The victims of informal illegal money-lending in the UAE
Many owners of small-scale businesses rely on private money-lenders as a last resort to overcome temporary cash shortages
Published: Sat 7 Jan 2017, 8:38 PM
Updated: Sun 8 Jan 2017, 3:21 PM
Picture for illustrative purposes
Small business owners are finding out the hard way that borrowing from deceitful, illegal money-lenders is a ticket to disaster. Many expatriates are falling into the trap to keep their businessness afloat during tough market conditions. It starts with borrowing from banks, then moves to local money-lenders. Loans, more loans, a mountain of debt, and defaults follow. Loan sharks then land at their door demanding they be repaid with the accrued interest. When told they won't be able to repay, the harassment begins. Soon, the calls and threats from lenders become constant. The borrowers change homes and hide from the law as their businesses go bust.
Many owners of small-scale businesses rely on private money-lenders as a last resort to overcome temporary cash shortages, a Khaleej Times investigation can reveal. A number of recent suicides have been attributed to loans gone sour. These loans are easy to obtain. Simply hand the passport to the lender, sign a few documents, and the loan is theirs at 10 per cent interest. Before they know it, they are neck-deep in trouble and the wolf is at their door.
An Indian business couple recently agreed on a suicide pact after sending their two sons to a friend's house. Rising losses from their investments had led them to take the extreme step. Unfortunately, the husband died while the wife survived the attempt, leaving her with all the debt inherited from her husband's failed businesses and a criminal case for attempting suicide in the UAE.
A year ago, an Indian film producer, who was running a cleaning company in Dubai, killed himself along with his wife and daughter. The family had their passports pledged with private moneylenders. Repatriation of the bodies was a herculean task as the lenders did not part with them. Friends claimed the man was in serious financial trouble and that creditors had driven him and his family to suicide. The pressure was too much for the man. He even tried to sell his assets back home, but it did not cover his loans.
Two years ago, an Indian family of four - a truck driver turned businessman, his pregnant wife, school-going daughter - were found dead in their Ras al Khaimah apartment again due to financial troubles. Lenders did not leave him in peace, according to sources close to the family. He tried to save his business and borrowed at a high rate from unscrupulous lenders. He failed in the venture and resorted to the rash act. The close-knit Indian community is still in shock.
"Lending money at a high interest rate without proper license and harassing people is a crime in the UAE," said Bindu S. Chettur, a lawyer who also advises the Indian Workers Resource Centre.
"Never pledge your passport to take loans from private lenders. Never give money on interest, especially at high interest rates, because it is an illegal business in the UAE, " she said.
Recently, Khaleej Times met a young woman entrepreneur from Gujarat, India, who has resigned her job with an airline to pursue her dream of opening a business in Dubai. The dream has become a nightmare now. For 14 months, she has been struggling to pay back the Dh250,000 she borrowed from a private money-lender in Deira. According to the woman, the creditor has been harassing her with persistent demands for a guarantee cheque and documents of property back home. There is also the threat of being put in jail for defaulting on payments. She had issued cheques to the lender that have bounced, which is an offence under the law, and the woman said life has been a ''living hell''.
Threatening and putting pressure on a person, particularly a woman is a criminal offense is a criminal offence in the UAE. "She can approach Dubai Police for help but many victims either keep silent or suffer the abuses," said Bindu, who has been handling such cases from the Indian community.
"In such a case, the court should be able to take into consideration the borrowers peculiar situation," said the lawyer.
But the woman, S.O, is tired of running away from creditors. In the last six months, she said she has changed seven accommodations, stayed in a public park, lived without food. "I drink tap water as I cannot afford to buy bottled mineral water. I keep borrowing from friends and relatives here and in India to get out of the mess. My friends have started avoiding me, but I am hoping that there will be some help coming my way," the woman said.
She regrets her decision to open a business after she was fooled by an advertisement and some flawed investment decisions. She even consulted an astrologer who advised her to start the beauty business in Dubai, a plan she said she would regret for the rest of her life.
Not only is she now homeless and depressed, her mother, who lives in India, has allegedly been threatened with eviction by goons sent by the money-lender. She claimed she gave him a power of attorney and a legal document to transfer her mother's property to his name. The creditor allegedly made a U-turn after taking the property documents and filed three dud cheque cases against her. "Everybody was welcoming the New Year with hope and happiness. But for me and my old mother, the New Year has been a nightmare so far," she said.
Don't depend on illegal lenders
Small businesses are the most vulnerable to moneylenders, who are the only available source of finance during emergencies. While there are many informal moneylenders here, lending money at high interest rate without proper licence and harassing people is a crime in the UAE, says Bindu S. Chettur, a lawyer who is giving advisory service to the Indian Workers Resource Centre (IWRC) in Dubai and board member of Indian Business & Professional Council (IBPC).
"Never pledge your passport to take loans from private money lenders. This is a common method of borrowing money, which is not advisable. Never give money on interest without a licence as it is an illegal business in the UAE," Bindu said, adding that "threatening and putting pressure on a person, especially a woman, is a criminal offence. She can approach the Dubai Police for help. But as they don't have their passports with them, many victims either keep silence or suffer the abuses," she said.
"In such a case, the court should be able to take into consideration the borrowers' peculiar situation."
She added that as per Indian Penal Code, a criminal case can be filed in the Indian courts against an Indian citizen who is committing such a crime outside the country. In this case, Shikha Ojha can file a case against the lender in an Indian court. Such a case will send the right message to the illegal moneylenders who normally harass the borrowers using different intimidating tactics.
"The IWRC gets such cases and we try to amicably settle the problem with the cooperation of both the parties. Before taking over an existing company or business, the investor should make an inquiry with the Department of Economic Development and do a due diligence exercise. Always ask for an audit report of the company.
"There are many rackets involving buying and selling of existing businesses and the new buyers need to be vigilant about unpaid debt and other liabilities of the entity that they are buying. In case of many grocery sales, the seller disappear after selling the shop, without paying the creditors or suppliers and sometimes the new buyer will end up in big liabilities," the lawyer said.
A lot of people enter businesses without full knowledge and only when they get into problems they realise the seriousness of the matter. "There should be a clear awareness about taking loans, especially from private moneylenders. "In case the passport is withheld by a moneylender illegally, report a lost passport case and apply for a new passport," she added.