowed to invest. He commented, “For a while, I did dabble in stocks but I lost quite a lot. The loan business is the best. I have no fixed interest rate; it depends on the person and I decide on a case-to-case basis. There is nothing in writing. Everything is through word of mouth. The business is based on trust.”
He said he lent money to those he knew would pay him back — with interest, of course. “I lend money to those I trust. What I do is lend them money during Eid and for other festive occasions. And I ask them to return it in two or three months’ time. They deposit the money into my wife’s account in India through Samba Speedcash or Al-Rajhi Remittance Center. My wife has an NRI (Non-Resident Indian) account and there are no taxes on NRI money in India. The deals are safe. They benefit both parties. The guys I lend money to also feel highly obliged and for them, I am the guy to bank on. Literally.”
Essaf, an Indian living in Jeddah, said there were loan sharks in the community but he personally had never taken a loan because it is “riba” or usury. (In Islam interest is forbidden). “My friends have taken loans and the interest rates are very high, I have heard of rates as high as SR200 a day,” he said.
Essaf added that between friends no official documents are needed but in some cases, some paper work is required as a form of guarantee. If the money is not repaid here, the guarantee can be used in the borrower’s home country. When they lend to friends, they don’t say it is their money even if it is. The reason of course, as he pointed out, is to make sure the highest rate of interest is paid.