*** ----> Loan sharks reign over oceans of illegal debts | THE DAILY TRIBUNE | KINGDOM OF BAHRAIN

Loan sharks reign over oceans of illegal debts

With more than 120 per cent interest rate per year and taking valuables and even passports as collateral, loan sharks are making life miserable for many expatriates who were gullible enough to approach them. Some expatriates risk losing everything, in the underground world of money lending and borrowing. Charging exuberant interest rates, the loan sharks are making a fortune preying on desperate victims. 

Speaking to Tribune, Dr Yousef Mashal, an economist, said he has been observing the underground borrowing and lending scene for the past 30 years and in the authorities have failed to end this illegal practice. “This has been a common practice in Bahrain throughout the 30 years that I have been observing it. The victims are mainly expatriates. I have not witnessed this practice in the Bahraini society because paying interest is something looked down upon in any Islamic society,” he said. 

According to sources, the interest rate can be over 10pc per month if someone borrows money from these loan sharks. 

Valuables like gold, passport, ATM cards are some of the collateral taken by the loan sharks. “Unfortunately approaching loan sharks have become so common and widespread. People do not think twice before approaching them for money,” said Him Lal Pandey, an activist and social worker.

 A victim, who wished not to be identified, said he borrowed BD600 from a loan shark to pay for his father’s medical treatment and to travel to his home-country. “My father was seriously ill and I had to go back to Nepal to see him, and I badly needed money. There was no way I could immediately obtain the amount I needed for my father’s treatment and air-tickets other than by approaching a loan shark. “I got loans and in three months I would end up paying an interest of about BD150. After three months I somehow managed to pay the whole amount and the interest or else I would have been in a big danger.“

Saleem, a graphic designer, working in Manama said he was approached by someone he recently acquainted for an amount of BD500. “I lent BD500 to this person whom I know through a mutual friend. He said he is a businessman and will return the amount with interest once he generates profit, so it would be a win-win situation for both of us. “This is basically like investing in a business. I would like to carry out such money transfers as they reap good benefits,” he said.

Dr Mashal said that there isn’t anything realistic the banking industry could do to offer alternatives catering to the vulnerable population. “A solution which involves banks offering small loans so that the modest segment of the people can get legal loans instead of going to loans sharks may sound like a great idea but is unrealistic. “There are many regulations involved and its too difficult to have a solution for this through banks. So this is something only the Ministry of Interior can tackle through the strict enforcement of the law and cracking down on anyone engaged in these activities.”

Pandey highlighted recruitment scams through which labourers are charged huge amounts to obtain work visas in the Kingdom as one of the reasons behind the growth of loan sharks. “These poor workers are given the big amounts to obtain visa by these loan sharks, who charge hefty interest on them once they start receiving their salaries. If they refuse to pay they are threatened of dire consequences.”