As Myanmar's economy and rule of law collapse, moneylenders are charging exorbitant interest rates to desperate borrowers and hiring thugs to collect dues.
by frontier
One day in August, Ko Soe Thu returned home from work to find her mother surrounded by three men brandishing pipes menacingly and a woman screaming.
“As soon as I saw them, I knew what was going on. They came to my mother to ask her to repay the loan. My mother was apologizing, but the woman was very rude. . She called my mother a beggar,” So Thu, 27, told The Frontier.
One day, the woman (a well-known moneylender in Shupital township) slapped So Thu's mother, and So Thu ran to protect her. The men, local thugs hired to blackmail the debtor, beat him until a neighbor intervened and stopped the scuffle.
Soh Thu works as a trishaw motorcycle driver and earns about K8,000 on a good day. His wife, on the other hand, works in a garment factory for a monthly salary of K300,000, or about US$60 at the market rate. After paying the rent and supporting So Tu's mother and two-year-old daughter, there is little left.
So when Soe Tho's daughter came down with the flu in July, her mother borrowed K100,000 through a scheme commonly known as Mat Tho to cover the medical costs.
Under this scheme, borrowers have to pay 10 per cent a day (K10,000 in this case) to keep the lender at bay until they can repay the entire loan in one lump sum. So if it takes you 10 days to raise the cash, your repayments will effectively double. This means 10 daily payments of K10,000 and a lump sum payment of K100,000.
“It is not easy to pay off debts in this situation. After paying interest to the moneylender, we only have enough money to pay for food,” So Thu said.
After four weeks of paying this per diem rate, the family stopped paying, and three days later the moneylender came to her demanding payment.
So Thu had already borrowed K700,000 in installments from another moneylender at a monthly interest rate of 20% since October last year, when his wife lost her job and was struggling to pay rent.
“These loans are very easy to get, but they are not easy to repay,” he says.
As collateral, the first moneylender took Soe Hthu's citizenship card, Myanmar's main citizenship document, and the second moneylender took her mother's.
“The interest I've paid so far has already exceeded the money I borrowed. I wanted to run away, but they took my (Citizenship Investigation Card) card and I can't run away. If I run away, my wife… We will have to confront them,” he explained. “It is impossible for the whole family to escape. I still have no way to escape from this debt.”
Growing interest and hiring of violent criminals
Soe Thu's plight is not unique in working-class neighborhoods in Yangon and other Myanmar cities. Illegal moneylenders are nothing new, but the economic crisis caused by the 2021 military coup and subsequent armed conflict has led to more people taking loans from illegal moneylenders. Meanwhile, interest rates are becoming increasingly exorbitant at a time when the military regime appears to have little desire or ability to enforce the law.
“The reality is that this kind of moneylending is illegal,” says Ko Zaw Min*, a member of a social welfare organization based in Shupital. “No one complains about it because the police never arrest moneylenders and people rely on them when they urgently need money.”
Daw Shwe Shin, 48, has been working as a moneylender in Yangon's East Hlaing Thar Yar township for more than 10 years. She says interest rates used to range from 10% to 20% per month, but now most lenders have increased it to 20% per 10 days.
And the number of people taking out loans is increasing.
“This year it has gotten even worse. People are having a hard time. Before, I had as many as five people borrowing money from me every month, but now there are at least 10. The main reason is The price of goods is going up,” she said.
If the economy is bad and more people take out loans, the number of people who default will inevitably increase. And to recover unpaid loans, moneylenders rely on hired thugs.
“When they come to get money, they come with sticks,” Zaw Min said.
“They work in gambling parlors and KTVs (karaoke nightclubs) providing security. Lenders often hire them to recover loans,” he says.
Shwe Shin said she did not use thugs, but many moneylenders in her town did. She says they are typically paid about 15% of the amount the lender receives.
“If the renters do not pay, the thugs beat them at their homes,” she said.
Zaw Min said people usually don't bother filing complaints with the police. He claimed that many of the thugs were also members of the pro-military Pyosauti militia, but Frontier was unable to substantiate this claim.
“Police do not intervene and take no action,” he said.
Few other options
People who need to borrow money have the option of going to microfinance companies, which have been operating legally in the country since the passing of the Microfinance Business Law in 2011.
According to the government's Ministry of Planning and Finance, as of January last year, there were 181 microfinance businesses, providing loans to more than 4 million people.
A Bago regional loan officer from Early Dawn Microfinance Company said the microfinance company legally issues loans ranging from K200,000 to K2 million with interest rates that cannot exceed 2.3%. .
However, these services are not available to the poorest and therefore most desperate members of society.
“You cannot rent alone. We only offer loans to groups of at least five people. Borrowers must also own a home, provide a household list, and have a guarantor for payment.” she stated.
Microfinance companies also vet borrowers to see if they are at high risk of default. Businesses are having a particularly difficult time recovering loans due to the impact of the conflict, with many branches closing and borrowers relocating.
“People are displaced due to war, and it is often very difficult to repay loans,” she said, adding that many businesses have closed down as a result.
The conditions imposed by microfinance businesses and their reduced availability are leading more people to obtain loans from illegal moneylenders, making them vulnerable to blackmail and extortion.
Daw Kyin Htay*, 60, is one of those caught in the moneylenders' web. A widow, she lives in Yangon's Mayangon district with her son and five daughters.
Although his household income is about 1.2 million kyats a month, Kintai is a gambling addict and lost 1 million kyats last year by betting on illegal lottery tickets in his neighborhood.
“My children don't like me playing the lottery. They get mad if they find out, so I borrow money from them behind my back,” she said.
When she took out a K200,000 loan in April last year, she had to hand over her original household list to the lender as collateral. This is a common practice as the borrower cannot afford to lose the important household list in order to obtain other documents such as CSC and passport.
Kyin Htay used a loan system known as Tu Yin Paung, similar to Mat Tu but more predatory. Similar to mat toe, the borrower must pay 10% interest every day until the full amount is paid off, but any missed payments will be added to the final payment.
Therefore, if Kyin Htay defaulted on the payment of K20,000 per day, the new lump sum payment increased to K220,000 and the daily payment increased to K22,000. Due to delayed payments, her debt had ballooned to K500,000.
Then one of her children contracted dengue fever and had to be hospitalized, and she stopped paying the full daily wage. After three days of non-payment, the moneylender visited her house accompanied by thugs. As Ms Kiin Tai continued to evade payments, the moneylender periodically returned with a threatening security detail to publicly threaten and humiliate her.
“We cried every day when they came to yell at us,” Kiin Tay said.
Eventually, her son borrowed money from a friend to pay off the debt, by which time the debt had ballooned to K800,000.
“We borrowed K200,000, but in the end we had to pay K800,000. But the worst thing of all was the shame and embarrassment it brought us.” she said.
* indicates use of a pseudonym for security reasons
