Father Sez

From and to parents - parental advice to our children on personal financial management and life.
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An “interview” with a loan shark

Friday, March 20th, 2009

Vicky did not look anything like what I thought loan sharks would look like. He struck me as a cultured and soft spoken businessman. He certainly had the build to be pretty intimidating if he wanted to, though. 

I met Vicky whilst waiting for my wife to finish an errand. I wanted to have a tea at one of the local mamak shops whilst waiting for her. There was an empty seat at the table where Vicky was having his lunch. I asked his permission and he cheerfully asked me to take a seat.  

I mentioned that it was pretty late for him to be having lunch (it was already about 4 pm). One thing led to another and we got to talking.  

Vicky, single and 30 years old had been doing this for the past 7 years. He told me that his “brothers” had given him capital at 3 sen, and he lent out the money at 10 sen. His cut would be the 7 sen. Though he used the term “sen”, it basically meant % per month. 

7% per month return or 84% a year is no small return.  

Vicky told me that he had lived in Seremban all his life and he knew personally almost all the Indian small businessmen and traders. He only lent to people he had known for at least 5 years. People whom he was confident would not run off on him. 

He had a very low opinion of loan sharks who resorted to acts like throwing red paint in people’s homes etc. Vicky’s stand was that this was a business. He made his money by choosing good borrowers. This was the key and his USP.  

The second was to be reasonable in his rates. He claimed that there were some loan sharks who charged more than 200% per annum and a day’s delay in paying the monthly instalment would result in the repayment being doubled. He pitied people who had no choice but to borrow at these rates. They are doomed……were his words.  

I asked him about his bad debt rates. (Though I wanted to, I did not ask him what he did to people who did not pay). He mentioned that a 10% provision for bad debts should be enough. He gave an example of one person who ran off to another town and returned later to pay the principal plus interest. 

His “brothers”, who had invested the money with him were actually just investors. He considered them as his brothers as they had given him this means of making his living. (He also had a restaurant as well as a scrap metal business.) 

I told him that my religion forbid me from participating in this type of business. He had heard about this, but his view was that he was actually helping people get second chances.

It seems that Vicky hangs around this particular mamak shop often as his office was just around the corner. He was still single and he always had all his meals there.  

Though I hope to get to know Vicky better, it should not be for the intention of becoming a customer.

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