Loan Sharks Circling

Is there no end to the number and types of issues that an Industrial Leader must deal with?

Loan Sharks are prevalent here in Thailand and throughout most of Asia, but predatory loans of various types are a global phenomenon.

In the USA, many employees get trapped into Payday Loans, which are small loans with high interest rates and fees of up to 400% on an annualized basis.

Unlike Payday Loans in the USA, which are legal, loans from Loan Sharks are illegal in most jurisdictions. Unfortunately, they remain prevalent, widespread, and highly destructive to those unfortunate individuals who become trapped by predatory loan agents.

Many company work rules forbid employees to loan money to each other for profit. Here is an example of language that is common in many Thailand based work rules:

An Employee shall not acquire any advantage by money lending among Employees, play illegal lottery, be a collector or a member of a money pool, or perform any activity for profit. 

In nearly every company that I have managed here in Thailand, I have run into issues concerning Loan Sharks. From my many discussions and relationships with companies and business leaders in other countries, Loan Sharks and predatory loans are a scourge that impacts employees everywhere.

Not the Company’s Business

Okay, I understand that Loan Sharks are scum, and that predatory loans are a terrible trap that ensnares many victims. However, why do I need to worry about this problem. I already have enough problems to manage in my factory.

Life is always going to be a challenge, and my employees and their families will sometimes suffer minor or major crises. Do I need to be personally involved every time someone’s puppy dog gets run over by a car?

Employee Retention and Loyalty Is Your Business

Yes, it is true that even with the best of intentions, an Industrial Leader cannot take responsibility for solving every problem that an employee might encounter. We can and always should be compassionate, but there are genuine limits on what issues we can and should seek to address.

The financial security and personal safety of your employees must be a priority. Predatory loans and loan sharks can and often do sink your employees deep into debt with almost no hope of salvation. When an employee is paying nearly all of his salary directly to a loan shark, the employee loses the capacity to be a loyal and responsible employee. Escaping the clutches of the loan shark is frequently the single highest priority of an ensnared victim.

It is not uncommon for a loan shark victim to simply disappear, individually or as an entire family. You lose a valued employee, and the employee loses a job, perhaps a career, and certainly his or her reputation as a loyal employee.

Shark Warning: No Swimming

I will suggest that the worst Loan Shark is the one who is working for your company, ensnaring your valued employees.

In my personal experience, employee Loan Sharks are extremely common, and extremely damaging. These in-house Loan Sharks are frequently in positions of authority, such as foremen, supervisors, or department managers. They loan money to employees, including subordinates in their own departments, then use their position of authority to enforce repayment of the loan.

I have personally encountered several instances of Loan Sharks operating inside my companies. Each shark was in a supervisory position, and had ensnared a number of victims. Some victims managed to pay back the loans, others sunk deeper into debt and despair as egregious interest charges mounted.

One revelation common to each case was that the staff in general was well aware of the Loan Sharking activities. Most of the employees were well aware of the rumors concerning who was Loan Sharking, and who were victims. People are generally poor at keeping secrets, and desperate people share their despair with their friends and colleagues.

Unfortunately, rumors about rules violations (and indeed law violations) such as Loan Sharking typically only reach the ears of Sr. Management when the problem becomes severe. By that time, employees may assume that Management must also know of the problems and the rules violations, and wonder why Management takes no action to address the problem. Management integrity can be seriously impacted even though the manager is truly unaware of the problem and would be sympathetic if aware.

Shark Repellant

Don’t assume or hope that your company doesn’t have problems with Loan Sharks. Most likely you already have at least one active Loan Shark on your staff, or you soon will. Without a proactive policy, eventually (likely sooner rather than later) someone on your team will take advantage of another employee and ensnare them with a predatory loan.

Check the law in your jurisdiction. Be sure you understand what the law says about predatory loans, non-bank loans, and loan sharks.

Check your work rules. If your work rules don’t clearly and strictly prohibit money lending among employees, revise them accordingly. Naturally, you should always consult with a lawyer or other legal authority to ensure that your rules are properly written and are enforceable.

Most importantly, you as leader must very clearly, loudly, and publicly announce that lending money among employees is strictly prohibited, and anyone taking advantage of another employee by lending money will be strictly punished. This message must be repeated periodically, probably every six months, certainly not less than annually. Your organization must clearly understand that your company culture of care and respect for fellow employees means that predatory loan sharking is completely unacceptable and will not be tolerated.

Teaching Financial Responsibility

Eliminating predatory loan sharking within the organization is very important, and must be taken seriously by management.

However, management should also seek to provide employees with basic financial skills and advice to enable them to effectively manage their money and protect their families.

I encourage companies to include Personal Financial Skills training for all employees. Training can be provided in the form of a seminar, a take-home pamphlet, a series of 5 minute “tool box talks”, and/or other forms of engagement and outreach. It takes some effort to assemble a financial responsibility program, but it is well worth the effort.

Actively promote employee loyalty and tenure as a source of financial stability. Employees who are employed for several years can often qualify for bank loans, whereas “job jumpers” have difficulty gaining bank credit.

Don’t neglect discussing employee health and personal safety practices. Many people fall into debt and get ensnared by loan sharks due to unexpected medical expenses. A healthy and responsible lifestyle, especially avoiding accidents and injuries from contact sports, intoxicated driving, irresponsible motorcycle riding, or unsafe home repairs, can eliminate many if not most unexpected major medical expenses.

Do not wait until loan sharks ensnare and devour your employees and destroy your team loyalty and motivation. Protect your staff and organization today.

Frank T.