Many companies that provide loans against high interest rates are competing heavily to cash in on the situation and are trying to lure customers by offering attractive incentives.
Such companies are sticking posters close to cash machines, billboards and along walls to advertise their services. Even though 50 percent of their customers tend to default on their loans, there is stiff competition among these companies, Al-Watan newspaper reported.
Muhammad Al-Atwi, Abdul Aziz Al-Qahtani and Muhammad Al-Sobar are three Saudis who run loan companies.
All three said there has been a tremendous increase in the number of people borrowing cash this summer.
“Nearly 20 percent of our customers are women. About 40 percent of borrowers are highly-skilled professionals such as doctors, academics and teachers who draw monthly salaries that range between SR15,000 and SR30,000,” said Al-Atwi, adding that most of his clients are between 30 and 40.
The three money lenders say most people who take loans have low liquidity and that the loans they take do not exceed SR30,000.
“We have set aside a part of our working capital to provide personal loans. When people repay their loans, our capital increases and that enables us to give more loans to other clients,” said Al-Qahtani, adding that companies such as his accept vehicle ownership documents and property deeds as loan guarantees.
The three investors also said their fast-track approach in approving loans makes them more attractive than banks.
“The percentage of people who default is nearly 50. Therefore, we are now keen to ensure our customers have the means to pay us back,” said Al-Sobar.
Abdul Ghani Al-Ansari, chairman of the social responsibility wing at the Madinah Chamber of Commerce and Industry, said that some of these offices are engaged in financial activities without proper licenses from the authorities, and urged the authorities to take stringent action against them.
Abdullah Al-Mokhlaf, who is chairman of an organization that looks after the interests of prisoners, said that about 80 percent of people in jail for cases involving private rights are the victims of such loan companies.
