JEDDAH: To many creditors in Saudi Arabia, jailing debtors is the best solution to pressure them into paying back their debts. But many question the wisdom of this move: What’s the guarantee that they would honor the debts even after imprisonment? What is the point of placing people behind bars when they are in debt? If they are in jail how can they pay the money back?
The creditors argue that people who know that they cannot pay back the loans should, in the first place, not take out loans. And when they default on their repayments, jailing is the only option. They also feel that this option provides deterrence against those who take out loans without scruples.
The Saudi law states that a debtor is imprisoned if he fails to pay his debt, and he can only get out of prison if he can prove his insolvency or pay the money — often through the help of charity organizations or royal intervention (such as when the king pays the debts on their behalf, which is often done during the holy month of Ramadan). The debtor, however, is neither a criminal nor fraudster and the questions remain whether he or she should be kept in prison or not.
According to recent statistics, more than 20 percent of detainees in Jeddah languish in prisons because of their inability to repay debt and are relying on nonprofit charity organizations to help rehabilitate them.
According to a local newspaper, the total amount of debt is estimated at SR50 million.
Ibrahim Al-Zamzami, of the Al-Zamzami Law Firm, said that people are put in prison either for acting as guarantors to a defaulter or for themselves defaulting on loan repayments. Al-Zamzami, who is currently handling a case of a man who has been jailed for being SR110,000 in debt, said the debtor has been incarcerated for over six months for buying cars and not paying the installments.
“The first court verdict ruled that he had to pay the full amount. But when I proved that there were three partners who had bought cars in the man’s name, the ruling was modified. The debt was divided among the four parties and now he has to pay only SR30,000,” he added.
Al-Zamzami says that the debtor is not imprisoned immediately on defaulting.
“There’s a procedure to follow, and only when there’s no solution that the debtor is jailed. The debtor and the creditors are asked first to appear before the department that deals with private rights (under the Interior Ministry) in an attempt to solve the issue. In case the creditor refuses to settle for installments and asks for the full payment, the debtor is imprisoned if he cannot pay up,” said Al-Zamzami.
“The judge would never send a debtor to jail before exhausting every means of recourse. Our religion stresses on easing things for the debtor,” he said, adding that the only option left for a debtor to come out of prison without paying anything is to prove his insolvency.
“The insolvency procedures could take up to one year and the debtor remains in prison during that period,” Al-Zamzami said.
Investigation takes a lot of time while attempting to prove that the debtor is insolvent. “The lawyer and the court check whether the defaulter owns any property, and also write to the Ministry of Finance and the Saudi Arabian Monetary Agency to inquire about any bank accounts existing in the person’s name,” said Al-Zamzami.
“There are some committees which act as go-betweens in order to bring about a settlement between the two parties under which the debtor would pay only part of the amount owed,” Al-Zamzami said.
Sayed Al-Salek, an attorney and owner of a law firm, said that from the beginning of this year, some reformation has taken place in courts. “An executive judge is assigned to the case in an attempt to ease the burden of debts,” said Al-Salek.
The executive judge’s mission is to stop debtors from using bank accounts and disposing of property. The judge estimates the value of a debtor’s personal property, sells what could be sold and pays the debts, Al-Salek said.
This is a major transition. “The executive judge cannot sell private property such as houses but can use the bank accounts, for example, to add to the sum that is being paid back,” Al-Salek added.
However, in the case of small debts there are government committees formed to help. Such charitable committees collect money, especially during Ramadan, and pay off the prisoners’ debts. “These committees collect money from businessmen during Ramadan. There is the Prisoners Family Commission, a charity that has been established in the summary court and has a branch in Jeddah. It helps prisoners even after they are out of jail,” Al-Salek said.
Saeed Badgaish, director of the Commission to Assist Prisoners and the Insolvent, said that the agency’s main task is to pay prisoners’ debts and get them out. The organization, in cooperation with the prison administration, meets the prisoners and assists them to pay off their debts.
“We collect money from philanthropists and businessmen. We do not pay more than SR110,000 worth of debts, which is the amount of blood money,” Badgaish said.
Jeddah businessmen and charity donors established the commission 30 years ago.
Abdullah Al-Ahmed, a beneficiary of the commission’s assistance, was jailed for a SR4,000 unpaid loan. The lender was financially well-off but refused to take the money in installments and requested the whole amount to be paid.
“I told him that I would pay off my debt in six monthly installments, but he rejected this offer,” said Al-Ahmed.
“My financial condition is bad. Neither my family nor could I collect the money. Every time I collected some money to pay my debt a family obligation popped up,” he said. “Finally, the commission helped me out.”
