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There are so many advertisements for 'Ah Longs' or loan sharks in practically every district of Malaysia. These people, as we know are charging exorbitant interest rates. They are often violent gangsters offering no ways out, no solutions - only bitter pain to their 'customers'...ahem...victims.
There seems to be no concerted effort to tackle this menace on a community-based level, and I believe that this problem begins within the community itself. During the recession in the 1980s in my country (I come from a working class suburb) we only tackled this menace which was at its worst at a time of mass unemployment, despair, recession by helping ourselves.
By doing so, we removed the cancerous menace of loan sharks. They did their best business during festive occasions, when the children returned to school, when the car broke down, when money was scarce.
Within a month, the cycle of despair began while waiting for the next paycheck and dole payment. The loan sharks lurked around at payday outside work places, the dole office, the post office, knowing who their customers were. Their rates were up to 300% per annum.
I am not aware and have not seen anything remotely resembling a credit union movement in Malaysia which has been very effective in Europe and the US. It is not in the interest of the politically-linked banks to provide community-based finance initiatives of this nature. It is not in their interest to promote them either.
Credit unions are a key solution to the Ah Long problem. If people wish to resort to Ah Longs, so be it. They won't disappear, they never will. A bank will only provide for the interests of its shareholders and their politically-linked masters.
A credit union, by contrast, provides for the interests of its members, and its members are also shareholders. Each ringgit saved is regarded as a share, which can be used as collateral to borrow against.
You can save as little as RM5 per week/month, or as much as you wish with a credit union but the difference is that there are dividends, not interest. Therefore, it also abides by the tenets of Islamic finance.
No one member can hold more than 25% of the share capital. After six months, with a proven savings record, you have a credit rating. You can prove that you can save, so you can be trusted to borrow. But initially, you cannot borrow more than 50% of the amount you have saved.
As we are all aware, no one can borrow without savings. Savings, no matter how small, offer a buffer; a safety net for hard times.
The interest charged by credit unions is one percent per month (normally) on loans. There is an annually-declared dividend. The members can vote in a board of management. It is 'one member, one vote' for those members above the age of 16 or 18.
There are also rebates on the loan interest which are also declared annually depending on the profits of the credit union. All of this is transparent. All the expenses are listed in an annual report. All of this is community-based finance. All of this, in Europe, has to be externally audited.
Loan sharks are a symptom of a system geared towards the large corporations and people with more than RM100 per month to save. There does not appear to be any product geared towards those who have little or less.
The time is ripe for credit unions to be the saviour of the ordinary people in Malaysia - from the fisherman in Terenganu to the 'mak cik' selling 'nasi lemak' by the roadside in PJ, to the DVD seller in Sri Hartamas to the taxi driver slaving away 12 hours daily to the workers at Alam Flora, and to those who have been forgotten and neglected by the conventional 'money first, humanity second' banking system.
People can save small amounts of money, get decent dividends and use the money they have saved as leverage towards borrowing small to medium amounts of money when required.
Weekly wages are not the solution either. These impose added bureaucracy on human resource departments. Most bills such as Astro, electricity, water, rental, mortgages, car repayments are on a monthly basis, so it is best to keep salaries on a month by month basis.
Weekly salary payments merely cater for those who want instant gratification. Paid on Friday, drunk on Saturday, gamble on Sunday, broke by Monday, and then only wait four days to repeat the process. Malaysians do not need to go down that route.
Malaysia also need a minimum wage. Former prime minister Abdullah Ahmad Badawi claimed that the country could not afford it. Singapore makes the same claim. How can a nation truly respect itself when it does not respect those at the bottom of its society.?
I love Malaysia, almost as much as I love my native land. I do not criticise for criticism's sake. But I advise, hoping it may, in some small way, make a difference and make this a better place.
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