Loan sharks who lend money at huge repayment rates are a stain on our society. But what can be done to solve the problems caused by these corrupt individuals who ruin people’s lives? Team Y reports.
Throughout history, most people have been taught to view anyone who lends money with a degree of scepticism.
From Shakespeare’s Shylock to the US and British banks that caused the financial crisis of 2008 – the consequences of which are still with us – professional money lending is not something done out of the goodness of anyone’s heart.
Oman has not been immune from the world recession, and like everywhere else, some of its residents simply can’t make ends meet; with employers that won’t pay salaries on time or banks that won’t lend to expats.
It all makes for easy pickings for loan sharks, who make up a corrupt clique preying on the vulnerable causing further and never-ending levels of misery.
The idea of an easy loan is lucrative – and more so when you’re in need and the bank won’t lend you any money.
On paper, these “secret banks” make it easier for you to procure the money. It’s so easy that you’ll ask yourself why anyone would opt for an actual bank rather than a private lender.
Money, it seems, is the least of their concerns – at least that’s what they tell us – and your happiness is what helps you put a smile on their faces. But then again, sharks do look like they’re smiling. Perhaps, that’s why they’re called ‘loan sharks’.
But, it’s a smile our interviewee Randall* knows only too well.
Today, he’s working for a retail firm in Oman. But, he calls himself “lucky” to no longer be strung out by chains of debt.
“Sinister. That’s what they are,” he tells us as we walk down the streets of Wadi al Kabir that are notorious for its loan sharks.
“These men are ruthless and intend to steal from you. But, not many people see it coming, at first.”
This is confirmed by finance website, Investopedia, which describes a loan shark as a person or entity that offers loans at extremely high interest rates, has cruel (or strict) terms of collection upon failure, and operates outside off the street and off the radar of the local authorities.
It currently sits as an illegal activity in the Sultanate as it flouts Islamic banking laws.
Our conversation is loud enough to unsettle a few sharks – and they make hasty retreats into the shadows of their buildings.
Randall’s encounter with loan sharks began in 2012 when he decided to take the plunge and buy a house in his hometown in India.
“The bank (name withheld to protect identity) wouldn’t give me a loan because the loan manager thought that I couldn’t handle a loan of RO25,000 over five years. I was 26 then, and today, I can understand why he said that. I was in no position to take a loan on my shoulders.
“Agitated by the rejection, though, I headed straight to Ruwi – based on a flyer I had received – and walked into a small dingy-looking office atop a restaurant and asked for a loan.
“The aged Omani was accommodating. For the first time in weeks, I felt like I was an important person. He even told me how all banks were designed to ‘serve the rich’ and that entrepreneurs such as him saw these as opportunities to serve the public. He also vaguely mentioned that he didn’t charge excruciating interest like other lenders in Oman.
In two days, Randall says he headed to the office with all the supporting documents: a bank statement, his residence card, driving licence, and his passport. By the next day, the money was ready.
“Everything was systematic and was going smooth initially. But then when we got to the part of the interest rate, I was shocked to see that he was charging based on a floating rate system with a minimum cap of 25 per cent (!)
Still, confident that he could pay off the debt, he signed the papers and left his passport at the lender’s office.
“The only collateral I had to place was my passport. It seemed like a fair deal at the time. Besides, he promised me to return it to me during my visa procedures and vacations.”
Things, however, didn’t go as planned. He tells us that the floating rate fluctuated anywhere between 25 per cent and 66 per cent depending on the cash flow the lender received from his other businesses, and that he also wasn’t allowed to leave the country throughout the duration of the loan.
“The pain of buying a new home and not being able to experience it is devastating,” he says. “And besides, there was no way I could have left – not even if I had my passport on me. I was paying anywhere between RO700 and RO1,100 per month as instalments.
By the end of his 60-month term, Randall had paid an eye-popping RO55,875 – more than twice his original amount.
The interview takes an emotional turn when Randall’s eyes tear up. He says: “This was the worst period of my life. In 2016 (a year before he completed his loan) I lost my father to a bike accident (in India).
