Friday 15 / November / 2024
Muscat: Loan sharks are seizing passports and charging interest rates of more than 100 per cent as cash-strapped expats and Omanis struggle to make ends meet.
The economic slump has created a fertile feeding ground for the men who charge exorbitant interest rates and seize the passports of their “customers” until they pay up.
One man borrowed OMR4,000 and ended up repaying OMR16,000 over four years.
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Another expat, too embarrassed to be named, faced delays in travelling home to visit his gravely ill mother because the shark he had borrowed from refused to hand back his passport.
Across the country, people are seeking out alternative finance packages as banks and bona fide lenders tighten their belts.
The men filling the vacuum – the loan sharks of Oman – will happily lend money, so long as they get more than double in return.
Two months ago, an Indian small-time businessman in Ruwi couldn’t fly to India to see his hospitalised mother as his passport was held back by an illegal money lender. He had given it as a guarantee for taking a loan of OMR2,000 from the lender.
“My mother was not well. I am the only son and had to travel. Business was not doing well. For her treatment only I had to take that loan. And, when I got a call to reach home immediately, the lender was reluctant in giving back the passport, which I had given him as guarantee. Finally, social workers had to talk to him to get my passport,” the Indian businessman said.
“I travelled as the social workers guaranteed that they will own up the responsibility of that money. I went and returned. Mother is now fine. I paid back the money as soon as I returned by taking a loan from a bank. Never will take a loan from illegal money lender, and I advise others not to do so. You will be trapped,” the businessman added. He paid OMR2,400 back after just two months, double the high street lending rate of around 4 or 5 per cent.
The Indian businessman’s case is not an isolated one. According to social workers and finance experts, many such cases are popping up as the country is on an austerity drive due to the oil price dip which is in turn causing salary and payment delays.
Making use of the opportunity, loan sharks are smelling blood.
“We come across several cases of people getting trapped by loan sharks. With my experience in Oman for the last 30 years as a social worker, I can say that the debt trap has forced a few to take drastic steps in their life,” Shaji Sebastian, a social worker in Oman, said.
“Recently, we came across a case of a family who got trapped by loan sharks. They had to raise money for a medical emergency. As his business payments were getting delayed, he had to depend on an illegal money lending person. Finally, we all had to chip in to pay back the money, which became an unaffordable amount for them after all kinds of interest was added,” Shaji added.
Borrowing OMR1,000 for 12 months actually means repaying OMR2,200, which amounts to 120 per cent interest, according to counsellors.
In addition to that, lenders are offering money in return for gold as a guarantee. For 20 sovereigns of gold, OMR2,000 will be offered with OMR200 as monthly interest.
In 2013, Central Bank of Oman’s loan interest rate ceiling was fixed at six per cent per annum for personal and housing loans and some of the banks in Oman offer rates of less than 4 per cent to lure more customers.
The social worker added that such usurious interest demanded by loan sharks will land the borrowers in a debt trap which may eventually result in suicide or permanent impoverishment of the family without hope of recovering.
Jose Chacko, a financial crime analyst in Oman, said that unlike in the west, there are no debt counsellors in Oman.
“People don’t know what to do and how to handle the situation when they land in financial trouble by taking loans from illegal money lenders,” Jose said.
According to Jose, there are different types of loan sharks in Oman.
“There are big ones and small ones too. Big ones lend money for investment, taking duly signed post-dated cheques of Oman and home country, original passport and bond papers as guarantee. Meanwhile, small ones lend money for mid-level and blue-collar workers on a monthly basis at camps, taking their salary account bank cards as guarantee,” the financial crime analyst said.
“Whatever the modus operandi be, the sharks fleece the borrowers,” he added.
A production manager in Oman, talking to Times of Oman on condition of anonymity, said that he paid more than OMR16,000 over a four-year period for an OMR4,000 loan.
“It was a work related emergency. I had to raise money immediately. Approaching banks would delay my payments. So, I took money from him. Finally, when I cleared it, I had to pay more than four times what I borrowed,” he said.
According to Jose Chacko, the Central Bank of Oman regulates commercial banks and financial institutions which have an imposed ceiling on rates of interest for various borrowers.
“However, money lenders do not fall within its ambit. Only government can enact suitable laws to address this problem which may be included as part of the criminal law. Otherwise, a special bill may be passed to address this menace. I feel that while it will not be possible to completely eradicate unorganised financial systems, efforts may be made to pass stringent laws accompanied by rigorous enforcement,” the finance expert added.
Meanwhile, a legal advisor in Oman said that they don’t come across any such cases because everything is done discretely.
“As it is illegal, lenders and borrowers settle the issue discretely. Nobody approaches us,” Deepa Sudhir, a legal advisor added.
Due to the oil price dip, the government has adopted severe austerity measures leading to companies tightening their budgets and cuts in spending. Recently, Times of Oman found that workers in Oman are facing serious salary delays with some waiting almost a year for wages prompting them to seek out loan sharks.
