Ah Long is a term for illegal loan sharks in Malaysia and Singapore. They lend money to people who are unable to obtain loans from banks or other legal sources. In Japan, these illegal loan sharks are called “TO-SAN” (TO=ten SAN=three) or “TO-GO” (TO=ten GO=five)), because the interest rates they charge are between 30 percent over 10 days or 50 percent over 10 days.
Why do these people go to Ah Longs? Is it because they have no access to the banks? Why do people have no access to the banks? Maybe the unavailability of the several requirements imposed by the banks such as three months pay slips, current account bank statements, collateral(s), guarantor(s), referees/ cables for recommendations and the loan approval depends totally on all the blacklist ‘bad debtors’ database. So far Malaysia has two blacklist ‘bad debtors’ database systems; which are CTOS (Credit Tip-Off Service Sdn Bhd) and FIS (Financial Information System Sdn Bhd). Another database system which shows the status for monthly installments is CCRISS (Central Credit Reference Information System). Once our names are on these lists, we can forget about getting any credit.
The bankers use the database from these companies as the holy grail of credit referencing in Malaysia. Ultimately, the companies involved in providing the database have created a very good business. They provide blacklisted names to bankers and put ‘remarks’ when debts have been settled completely. However, sometimes these companies fail to remove blacklisted names even-though debts had been settled. This creates tremendous suffering, problems, shame, and difficulties to the person.
The ‘good business’ gained by these companies comes from charging access charges for any information on the would-be borrower, and bank submissions of the names of bad debtors’ into the bad debtors’ database along with recommendations for loan settlement.
From an Islamic perspective, once debtors have settled their debts, these companies have no right to keep previous debtors’ names or their past track record on files marked ‘bad credit’. To continue to do so is unjust; even more so if those remarks remain forever listed in files marked ‘bad record’ until Judgement Day.
From my personal point of view, Malaysia’s Human Rights Commission (SUHAKAM) should look into this matter. Perhaps the above factors contribute to why people turn to loan sharks instead of the conventional banking system.
Can Malaysian banks know their customers without relying on the ‘bad debtors’ database system?. The answer is ‘yes’. One only has to study the efforts made by Nobel Laureate Muhammad Yunus, the Bangladeshi economist and his Grameen Bank.
The Grameen Bank (GB) has reversed conventional banking practices by removing the need for collateral and has created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and serves as a catalyst forwards the overall development of the socio-economic conditions of the poor who have been kept outside the banking orbit by virtue of the fact that they are poor and hence ‘not bankable’.
As of May, 2006, it had 6.83 million borrowers, 97 percent of whom were women. With 2283 branches, GB provides services in 73,609 villages, covering more than 88 percent of the total number of villages in Bangladesh. The NPL (non-performing loans) ratio was apparently less then 2%.
Among the Special Honors received by Muhammad Yunus are the “Adopted Son of Negros Occidental” (Philippines), “Man of the Year 1994” (Bangladesh), “Person of the Week” (USA), “Twenty Great Asians 1075-1995” (Hong Kong), “20 Heroes of the World” (USA), “The 25 Most Influential Business Persons in the Past 25 years” (USA), “Special Advisor” (Belgium), “Professeur Honoris Causa” (France).
The Grameen Bank Project (Grameen means “rural” or “village” in The Bengali language) was established with the following objectives:
(a) To extend banking facilities to poor men and women
(b) To eliminate the exploitation of the poor by money lenders
(c) To create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh
(d) To bring the disadvantaged, mostly women from the poorest households, within the fold of an organizational format which they can understand and manage alone.
(e) To reverse the age-old vicious circle of “low income, low savings & low investment”, into a virtuous circle of “low income, the injection of credit, investment, more income, more savings, more investment, more income”.
What is the method of the Grameen Bank?
(a) To start at the problem rather than the solution: A credit system must be based on a survey of the social background rather than on a pre-established banking technique
(b) To adopt a progressive attitude: Development is a long-term process which depends on the aspirations and commitment of the economic operators
(c) To make sure that the credit system serves the poor, and not vice-versa: Credit officers visit the villages, enabling them to get to know the borrowers
(d) To establish priorities for action vis-a-vis the target population: Serve the most poverty-stricken people needing investment resources, who have no access to credit.
(e) In the beginning, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan. (f) Lean on solidarity groups: Small informal groups consisting of co-opted members coming from the same background and trusting each other.
(g) Associate savings with credit without it necessarily being a prerequisite.
(h) Combine the close monitoring of borrowers with procedures which are simple and as standardized as possible.
(i) Do everything possible to ensure the system’s financial balance
(j) Invest in human resources: Training leaders will provide them with real development ethics based on rigors, creativity, understanding and respect for the rural environment. (http://www.grameen-info.org/bank/moa.html )
On the other hand, Malaysian bankers are basically specialized in several different types of loans; a) Credit Cards b) Personnel Loans c) Hire-Purchase d) Housing Loans.. Furthermore, these bankers do not have the time to entertain poor people because they are profit driven through the manipulation of people’s debts. In addition, they are very good at bank mergers to create a monopoly and at the same time at reducing employment by offering VSS (Voluntarily Separation Scheme).
If Malaysian banks are still interested in profit making rather than social contributions, let them be. Maybe what the Malaysian Government can do in parallel with the Hadhari approach is to apply the Grameen Bank concept through our various Cooperatives using professional people, namely former bankers or those VSS people to run the show.
People have to apply for facilities from the existing banks because they have no choice. If we have a duplicate Grameen Bank here, in Malaysia, certainly thousands of people will be queuing outside before its doors open at 9.30 am. Easy access for legal loans will reduce certain social diseases in Malaysia, namely ‘the Mat Rempits’, GROs, prostitutions, snatch thieves, beggars etc. With the right approach, these people need capital to start small businesses to create job opportunities for themselves as well as others. At the moment they are left idle on their hands which’s with time wasted on negatives activities, depriving them of reaping the benefits and hence become burdens to the society at large.