The dying days of loan sharks

Market forces are at work to ensure that people with sharp cash flow problem have now the option of window shopping for a cheaper interest loan. The only problem is that the lowest interest rate in the market are for illegal loans, courtesy of the loan sharks

Loan sharks, or ah longs as they are known popularly, seem to have fallen in hard times. Business is tough due to stiff competition from banks and borrowers are getting smarter by the day.

Gone are the days when borrowers react timidly to all sort of rough tactics employed by these illegal money-lenders.

In the words of one ah long:

"Borrowers are smarter now. If we harass them too much for repayment, they would go to the authorities. As such we are careful as to whom we give out loans."

Competition from banks and pawnshops too is having a major impact on their businesses. The same moneylender is quoted in The Star today as saying:

"Easier personal loans given out by the banks and lower interest rates offered by pawnshops are threatening our business. We have no choice but to reduce our interest rates to be competitive."

He added that in light of these unfavourable developments, some of these illegal moneylenders are forced to scale down their businesses.

"I use to have 10 offices in Kuala Lumpur, Negri Sembilan, Malacca and Johor. However, I have been forced to close four offices due to slower business."

As a result, the moneylenders are now offering low interest rates of 5 percent per month - a drastic drop from their usual 30 percent. This is lower than that offered by commercial banks and pawnbrokers.

The Star reported that commercial banks are offering annual interest rates of between 4.5 percent and 10.5 percent for loans up to RM100,000, while pawnshops give out loans at 6 percent interest per year.

Are we then seeing the natural demise of ah longs in Malaysia? Is justice finally catching up with these thugs on behalf of all the ‘poor’ borrowers who were harassed, assaulted and humiliated for being unable to settle the high interest rate?

I sure hope so.