x Abu Dhabi, UAEThursday 18 January 2018

Expats turn to loan sharks and find more misery

Such lenders charge exorbitant interest rates, hold passports and require blank, signed cheques.

ABU DHABI // More and more Indian and Filipino expatriates are turning to loan sharks to help them cope with the economic slump, officials say. But dealing with illicit lenders can land them in trouble. The lenders charged exorbitant interest rates, demanded passports as collateral and required blank, signed cheques from accounts in India or the Philippines, said K?V Shamsudheen, the founder of Pravasi Bandhu Welfare Trust, an organisation that advises expatriates on debt. "Demand for money from family members for emergencies like medical treatments, marriages, education and, sometimes, even adjusting to inflation of livelihood compels them to take loans," he said. Others simply find it intimidating to deal with banks that ask for a salary certificate, a three-month bank statement, a copy of their passport with a UAE visa page, and other paperwork. Some are not eligible to apply for bank loans because of their meagre salaries. Nelson Labung, a marketing officer at Royal Bank of Scotland in Dubai, said banks required a minimum monthly salary of Dh7,000 for a customer to qualify for a personal loan. The average monthly income of an expatriate in the UAE is about Dh14,000, or Dh6,900 for those in collective households. "Other banks require a much higher minimum salary and approve the loan on the condition that the applicant's salary is transferred to their bank," Mr Labung said.

The loan sharks, or "blades", attract business through word of mouth. They can lend any amount between Dh500 to Dh100,000, usually for a short term. If customers cannot repay on time, the amount that they owe doubles or the lender threatens to cash their cheques. If a cheque fails to clear, an account holder can be sent to jail. As an additional threat, loan sharks had "recovery teams" - thugs - who pressured and intimidated borrowers into paying, said Nasser Munder, the labour attache at the Philippine overseas labour office in Abu Dhabi. Such teams operated in the UAE and many Asian countries, he added. "I'm surprised that many nurses, who earn good salaries at a government hospital here, have been turning to their own colleagues for a personal loan," Mr Munder said. Mr Shamsudheen said: "Sometimes it will be the roommate of a labourer who is a money lender. But they will not say that. They will say, 'Shall I try to help you? I have approached a person, he will give you money'. Meanwhile, it will be that same person who is the money lender." It was illegal for individuals to engage in the money-lending business, Mr Munder said. Although Sharia law did not allow lenders to charge interest, there were those who took advantage of people who badly needed money, said Karunagappally Shamsudeen, a lawyer at Al Kabban Advocates and Legal Consultants in Dubai. "But the victims cannot do anything," he said. "They have signed blank cheques and blank documents to people who have offered them loans."

People whose passports were held could turn to police for help in recovering them, as that was also illegal, he said. In February last year, a Filipina working at a government hospital in Abu Dhabi told a meeting that police had arrested a colleague two weeks earlier after she defaulted on a loan offered by a compatriot. The nurse failed to pay back Dh15,000, so the amount doubled to Dh30,000. That led the lender to cash a cheque from the borrower, which bounced. "A nurse was picked up from the clinic because she was not able to pay this person on time," the Filipina said. The alleged loan shark in that case was also a woman from the Philippines. Mr Munder said: "A nurse who is from my place, Lanao del Sur [southern Philippines], had to take emergency leave because her father passed away. She left her car as collateral to a colleague who was involved in the money-lending business." In the Philippines, money lending is known as five-six. Any amount of a principal loan is charged 20 per cent interest. The same principles applied here, Mr Munder said. "It would be difficult to file a case against [loan sharks]," he said. "If other victims would come together and testify as witnesses against the suspect, we may overcome this problem." But a Philippine embassy official said it was difficult for its staff to help without knowing who they are up against. "We need to know who the loan sharks are," he said. "We have been told that this loan shark requires a blank cheque and if you are unable to pay, they double the amount. But who are they?" sbhattacharya@thenational.ae rruiz@thenational.ae