Despite being illegal, there are thousands of loan shark victims in the country and the number keeps on growing as people in need of cash flock into this underground loan market. This being an illegal market, no official figures are available but it is estimated that tens of millions of dirhams are in circulation in this business at interest rates of up to 10% per month.
While the laws in place in the UAE are tough for loan sharks, with jail terms and hefty fines, more and more victims are still falling into their trap. The authorities continuously encourage the victims to come out of the open but they are hesitant to do so because of the fear that they or their families back home will be harmed.
In the UAE, the loan sharks are mainly active within the Indian subcontinent and the Philippine communities where the malpractice is known in different names such as the “blade”. This refers to both the cut- throat rates of interest and the actual use of a blade as a tool of loan recovery. Upon signing up a “deal” with a loan shark, the borrower understands that the lender keeps a stranglehold on him, and the methods of recovery are not restricted to limits set by the law. The malpractice is also known, in the Filipino community, as “five-six” because of the “five-six”- interest calculation – for every Dhs5 lent, Dhs6 is repaid (120%).
Case studies from the 999 report show that very often the lender and the borrower are from the same country; they are referred to each other by common acquaintances. Sharing the lenders’ nationality offers no particular advantage to the borrowers, but makes it easier for the lenders to track the debtors and their families.
A common strategy used by loan sharks is to confiscate the passport of the borrower. Authorities and embassies/consulates denounce it as illegal. And victims, whose passports were illegally confiscated, are urged to lodge complaint with the UAE police.
Frank Cimafranca, Philippine Consul General to Dubai, told 999, “A passport is government property, issued only to the person whose name and biometrics appear on the document. It is against the law to transfer ownership of a passport to anyone. A passport cannot become someone else’s property. If the passport holder declares it lost, he can obtain another one and the one used as cash loan guarantee will hold no value for the lender.”
Still, even if the borrower can report the passport stolen and get a new one from the embassy and get out of the UAE, the lender has enough muscle in the debtor’s home country to keep him or her on the griddle.
In spite of the many repeat warnings from UAE authorities and Asian welfare groups about the insidious practices of loan sharks, the number of people that approach them continue to increase partly because of the bank’s stringent lending criteria. Loan sharks fill the gap left by the banks because they don’t ask for collateral and they also provide funding for those in the lower income bracket.
Lt. Colonel Awadh Saleh Al Kindi, Editor-in-Chief of 999, said, “The 999 Magazine report fleshes out how an illegal market in loans turns borrowers into deep financial trouble. Unfortunately, many have fallen victims to loan sharks. They have borrowed money during a personal crisis or a business need and have since been trapped in a vicious cycle of never-ending payments and ever-increasing dues. We encourage these victims to come out of the open and seek proper help from the UAE authorities. And more importantly, we urge every one to stay away from these loan sharks and where possible, inform the authorities about these individuals and groups so we can stop their insidious practices.”
The English 999 Magazine is a part of the Strategic Plan of the Ministry of the Interior to provide media coverage for the activities and efforts of the Ministry and Abu Dhabi Police. It also aims to encourage the public to contribute to the reduction of crime and enhancement of safety in the UAE.
Monday, March 18- 2013 @ 15:37 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.