For some time now the public debt was thought to be the biggest problem facing the county. No longer, however, for a more serious one has been discovered.
More than half the employees in both the government and private sectors are up to their necks in debt. They reel under the burden of debt because of personal loans and nobody knows how — not when — the debts can be repaid.
Public debt has been relegated to a lower position in the list of financial priorities since the Ministry of Finance and National Economy has outlined plans to reschedule it. These plans follow assurances from the minister of planning that public debt is no longer an obstacle to developmental progress.
The facilities enabling people to obtain loans have expanded rapidly with the result that they now amount to SR42 billion. The figure accounts for 24.1 percent of overall bank loans extended to the private sector. Private companies and establishments are competing to attract people into buying their products on credit.
The guarantees are there — the salaries and other benefits of these people. The best example of coordinated efforts involving banks and installment companies is what is happening in the automobile market. Banks provide installment firms with huge credit lines; loans for the purchase of cars account for 34 percent of all individual loans approved by the banks.
The success of installment companies over the past three years has encouraged banks to extend personal loans up to a limit of 30 monthly salaries.
With an increase in family sizes, the resulting financial obligations and all this not being matched by an increase in wages, people have turned to banks and installment companies to meet their needs. The result is that more than half of those working in the public service and three-quarters of those in the private sector have chosen personal loans for present and future needs. The money is spent on almost everything from electrical appliances to cars and real estate.
The contract is always in favor of the first party — the lender. The second party — the borrower — accepts whatever conditions are laid down even if this means paying service charges of up to 60, 80 or even 100 percent for a lending period that usually extends from two to four years at the maximum.
It is time that such a body as the Ministry of Commerce looked into this and initiated a comprehensive study to ensure justice and protect the rights of all involved.
To begin with, there should be a thorough revision of all installment contracts issued by these firms. Many people sign a document they have not read carefully or without fully understanding the terms and conditions it contains.
15 October 2002