“I couldn’t even be there to bury him. And not a day goes by when I don’t forgive myself for it.
“I don’t think I ever can. No one should ever take money from a lender, I implore you. It’s not worth the hassle and suffering. Today, I cannot enter my house; I believe it is cursed,” he says in a low tone, before stopping by a lone deserted building by the Wadi al Kabir market and pointing towards the window that used to be his lender’s office.
The Omani lender has since been arrested on the grounds of fraud, moneylending, usury, and for confiscating debtors’ and employees’ passports.
All our efforts to reach out to the offender in jail end in vain but it is known that Randall and the other victims will not have their money paid in interest returned. This means lender is free to enjoy all the spoils after he has served his sentence.
That said, Omani law takes a strong stand on moneylenders and loan sharks.
The severity of the action is backed by our source (who prefers to remain anonymous) at the Royal Oman Police (ROP). He says: “Any individual partaking in moneylending or similar activities will be tried in court. This goes against the Islamic banking law that institutions across the country have to abide by.
“If you find anyone undertaking such illegal activities, here in Oman, then it’s imperative that you come forward and file a complaint. These people are not only going against the law but also shaming the country’s human rights code.”
The officer then shines light on a matter of grave concern: suicides among debtors who struggle to repay loans.
“While it’s a last resort, several people in Oman – sometimes whole families – make the decision to end it all as a response when they go under financially. Thankfully, we haven’t seen such a case in a long time,” he says.
He’s wrong. In 2017, the Abu Dhabi-based newspaper The National reported that a 33-year-old Indian construction worker had hanged himself in Oman due to the “pressures of debt”.
The current law dictates that those operating illicit moneylending businesses will be subjected to three months behind bars plus a fine of RO200 although our source at the ROP says that it’s not enough to discourage moneylenders.
“RO200 is like a walk in the park for these people,” he says. “Some of them earn more than RO20,000 in five years in interest alone from one loan. That amounts to about RO1,700 per year, and RO140 per month. So, a mere RO200 won’t put any pressure on them.
“There’s no doubt that interest charged is an unjust form of income. It’s against Muslim culture and religion. While it has become the norm for banks today, you’ll notice that these legal financial institutions only charge interest rates as low as 4 per cent based on the bank.”
In reality, the Central Bank of Oman (CBO) is the advisory body that pegs the interest rates applied on loans and other similar contractual agreements, annually.
While the ceiling for interest rates differ based on the type of loan, it is known that banks are only allowed to charge 6 per cent for personal loans – and debtors are expected to pay the amount based on their contract with the bank.
Article 80 of Oman’s Commercial Code (issued by Royal Decree 55/1990) – a body of laws that govern financial institutions in Oman – states: “a creditor shall be entitled to levy interest in consideration of the debtor obtaining a commercial loan or debt.
“The interest shall be determined by the agreement of the two parties within such limits as the Ministry of Commerce & Industry shall set in agreement with the Oman Chamber of Commerce & Industry each year, having due regard to the term of the loan, the purposes thereof, and the risks attendant thereon. If the debtor is late in making payments on the due date, the creditor shall be entitled to claim the agreed interest in respect of the period in arrears”.
All of this brings us to the big question: can we ever put a stop to this?
To get to the bottom of this matter, we reach out to several banking officials. However, one employee from a local bank agrees to talk to us in exchange for complete anonymity. He dodges our question initially but goes on to reveal some shocking truths.
The loan officer tells us: “Corruption and immorality are the main reasons loan sharks exist in today’s economy. Think about it: if a bank would sanction loans to people who needed the money, all these problems would never occur.
“But no, there are several managers and bank employees that deliberately put a halt on loans sanctioned to customers – especially expats. If an expat’s bank account is flagged by even the slightest of salary variation, they will not sanction the loan.
“Instead, I have observed that these bank employees will then refer the customers to moneylenders. It’s a scam – and one that all parties but the customer will benefit from.
