‘Pag gipit, H’wag kumapit sa 5-6
Staff Report Published: February 16, 2017
‘We get a minimum of 10 OFWs a month asking us for advice. Based on their story, their friends and relatives also deal with the same loan shark, which is likely because when one needs money, he or she will be referred by his and her friends to the loan shark na nahiraman na nya before.”
Old habits die hard. Some Filipinos have, since their age of reason, embraced the practice of obtaining loans to make both ends meet. Some of them have become accustomed to the “5-6” lending scheme like it’s an unwritten way of life.
Back home, President Duterte has recently ordered a crackdown against “5-6” usurers, saying the practice only further worsens the plight of the poor. “Five-six” because you keep paying more in interest, which ranges from eight to 15 percent a month, while the principal amount borrowed remains unpaid.
Here in the UAE, the situation is no less different, only that the lenders include Filipinos as well.
And it works like this, as loan shark victims interviewed by The FilipinoTimes said: borrow Dh2,000 for instance and you get Dh1,800 because the lender has deducted the 10 percent interest for the first month’s payment.
Second month comes and you pay Dh2,200 – why? Because you only paid the interest for your first month’s payment and so you have Dh2,000 plus the 10 percent interest for the second month.
Now should you opt to pay off on the interest alone for the second month, you’d need to cough up Dh2,400 for your third month’s payment – and the cycle continues till you realize you’ve totaled Dh2,000 on interest alone but the Dh2,000 principal amount you borrowed remains the same.
Other victims, also speaking on condition of anonymity, said it depends on the arrangement with the loan shark. “Yung iba, you have a certain payment schedule, say six months and that’s it,” said Anna Arrozelis, a registered nurse.
She once borrowed Dh5,000 on condition that she pays back Dh6,000 in six months or Dh1,000 a month instead of just a little over Dh800.
Research done by The Filipino Times showed that a handful of OFWs in the lower income bracket are inclined to borrow from a usurer but only as a last resort.
Reasons for borrowing include getting money to help a relative with visa run expenses or a kin back home going through dire straits.
Being an underground activity in the UAE’s informal economic sector, it is quite difficult to gauge the extent of the practice. But it’s widely believed loansharking is so rampant that one OFW in every shared flat unit is paying off a debt through this arrangement.
“We get a minimum of 10 OFWs a month asking us for advice,” Atty. Barney Almazar, director at Gulf Law, told The Filipino Times.
“Based on their story,” he added, “their friends and relatives also deal with the same loan shark, which is likely because when one needs money, he or she will be referred by his and her friends to the loan shark na nahiraman na nya before.”
“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,” said the 999 report.
“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,” it added.
As it is back home, OFWs in the UAE resort to loan sharks because they have no access to lending institutions or are already blacklisted, which is why usurers require passports. “They (debtors) have nothing to offer as collateral,” Almazar explained.
Banks ask for a salary certificate, a three-month bank statement, a copy of their passport with a UAE visa page, and other paperwork like employment certificate.
What to do when you have already pawned your passport
• Report the matter to the police as this is a criminal act as the law says.
• Refuse to pay interest, based on previous cases, loan sharks back off once they realize the victim is serious with legal proceedings. Lawyers would send demand letter to loan sharks stating their violations, according to Atty. Barney Almazar, director at Gulf Law. “If they continue to collect, our client will proceed legally. The loan sharks return the passport. But it’s not easy. They will not just give up,” he said.
• Seek help also from the Philippine Embassy or Consulate General. As Vice Consul Anne Guerra said, “Generally, loan transactions are private matters between the lender and borrower and the Embassy or the Consulate General cannot intervene in these cases. But one can always visit us, we will see what help we can provide, depending on the circumstances of the case.”
Private lending with interest is illegal in the UAE
UAE law is very clear that it is illegal to lend money with interest. Among guiding principles to this is that allowing such practice would adversely impact economic activity. For one, interest concentrates wealth to a few; another is that it causes overconsumption where people borrow against future earnings.
Article 714 of the UAE Civil Transactions Law.
“Interest earned is an unjust income and therefore not payable.” Only banks and financial institutions can charge interest.
Article 409, UAE Penal Code
An individual who imposes unreasonably high interest rates faces a jail term of at least three months and a fine of at least Dh2,000.
Don’t pawn your passport
Pawning a passport is an offense that carries a jail sentence of up to three years or a fine of up to Dh2,000, as stated under a decree issued by the UAE Ministry of Interior on Dec. 25, 2002.
Who are the common victims?
• People with no access to banks
• People blacklisted by the banks or with pending police cases
• People who prefer quick money
Who are the lenders?
• People with extra cash wanting to make money on the side
• Organized crime
‘Blade Mafias’ in the UAE
Loan shark activities are not limited to Filipinos.
As 999, the official English monthly of the UAE Ministry of the Interior, has reported in previous editions, the UAE loan shark community has a “macabre” name: blade mafia – referring to the cut-throat interest rate imposed and the actual use of a bladed weapon to demand payment.
What’s really scary about the blade mafia is the way they operate, especially in the Indian community: They get in touch with a debtor’s family back home and do them harm if money owed is not paid, sending their photos to the debtor as a “warning.”
There have been several reports about victims of the blade mafia – mostly Indian nationals – expressing dire concern over the safety of their loved ones back home, at times even contemplating suicide.