As hard-up families and small businesses in Oman turn to illegal money lenders to make ends meet,loan sharks are charging high interest rates.
Due to the current economic climate,employees are reporting delays in salary and contractors failing to pay up. Social workers say more and more people are resorting to borrowing in the black market, with some giving up their passports or writing blank cheques as security for the loans they take.
The Central Bank of Oman has capped lending at six per cent interest, which is the maximum banks can charge customers, but loan sharks are charging those desperate enough to seek their services up to 120 per cent interest.
An expatriate in Muscat, said he is paying OMR100 in interest every month for the OMR1,000 he had taken from a money lender six months ago.
Social workers say the going rate in Muscat is OMR10 interest per month for OMR100. “Due to delays of months in salary, many are taking money from illegal money lenders. Sometimes, it is to send money home to pay off loans there or to meet a medical emergency,” said one social worker on condition of anonymity.
“Delay in payments on the part of main contractors and a drop in business is forcing many small-time businessmen to take loans from illegal money lenders by pledging passport and blank cheques. Some are paying OMR7 as interest every month while in some other cases, lenders are asking for even OMR10 and above.”
The number of such cases coming to us is going up. Every week, we receive at least two cases of this kind. According to the social worker, many cases involve people running small shops supplying construction material.