These are people or companies, otherwise known as ‘loan sharks’ or ‘predatory lenders’, that lend money to Thais at exorbitant interest rates, often in the region of 10-20 percent a month.
Unfortunately in Thailand, even though the police periodically do a crackdown on illegal money lenders, it has little effect as can be attested to by the number of Thais I still hear about in trouble with them.
The latest story of someone in trouble with a black market money lender in Thailand was told to me by one of my closest Thai friends.
One of her friends who I will call ‘Som’, and who is a woman I also know, had asked to borrow money from her for the third time in three months. Even though the money was being paid back by Som every month, the amount was increasing each time a new request for a ‘short-term loan’ came in.
The third time she asked for a short-term loan, that is when my friend asked Som “Are you having serious financial problems?” And the whole story came out.
Apparently, over several months more than a year ago, Som had borrowed 200,000 baht (around $6,995) from an illegal money lender in Bangkok. From what we understand, none of the money was for anything essential so was spent on things like a new mobile phone, clothes, a new laptop, eating out etc.
Things that, in modern Bangkok, many Thai women classify as ‘essential’,
The problem is, repayment on black market loans in Thailand often means getting anything paid off the principal you borrow is nigh on impossible. That’s because the interest rates are so high.
On her 200,000 baht loan, our friend has to pay 10 percent every month. That’s 20,000 baht ($695) a month. Considering her total monthly income is only 47,500 ($1,660), that’s over 40 percent of her monthly income just going to pay the interest on the loan.
The chance of her ever paying a baht off the capital on that kind of repayment scheme? Just about nil. And illegal money lenders in Thailand know that.
What Som is going to do about it, we honestly don’t know.
My friend, who has an incredibly good heart, is trying to get another friend to lend Som 200,000 baht so she can pay off the black market money lender and then repay him at a minimal annual interest rate of around 6-8 percent. If that were to happen, she could pay off the entire loan in a year.
The friend has already agreed, but isn’t sure how soon he can lay his hands on the cash.
Meanwhile, Som has been paying off the money lender for 10 months now. At 20,000 baht a month, that’s 200,000 baht she’s already paid. But not one baht of it has actually paid down the principal, as it has all gone to pay the interest.
Som, of course, isn’t unusual. This kind of sad story involving Thailand’s shady money lenders and poor Thais with little or no financial resources happens every day. Until the Thai police and Thai government stamp down on it in a serious way, it will continue.