In Colombia, poverty is causing a proliferation of usury, the practice of lending money at unreasonably high rates of interest.� Due to fewer educational and career opportunities, and thus lower economic status, women are particularly vulnerable to this type of crime.
Colombian banks do not offer loans to low income earners or those with no demonstrable credit or assets, so it?s all too easy for small businesses to fall prey to loan sharks.� Especially dangerous are the ?drop by drop? or ?pay by the day? loans, which require a repayment every 24 hours with interest rates multiplying exponentially.
A loan of as little as $200 can be enough to enslave a debtor with an un-repayable debt.� A small loan such as this initially seems manageable, but often the abusive conditions imposed by the loan sharks become too much. After one or two missed instalments, the debt quickly spirals out of control and, in order to meet payments, debtors are forced to take out second and third loans. Their predicament worsens as they borrow more to consolidate debts from various lenders. Rather than seeing debts diminish, debtors are borrowing more and more just to re-pay the interest they owe.
In this situation, unable to pay their bills, small businesses are forced to close and the owners are subjected to intimidation, seizure of personal property and even violence and murder. �
The widow of one debtor who was assassinated in mysterious circumstances explained "Before he died, when I was brought to the hospital, it was the paramilitaries who told me that my husband had been shot. When I thought about reporting what had happened, I received anonymous calls warning me not to go to the prosecution because they knew where I lived."
In fear for their lives, some people flee in desperation. But those who attempt to run from the loan sharks simply transfer their debt, and their woes, to the person who endorsed them.
This unfortunate individual is then treated to the same threats and coercion as the original debtor, all for a loan that wasn?t even theirs.
Fortunately for small business owners needing microcredit, a nonprofit organisation called ?Fomentamos? (Spanish for ?we encourage or ?we promote?)?, grants small, low-interest loans to those with low economic status. Unlike the loan sharks, Fomantamos? terms of business are within the law, since the loans they grant have a monthly interest rate of only.2.5%.
The organization's director, Fernando Flores, explained that many people seek aid from Fomentamos after suffering at the hands of the ?pay per day? loan sharks, who act with impunity in Colombia. "Even though usury is an activity punishable by law, the 'pay day' loan sharks work freely in the street. Everybody knows about it but nobody does anything because many of them are members of paramilitary or criminal gangs using usury as a means of financing the group. In addition to extorting businesses for ?protection? money, these groups prey on people who need money and cannot access the banks."
Loans from Fomentamos make it possible for low income earners to start and maintain small businesses. As well as offering loans, the organisation provides training and advice to its clients to help their ventures succeed.
One of the conditions of borrowing money from Fomentamos is that clients stop paying the loan sharks. This policy helps to maintain a loan repayment rate of 98.5%.� If a client is struggling to meet a payment, an extension is granted. Flores explains that not all nonprofits are so lenient; in fact some go so far as to put pressure on debtors to make repayments, using methods not dissimilar to those of the loan sharks.��
"Over the years, there have been many investors in the microfinance business who no longer work with a social conscience.
We want to rebuild the social fabric and restore people?s trust in each other and in the use of solidarity."
, Afortunadamente para ellas, Mar�a Luisa y Laura llegaron a las puertas de Fomentamos, una coorporaci�n sin �nimo de lucro que concede microcr�ditos a personas sin recursos.Fortunatesince the loans they grant have a monthly interest rate of only.2.5%. El director de la organizaci�n, Fernando Florez, asegura que muchos de los beneficiarios de Fomentamos recurren a la entidad despu�s de sufrir los abusos de los 'paga diarios', que act�an con total impunidad en el pa�s. The