Thailand a happy hunting ground for loan sharks

The problem of illegal money-lending is in the spotlight again after a middle-aged woman from Lop Buri set herself ablaze while filing a plea for help at Government House over a debt of about Bt1.5 million she owed to a loan shark. She suffered severe burns and is still recovering.
The act of self-immolation made headlines and prompted the authorities to take action. Senior local officials reportedly sought a meeting with the loan shark, who subsequently offered to write off the debt. But this was hardly a happy ending to the story, considering the terrible injuries the woman is enduring because the authorities were too slow coming to her aid.
The fact is that this case is just the tip of the iceberg. The problem of illegal lending is a deep-rooted and long-standing one in Thailand. Most complaints filed at Government House involve large “black-market” debts with exorbitant interest rates of up to 20 per cent a month. Debtors who fail to make payments are often attacked by hired collectors.
It can be a risky business for lenders, too, since it’s not unusual for customers to simply abscond without paying up. However, profits from the high interest rates make it an increasingly popular business.
Illegal moneylenders advertise aggressively to get new customers, distributing flyers door-to-door in housing estates and pasting them on utility poles and pedestrian flyovers. Their prime target is people who find it difficult to get loans from banks.
Governments over the years have come up with various measures to ease that difficulty and also help debtors repay their due, including helping them refinance loans with state-owned banks. The latest plan, from the Finance Ministry, is to “bring the loan sharks into the system” by giving them “nano-credit” licences. The licences would allow creditors to loan up to Bt120,000 per borrower and impose an interest rate no greater than 36 per cent on loans.
Refinancing measures and the nano-credit scheme are positive moves to ease the burden on small-time borrowers. However, they do little to tackle the problem of illegal money-lending at its core. The goal should instead be to encourage people toward self-sufficiency by making and saving money so they do not need to rely on lenders.
Bank of Thailand Governor Prasarn Trairatvorakul suggested recently that the problem could be resolved through job creation and improving wealth distribution. The public could also be offered education on how to best manage their savings and finances. “Measures such as lower interest rates and micro-finance improve borrowers’ ability to repay their debts only in the short term. It’s like taking a painkiller from time to time – but you can’t take painkillers every day of your life,” said Prasarn.
The authorities alone can’t tackle the root cause of the misery caused by this illicit business. Some of those targeted could help fend off the loan sharks by tightening their own spending habits and thinking more carefully before borrowing. Meanwhile the authorities can do more to ensure that wealth is redistributed more fairly and that fewer low-income earners are left prey to the illegal lenders.