Amid the collapse of both the economy and the rule of law in Myanmar, moneylenders are setting extortionate interest rates for desperate borrowers and hiring thugs to collect their dues.
By FRONTIER
Ko Soe Thu returned home from work one day in August to find his mother surrounded by three men menacingly wielding pipes and a woman shouting.
“I knew what was going on as soon as I saw them. They had come to ask my mother to repay a loan. My mother was apologising, but the woman was very rude. She called my mother a beggar,” Soe Thu, 27, told Frontier.
At one point the woman – a well-known moneylender in their ward in Shwepyithar Township – slapped Soe Thu’s mother, and he ran over to defend her. The men, local thugs hired to intimidate debtors, beat him until neighbours intervened and stopped the brawl.
Soe Thu works as a motorcycle trishaw driver, earning about K8,000 on a good day, while his wife works at a garment factory for a monthly salary of K300,000 – about US$60 at the market rate. After paying rent and supporting Soe Thu’s mother and their two-year-old daughter, there is little left.
So when Soe Thu’s daughter fell ill with influenza in July, his mother borrowed K100,000 via a system popularly known as mat toe to cover her medical expenses.
Under this system, the borrower has to pay a daily rate of 10 percent – in this case K10,000 – just to keep the lender at bay, until they can pay back the entire loan in a lump sum. So if it takes 10 days to gather the cash, the repayment essentially doubles – 10 daily payments of K10,000 plus a lump sum of K100,000.
“It’s not easy for me to pay off my debts in this situation. After paying interest to the moneylenders, we have barely enough money to pay for our food,” Soe Thu said.
After four weeks of paying this daily fee, the family stopped, and three days later the moneylender came to demand her due.
Soe Thu had already borrowed K700,000 in instalments from another moneylender at an interest rate of 20pc per month, starting in October last year, at a time when his wife was unemployed and they were struggling to even afford their rent.
“These loans are very easy to get, but they aren’t easy to repay,” he said.
For collateral, the first moneylender took Soe Thu’s citizenship scrutiny card, Myanmar’s primary citizenship document, and the second took his mother’s.
“The interest we have paid so far already exceeds the money we borrowed. I have thought of running away, but they took my [citizenship scrutiny card] card so I can’t flee. If I run away, my wife will have to face them,” he explained. “It’s impossible for the whole family to run away. I still have no way out of these debts.”
Higher interest and hired thugs
Soe Thu’s plight is far from uncommon in working-class neighbourhoods in Yangon and other Myanmar cities. Illegal moneylenders are nothing new, but more people are taking loans from them due to the economic crisis triggered by the 2021 military coup and subsequent armed conflict. Meanwhile, their interest rates are becoming increasingly extortionate at a time when the military regime seemingly has little desire or capacity to enforce the law.
“In reality, this kind of moneylending is illegal,” said Ko Zaw Min*, a member of a social welfare organisation based in Shwepyithar. “The police never arrest the moneylenders and no one complains about it because people rely on them when they need money for an emergency.”
Daw Shwe Sin, 48, has worked as a moneylender in Yangon’s East Hlaing Tharyar Township for more than 10 years. According to her, interest rates used to be between 10pc and 20pc per month, but now most lenders have increased them to 20pc per 10 days.
And more people are taking loans.
“It’s gotten worse this year. People are having a hard time. Before there were five people who borrowed money from me every month, now it’s at least 10 people. The main reason is higher commodity prices,” she said.
With more people taking out loans in a poor economy, inevitably there are also more people defaulting. And to recuperate outstanding loans, moneylenders rely on hired thugs.
“When they come to get the money, they come with sticks,” Zaw Min said.
“They work at gambling dens or KTVs [karaoke nightclubs] providing security. Moneylenders often hire them to get their loans back,” he said.
Shwe Sin said that she does not use thugs, but many moneylenders in her township do. According to her, they are typically paid about 15pc of the money the lenders receive.
“If the borrower doesn’t pay, the thugs beat them up in their own house,” she said.
According to Zaw Min, people usually don’t bother filing complaints to the police. He claimed many of the thugs are also members of pro-military Pyusawhti militias, an allegation Frontier couldn’t corroborate.
“The police don’t interfere with them and don’t take any action,” he said.
Few other options
Those who need to borrow money have the option of going to microfinance companies, which have been operating legally in the country since the Microfinance Business Law was passed in 2011.
According to the regime’s Ministry of Planning and Finance, there were 181 microfinance businesses operating as of January last year, providing loans to over 4 million people.
A Bago regional loan officer for the Early Dawn Microfinance company said microfinance companies issue loans ranging from K200,000 to K2 million with an interest rate that cannot legally exceed 2.3pc.
However, these services are not available to the poorest, and therefore most desperate, members of society.
“People can’t borrow alone, we only give loans to groups of at least five people. Also, borrowers need to own a house, present their household list, and they need guarantors for the payment,” she said.
Microfinance companies also scrutinise the borrowers to see if there’s a high risk of default. The companies are having a particularly difficult time recuperating loans due to the conflict, with many branches closing in conflict-affected areas or borrowers being displaced.
“People are displaced by the war and it’s often very difficult to get back our loans,” she said, adding that many companies are closing as a result.
The conditions imposed by microfinance businesses and their decreasing availability is pushing more people to take loans from illegal moneylenders, leaving them vulnerable to threats and extortion.
Daw Kyin Htay*, 60, was one of those caught in the moneylenders’ web. A widow, she lives in Yangon’s Mayangone Township with her son and five daughters.
The household income is around K1.2 million per month, but Kyin Htay has a gambling problem, losing K1 million betting on the neighbourhood’s illegal lottery last year.
“My children don’t like me playing the lottery. They get angry if they find out, so I borrow money behind their back,” she said.
When she took out a loan of K200,000 in April last year, she had to give her original household list to the moneylender as a collateral. This is common practice, as borrowers can’t afford to lose their household list, which is crucial to obtaining other documents like CSCs or passports.
Kyin Htay used a loan system known as toe yin paung, which is similar to mat toe, but even more predatory. Like mat toe, the borrower must pay a daily interest of 10pc until they can pay off the total amount, but every payment they miss is added to the final payment.
So when Kyin Htay missed a daily payment of K20,000 her new lump sum payment went up to K220,000 and her daily payments went up to K22,000. Because of the missed payments, her debt spiraled to K500,000.
Then one of her children got dengue fever and had to be hospitalised, and she stopped paying her daily instalments entirely. After three days without paying, the moneylender went to her house accompanied by thugs. When Kyin Htay continued to avoid paying, the moneylender would return periodically with an intimidating security detail to publicly threaten and insult her.
“We cried every day when they came to yell at us,” Kyin Htay said.
Eventually, her son borrowed money from a friend to pay off the debt, which by then had ballooned to K800,000.
“I borrowed K200,000 and in the end we had to pay K800,000. But the worst part of all was the shame and embarrassment that it brought to us,” she said.
*indicates the use of a pseudonym for security reasons
