International Law

Malaysian Loan Sharks, ???? and Making an Offer the Debtor Can't Refuse

???? (literally, "underground bank") flourishes wherever Chinese borrowers need cash quickly without having to go through the process of a loan application at a formal bank. They are as easy to access as black market foreign exchange in any Chinese city, if you get an introduction. While not always tied to criminal gangs, one never knows whether the poorly dressed man in the watch repair shop is a front for a group of successful, wealthy store owners or potential leg breakers.

Fujian ????immigrants to the United States, businessmen who are completely on the level, for example, will often pool assets to lend to the Fujianese newcomer so that he may open his business. This has been a common practice in Chinese communities in the United States since the mid-19th century, e.g. the ??? (an association of people originating in the same locale). Koreans, as well.

Cash is advanced at terms certain and agreed, usually at a high rate of interest (in one case, I was told, 12% monthly), often with the reversion of certain properties occurring on nonpayment, including the entire business, personal automobile, etc. Sometimes, the parties sign a simple document?much like an IOU, several of which I have seen. Other times, a relationship, family or close friend, serves as the bond sufficiently close to compel either repayment or a transfer of property. Many times, that family or friend, who was the intermediary, is the one who must pay up upon default of the primary debtor.

What happens to those who don't pay? in Malaysia, apparently this. Public ostracism. But this is certainly the easy-out. Among Chinese, as far as I am aware, beatings, leg-breakings and death -- where lender-debtor are strangers, not family or friends -- occur frequently.

An example, which occurred in Taipei. A friend lent a substantial sum of money to an investor. The investor's business failed. Fraud was suspected. My friend arranged for a small-time gangster to visit the investor, but when the gangster returned, he informed my friend that the investor had already been stabbed to death. The investor paid a very high rate of interest, indeed, and my friend's investment was entirely lost. In other words, my assumption is that the deeper truth among Malaysian loan sharks and their debtors is not as ?? (pure and simple) as the Bloomberg writer, who otherwise wrote a terrific article, makes it out to be.

Full post as published by Asia Business Intelligence on March 27, 2009 (boomark / email).