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Many small business owners turn to private lenders as a last resort to overcome temporary cash shortages
Many small business owners rely on private lenders as a last resort to overcome temporary cash shortages, a Khaleej Times survey can reveal. A number of recent suicides have been attributed to loans gone bad. These loans are easy to obtain. Just give the passport to the lender, sign a few documents and the loan comes back to him at 10% interest. Before they know it, they’re up to their necks in trouble and the wolf is at their doorstep.
An Indian business couple recently made a suicide pact after sending their two sons to a friend’s house. The increasing losses of 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 bankrupt businesses and a criminal case for attempted suicide in the United Arab Emirates.
A year ago, an Indian film producer, who ran a cleaning business in Dubai, committed suicide along with his wife and daughter. The family had their passports pledged to private lenders. Repatriating the bodies was a Herculean task as the lenders did not part with them. Friends claimed the man was in serious financial trouble and his creditors had pushed him and his family to suicide. The pressure was too much for the man. He even tried to sell his assets back home, but that didn’t cover his borrowings.
Two years ago, an Indian family of four – a truck driver turned businessman, his pregnant wife, his school-going daughter – were again found dead in their Ras al Khaimah apartment in due to financial problems. The lenders did not leave him alone, 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 business and resorted to the rash act. The tight-knit Indian community is still in shock.
“Lending money at high interest without proper license and harassing people is a crime in the UAE,” said Bindu S. Chettur, a lawyer who also advises the Indian Worker Resource Center.
“Never pawn your passport to take out loans from private lenders. Never give money on interest, especially at high interest rates, as this is an illegal activity in the UAE united,” she said.
Recently, Khaleej Times caught up with a young female entrepreneur from Gujarat, India, who quit her airline job 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 repay the 250,000 Dhs she borrowed from a private moneylender in Deira. According to the woman, the creditor is harassing her with persistent demands for a security check and home ownership documents. There is also the threat of being jailed for default. She had issued checks to the lender which bounced, which is a breach of the law, and the woman said life was a “living hell”.
Threatening and coercing a person, especially a woman, is a criminal offense is a criminal offense in the UAE. “She can ask the Dubai police for help, but many victims remain silent or suffer the abuse,” said Bindu, who handles such cases in the Indian community.
“In such a case, the court should be able to take into consideration the particular situation of the borrowers,” the lawyer said.
But the woman, SO, is tired of running away from her creditors. In the past six months, she said she changed seven accommodations, stayed in a public park, lived without food. “I drink tap water as I cannot afford bottled mineral water. I keep borrowing from friends and relatives here and in India to get out of trouble. My friends started avoiding me, but I hope there will be help coming my way,” the woman said.
She regrets her decision to open a business after being misled by erroneous advertising and 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, but her mother, who lives in India, has reportedly been threatened with eviction by goons sent by the moneylender. She claimed that she gave him power of attorney and a legal document to transfer her mother’s property to her name. The creditor is said to have turned around after taking the property documents and filing three bad check cases against her. “Everyone was welcoming the New Year with hope and happiness. But for me and my elderly mother, the New Year has been a nightmare so far,” she said.
Small businesses are most vulnerable to pawn shops, which are the only source of financing available in an emergency. Although there are many informal lenders here, lending money at high interest without proper license and harassing people is a crime in the UAE, says Bindu S. Chettur, a lawyer who provides services Counselor at the Indian Worker Resource Center (IWRC) in Dubai and Board Member of the Indian Business & Professional Council (IBPC).
“Never pawn your passport to take out loans from private lenders. This is a common method of borrowing money, which is not advisable. Never give money on interest without a license because it is an illegal activity in the UAE,” Bindu said, adding that “threatening and pressuring a person, especially a woman, is a criminal offence. Dubai. But because they don’t have their passports with them, many victims remain silent or suffer abuse,” she said.
“In such a case, the court should be able to take into consideration the particular situation of the borrowers.”
She added that according to the Indian Penal Code, a criminal case can be filed in Indian courts against an Indian citizen who commits such a crime outside the country. In this case, Shikha Ojha can file a lawsuit against the lender in an Indian court. Such a case will send the right message to illegal lenders who normally harass borrowers using different bullying tactics.
“IWRC receives such cases and we try to settle the matter amicably with the cooperation of both parties. Do a due diligence exercise Always ask for a company audit report.
“There are many rackets involving the buying and selling of existing businesses and new buyers need to be vigilant about unpaid debts and other liabilities of the entity they are buying. In the event of many grocery sales, the seller disappears after selling the store, without paying creditors or suppliers and sometimes the new buyer will end up with big liabilities,” the lawyer said.
Many people enter businesses without being fully informed and it is only when they have problems that they realize the seriousness of the matter. “There should be a clear awareness about the possibility of taking loans, especially from private lenders. “If the passport is illegally withheld by a pawnbroker, report a case of lost passport and request a new passport” , she added.