Are money lenders the scum of the earth?

Charles Ponzi

It came up in a topic lately on a forum how making profit out of loans was the lowest of the low. Odd thing was the same guy who stated it had previously invested in the Legacy investments which were double your money in two years then finally double within three years before its final collapse. Now at any point did he wonder how does a bank actually make that much interest ok.. it was a ponzi scheme but what if it wasn’t? Questions never got asked where the money came from to give such high rewards same as the motorcycle investment that followed after that. Why? Because most people know in the Philippines a motorbike is going to cost you at least 150% of its value if on a loan longer the loan it soon becomes double. But that scheme was alright as well because its indirect investments..

Truth of the matter is the lending companies here are probably one of the few things that keep the economy ticking over besides the OFW remittances. Why when the interest is so high your probably asking.. Because a lot of people take on things like short term loans to buy stocks for stores, market stalls, businesses which even at 20% can be easily recouped (that is 20% per month). Problem when dealing in countries like the Philippines the risks are a lot higher on the investments which is why the rates can be high, also emergency loans for medical bills. Are the lending companies just loan sharks? You will find the reputable ones are working to protect themselves they want repaid.. Loan sharking is a trade that involves keeping people in debt indefinitely because you know they can’t afford to pay. You don’t want them to be able to pay in full at any one time but keep them constantly owing you more and more money. Where money lenders here are often struggling to get paid. The Turko’s or Bombay’s as they are generally called will force payments often by tormenting people or harassment but that only works short term as customers don’t like seeing others being attacked and quickly look to get loans elsewhere in future.

Thing is the lenders keep a lot of things afloat people don’t even realise. You want to go abroad where do you think  the money will come from? Your agent, the bank? well if your agent is doing it no doubt its gone via a lending company to get the money they are unlikely to have that sort of quantity of cash lying around with the number of clients they have. The banks won’t lend you money because you haven’t got money.. sound familiar to the West? Banks only help you when you have cash in the first place? Difference is here things like land often the bank’s won’t take as guarantee. The only option for many is the lenders remove them from society you lose most of your OFWs because they need that initial investment to get them abroad!

The funny thing I will finish this post on is back to the guy that got me thinking about this post. He invested P1m in rice and churning 5% profit a month from it. Isn’t that more likely to be taking food from mouths than companies that actually get people abroad and into a better life?

Makes you wonder.. I was going to talk about charities but that will be the next post!

2 comments for “Are money lenders the scum of the earth?

  1. Tropicalpenpals
    June 26, 2010 at 5:43 pm

    At the end of the day what if there wasn't lenders how would money move round? how would even the simple of businesses survive because like you said the loans are all relevant to risk which is why the banks aren't giving people the money in the first place. But i think the other thing is people jump to conclusions without researching ahead of the mouth..

  2. Andrew_wearing_well
    June 26, 2010 at 4:51 pm

    Interesting post Matt most of what you say is spot on sir, the bit that most people don’t see here is that lenders are not seen as low life here they are seen as business people providing a service which would otherwise not exist given the way banks operate here. It is also worth while noting that most lending companies here don’t look to charge people 20 % or even 10% most are around 5% per month which is not unreasonable give the level of none payment most lender face in order to make a return they need to charge the rates they do. The higher the rate the higher the risk that person has. The lending market is very competitive and anyone charging anything near 20% is doing it as the people they are lending to are very high risk of none payment, if they were not so high risk then they could easily find lower rates of credit.

    So to all those who call lenders parasites, consider this, most just operate as a bank but with one massive difference, the banks lend out other peoples money, they have none of their own, the smaller lenders use their own money to lend out, thus the return they need to get is considerably higher!