Friday, December 23, 2016

Private Money Lending Rules of RMA and Supreme Court.

First one must thank The Bhutanese for sharing on the social media the Draft Rules being worked out by RMA and Supreme Court.

Second this Draft Rule will definitely kill Private Money Lending.  It is designed to kill the system or at the least, drive private money lending and borrowing under ground. I feel it will go underground. The fallout from the rules, therefore, is even more disastrous. So why bother with the rediculous facade of drafting Rules that choke only the Lenders?  

Why not simply pass a law banning private money lending? And if RMA and Supreme Court feel that demands of borrowers must be met to some extent then come up with solutions in the financial institutions for meeting demands of such types of would be  borrowers.   

Also I am rather surprised that the two institutions have just one sided view of the private money lending and borrowing problem that is ailing the Bhutanese society. And that view is the incredible compounded  interest rates charged by money lenders. The same view is also shared by many innocent onlookers or those who choose to know no more than what appears on the surface. What about  con persons ( some borrowers)  out to wrest hard earned money of others by offering attractive dividends or interests  that they  have no intention to pay? Such borrowers are not victims. 

What the Supreme Court and RMA totally misses in the Draft Rules is the " pyramid scam" type that quite a many  borrowers are actually engaged in. The pyramid scams  are financial schemes that promises very high returns on investments. In Bhutanese parlance the borrowers promise high interests return.  The initial investors/ loans are paid  high returns and this leads to more people banking their money in such schemes/borrowers. Then the scheme fails or rather the Promoters / borrowers disappear with the investments leaving quite a many high hopeful investors cheated of their money.

This is the other side of the Bhutanese money lending and borrowing  story. Borrowers have led lavish lives in the country and then  absconded the country and few of them possibly enjoying the loot in another country away from the arms of Bhutanese laws. Consequently leaving behind quite a many money lenders without even recovering their initial capital. And not all money lenders are loan sharks. Quite a few elderly pensioners have been duped to invest/ lend their life savings to such unscrupulous borrowers. 

There is a private mony borrower serving prison term as the borrower was unable to pay back to many money lenders. A building owned by the borrower was auctioned off by the Court to settle dues. The lenders had to settle with whatever percentage of money they could recover by dividing the amount fetched from the auction proceeds of the building.

The borrower was supposed to have been bankrupt with the only asset the building being auctioned off. There is now a story going round.  And according to it, the imprisoned  borrower had actually bought the same building put out in the auction through an intermediary. If true the joke was on the Court and the money lenders. And rumours that circulate in the narrow Bhutanese social circles are invariably true.

There would be borrowers who would be prepared to bear some pains so that they and their family members financially benefit. There are also cases where some money  Lenders and Borrowers have caused much pain and hardship upon their own family members because of their ventures of greed.

There are grave eonomic and social ills  that private money lenders and borrowers create through their joint greed. Most of the private money cases that flood the Courts and are sensationalised in both main media stream and social media are related to black market, gambling and speculations of buying now and selling at huge profit later on.

The agreements do not reflect the actual  purposes of the loans. Therefore, the Courts are not legally aware though the judges as individuals would have to be aware of some of the happenings in the social business circles. 

Small time private lenders and borrowers are far away from public and judicial  gaze. The amounts do not run into millions and most borrowers are good people in need of ready cash to override an economic crunch or settle a social debt. The lenders too are people who do not make business out of money lending.

The authorities and the public must exercise caution and differentiate between those high market borrowers  and lenders among  urban communities  and those traditional rural community based lending and borrowing.

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