No solution in sight for Thailand’s estimated US$3 billion loan shark business


According to latest statistics, reported in Matichon, a local newspaper, past program to reduce Thailand‘s loan shark business have failed, with currently, the interest rate charged on borrowers about 3% per day or about 1,000% a year.

Under the previous government of Abhisit, Thais who owe money to loan sharks, were encouraged to register with the government for help. About 1.2 million Thais registered for help with the total amount of debt to loan shark, about US$4 billion.

loan shark is a person or body that offers loans at extremely high interest rates.[1][2] The term usually refers to illegal activity, but may also refer to predatory lending with extremely high interest rates such as payday or title loans.[2][3][4][5][6][7][8] Loan sharks sometimes enforce repayment by blackmail or threats of violence. Historically, many moneylenders skirted between legal and extra-legal activity. In the recent western world, loan sharks have been a feature of the criminal underworld.

20th century gangsters

In the 1920s and 1930s, American prosecutors began to notice the emergence of a new breed of illegal lender that used violence to enforce debts. The new small lender laws had made it almost impossible to intimidate customers with a veneer of legality, and many customers were less vulnerable to shaming because they were either self-employed or already disreputable. Thus, violence was an important tool, though not their only one. These loan sharks operated more informally than salary lenders, which meant more discretion for the lender and less paperwork and bureaucracy for the customer. They were also willing to serve high-risk borrowers that legal lenders wouldn’t touch.

Threats of violence were rarely followed through, however. One possible reason is that injuring a borrower could have meant he couldn’t work and thus could never pay off his debt. Many regular borrowers realized the threats were mostly bluffs and that they could get away with delinquent payments. A more certain consequence was that the delinquent borrower would be cut off from future loans, which was serious for those who regularly relied on loan sharks.[12]

One important market for violent loan sharks was illegal gambling operators, who couldn’t expose themselves to the law to collect debts legally. They cooperated with loan sharks to supply credit and collect payments from their punters. Thieves and other criminals, whose fortunes were frequently in flux, were also served, and these connections also allowed the loan sharks to operate as fences.[13] Another type of high-risk customer was the small businessman in dire financial straits who couldn’t qualify for a legal loan.

Violent loansharking was typically run by criminal syndicates, such as the Mafia. Many of these were former bootleggers who needed a new line of work after the end of Prohibition. Towards the 1960s, loan sharks grew ever more coordinated, and could pool information on borrowers to better size up risks and ensure a borrower did not try to pay off one loan by borrowing from another loan shark. The fearsome reputation of the Mafia or similar large gang made the loan shark’s threat of violence more credible.

  • Currently, about 700,000 Thais continue to be indebted to loan shark, with the total amount about US$3 billion, reported Matichon. Matichon, said, banks that participated in helping Thais out of borrowing from loan sharks, were only about to extend loan of about US$1 billion.

Matichon reported that about 164 cases have been lodge against loan sharks, and in the courts, mostly about borrowers being threatened. At the Thai center to help victims of loan shark, Matichon reported, the center says it had received an increasing number of cases, in recent years.

A research by Thai Chambers of Commerce University found that ability to carry debt by Thai household is about the same in recent years, however, the amount of debt has increased by about 6%, to average debt per household of about US$5,000.

However, the chamber found that the average household borrowing from loan shark have increased by about 2% in recent years, to have loan shark borrowing accounting to a 46% proportion, of total borrowing.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s