“The individual who recommended the moneylender to the customer will also profit from this – it’s all a game. Truth be told, if the customer were to simply push a bit harder for the loan, it would be sanctioned. But fearing a confrontation with the institution, several opt for the alternative option.
He then goes on to explain: “Those that come to banks nowadays for loans are those who haven’t been paid their salaries on time.
“These people have bills to pay and mouths to feed. They aren’t coming in to buy cars and expensive gadgets. These corrupt employees see them as the easiest targets as they’re desperate – and that’s why they’ll take the word of a bank employee, and approach loan sharks.”
Italian expat Michelle is a single mother and is one among several such victims – but she has since realised her mistake and amended it. In a phone interview with Y, she says: “I work with an engineering company here in Oman and have been put on a salary of RO1,800 per month.
“But I didn’t get paid for a period of three months. So, I had to head to the bank to pay instalments from my previous debts, rent, as well as my daughters’ school fees.
“The bank (name withheld to protect identity) that I headed to, however, refused the loan because they couldn’t determine whether my source of income was stable enough to pay for
So, like any other customer would, she asked the bank manager for advice on her problem. But he simply referred her to a moneylender here in Oman – a Sri Lankan man specialising in gold loans.
“I met him at his house, in May, this year. The meeting was almost shady, and the money was presented to me at the expense of my jewellery; two gold necklaces and a gold ring. Based on my estimation, the trio were worth RO4,500. But, I was only offered RO3,000.
“Still, I needed the money so I took it.
“Where things took a turn for the worse was when I went back to the moneylender to take back my jewellery after our salary situation stabilised. That’s when he told me that I’d have to pay RO4,800 to get back my items – which was a whole RO1,500 more than what we had initially agreed upon in writing.
“He had turned into an absolute monster during our meet. I initially thought of approaching the authorities with this matter, but then fearing for the safety of my girls, I decided to pay it off in instalments.”
It didn’t end there for Michelle, either. She tells us that she had to dish out an extra RO400 as a penalty and to cover late fees. Thankfully, she stays clear from all debts today. But, the scars from her experience with the loan shark will continue to haunt her.
It’s uncanny how one pins their hopes on those conducting criminal activities in times of desperation. Many experts are now saying that the problem is only growing further – and more individuals could be in debt by 2020 if banks don’t support needy communities further.
Simon Schlicht, a finance lawyer with an international firm situated in Oman says: “They say that necessity is the mother of invention. This whole issue concerning loan sharks – or as some call expats call it ‘blade mafia’ – came to rise because of people’s demands for money with minimal paperwork.
“A bank, for instance, would require collateral, salary statements, and most importantly, approvals from the bank. This would take time and a lot of effort. Most people get around this problem by simply making use of a credit card. “Though, that comes with its own horrors. In Oman, however, those who really seek out money are those who are in desperate need of the money, and cannot afford a credit card.
“This leaves them in the jaws of the terrorising finance mafia; it’s not a pleasant thing to think of and will leave people in the red. But one way we could perhaps get around it would be to have banks allocate smaller personal loans to individuals with minimum paperwork but a higher interest rate, of say, 6 per cent per annum.
“This would completely resurrect the individual for a period until the cash flow came back. But another method – and this is what I am hoping for – is to have registered moneylenders working in tandem with banks.
“Currently, banks flout moneylenders – but co-existing entities could solve this issue. By doing so, these lenders will be forced to be registered, meaning the paper trail can come under the scanners of the Central Bank of Oman.
“Also, should these lenders come across debtors looking to procure greater loan amounts, they can work together with the bank to draw up an efficient payment strategy; one that would possibly keep both parties happy,” he adds.
All of this brings us back to what our source at the bank states: “I lose faith in the banking system here by the day – not because of the laws but rather the people. There should be no place for usury in the world anymore.
“Extortion of this kind is cruel – it’s an active scorn of human rights. Get it together, people. Report such actions to the ROP and head to your bank. Fight for your rights. Just remember that in the eyes of a moneylender, you’re his investment and his asset. Like the name suggests, it really is like a shark stalking its feed.”