Agencies failing to suppress loan sharks

Anoma Srisukkasem

The Nation

At least 276 illegal creditors are in business, causing grave concern among related authorities that the widespread illegal business will aggravate Thailand's financial stability.

The business continues smoothly because the loan providers enjoy high returns while debtors can access finance easier than through legal channels.

 Authorities earlier expressed confidence that they would be able to abolish both small and large loan sharks as a result of firm cooperation among five

state agencies: the Bank of Thailand, the Bangkok Metro-politan Administration, the Office of Consumer Protection, the Revenue Department and the Economic and Cyber Crime Division (ECCD).

 However, they underestimated a demand-and-supply situation so strong that market intervention doesn't have much chance of success. High returns make it worthwhile for loan sharks to stay in business, compared with the penalties they would face if found guilty.

 Police Colonel Sarayud Poonthanya of the ECCD said last week that the loan sharks shifted their business patterns to escape the crackdown. For example, they hired other providers to lend to debtors, making it difficult for the authorities to track them down. Moreover, the authorities have not yet obtained firm evidence to prove connections between illegal lenders or robust grounds to file lawsuits against the estimated 50-100 large operators.

 "We will suppress the small providers first before cautiously moving on to big ones," Sarayud said.

 So far, the police have clamped down on only one loan shark, and even in that case could not bring charges.

 In fact, debtors are the best source to help the authorities to enter the inner circles to eliminate the business. However, the police receive hardly any cooperation because the debtors believe they benefit from the business.

 Most debtors are low-income people with limited financial literacy. They cannot access legal financial services. As a result, they are not reluctant to seek opportunities from loan sharks without concern that they are involved in an illegal business.

 "We get little cooperation from the debtors because they benefit from the business," Sarayud said.

 Nonetheless, the five agencies have succeeded in tightening cooperation among themselves to seek more effective results.

 Sarayud said the central police have asked for cooperation from rural police in order to cover more effectively the widespread illegal networks throughout the country.

 The crackdown may become effective when debtors realise that they are being taken advantage of through high interest rates and cannot repay their debts.

 The loan sharks will emerge out of the shadows only when the debtors walk into police stations.