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Sports |
Loan sharks do not exist
I REFER to several articles printed
in your paper which loosely use the term “loan sharks”.
I believe this term is being overused. Most finance companies
referred to by the article are registered with the Investment
Promotion Authority (IPA) and finance companies like these are
classified under the category of “Other Credit Lending”.
If a finance company “does not accept” deposits from the public
and if it is wholly a lending company, they “exempted” from
requiring having a licence by the Bank of PNG as per National
Gazette No. G129 dated October 2000.
Most finance companies serving the public servants do not accept
deposits so they are all exempted.
Operations of these finance companies are legal, they are
registered with IPA, they pay taxes, group taxes and they also pay
a service fee of 5% of their gross collection to the Department of
Finance.
Their interest rates are fair and comparable with the so-called
licensed finance companies (or those companies who accept
deposits).
I request everyone concerned to compare their rates with the
licensed finance companies so they will know that their rates are
sometimes even lower.
Wikipedia encyclopeadia defines “loan sharks” as “A loan shark is
a person or body that offers illegal unsecured loans at high
interest rates to individuals, often backed by blackmail or
threats of violence. They provide credit to those who are not
willing or are unable to obtain it from more respectable sources,
usually because interest rates commensurate with the perceived
risk are illegal” (source: http://en. wikipedia.org/wiki/Loan_shark).
The same encyclopaedia calls finance companies such as the ones
that operate in PNG as “payday loan or consumer finance
companies”. They are not mainstream lenders but are sub-prime
lenders and “non-standard consumer credit lenders”.
These kind of companies “have made true loan sharks rarer”,
according to the encyclopeadia. Loan sharks virtually do not exist
anymore.
Based on the encyclopeadia, loan sharks’ interest rates are well
over 1,000,000% per annum.
No finance companies in PNG lend at these kinds of rates and no
violence has ever erupted as a result of non-payment of loans.
My suggestions:
l Other credit lending is an important aspect in any financial
industry. There are mainstream lenders like the banks but there
are sub-prime lenders such as the finance companies in PNG. We
only have to regulate the industry, for example limit the maximum
interest that can be charged.
l The developed world like Australia, UK, US, etc does not just
have mainstream lenders such as the banks. They have sub-prime
lenders but are not called loan sharks. They are fully supported
and operate with the highest level of professionalism. This kind
of professionalism should be brought to PNG.
We hope that concerned authorities will support this industry,
regulate it and develop it. In this way we will be giving our
people more access to funds.
Concerned Observer
Via email
 
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