Egypt: Nature and extent of the use of "loan sharks"; legal ramifications for person indebted to a loan shark; police complicity with loan sharks
|Publisher||Immigration and Refugee Board of Canada|
|Author||Research Directorate, Immigration and Refugee Board of Canada, Ottawa|
|Publication Date||4 February 2009|
|Citation / Document Symbol||EGY103047.E|
|Cite as||Immigration and Refugee Board of Canada, Egypt: Nature and extent of the use of "loan sharks"; legal ramifications for person indebted to a loan shark; police complicity with loan sharks, 4 February 2009, EGY103047.E, available at: http://www.refworld.org/docid/4b20f02728.html [accessed 23 April 2014]|
|Disclaimer||This is not a UNHCR publication. UNHCR is not responsible for, nor does it necessarily endorse, its content. Any views expressed are solely those of the author or publisher and do not necessarily reflect those of UNHCR, the United Nations or its Member States.|
The term "loan shark" refers to a "person who lends money at an extremely high or unlawful rate of interest" (Gage Canadian Concise Dictionary 2002, 519). In a telephone interview with the Research Directorate, a representative of the Egyptian Organization for Human Rights (EOHR) indicated that loan sharks exist in Egypt but that the practice is not a "widespread phenomenon" (EOHR 26 Jan. 2009).
According to the American Chamber of Commerce in Egypt's publication Business Monthly, Islam forbids riba, which can be defined as "a return on money for lending money in which the borrower bears all the risk" (American Chamber of Commerce in Egypt June 2007). Arabian Business reports that although there is debate as to whether riba encompasses all types of interest or only applies to usury, defined as "excessive interest rates common in loan sharking," Islamic scholars agree that certain "predatory lending practices" are forbidden (17 Aug. 2007).
According to another article in Business Monthly, published in January 2003, no more than 10 percent of Egyptians have bank accounts and formal financial institutions are used mostly by the "affluent" (American Chamber of Commerce in Egypt Jan. 2003). The article provides details on alternatives, such as a type of interest-free informal group loan practice common in Egypt, and also mentions "informal moneylenders" as sources of financing (ibid.).
According to a study on microfinance in Egypt, produced by the Egyptian Banking Institute (EBI) in coordination with the Social Development Fund (SDF), poor Egyptians lack access to formal financial institutions and often resort to taking loans from lenders at high interest rates or using local rotating savings and credit circles, which require deposits and inflexible loan amounts (EBI/SDF 2005, 7). The same study characterizes Egypt's informal financing system as "costly, risky, and inconvenient" (ibid.).
PlaNet Finance, an international organization based in Paris which aims to help poor people by developing microfinance sectors (PlaNet Finance n.d.), conducted a national survey from September 2007 to January 2008 of the microfinance sector in Egypt (PlaNet Finance May 2008, 13). According to their research, 30 percent of the Egyptian microfinance clients surveyed had received financing in the previous three years (ibid., 69). Of this 30 percent, 12 percent received a loan from a moneylender or supplier, representing 3.6 percent of all those surveyed (ibid.). The survey lists ROSCA (45 percent) (defined as an "informal group saving and lending scheme"), family or friend (31 percent), or another microfinance institution (MFI) (29 percent) as more common sources of loans than banks (14 percent) or moneylenders (12 percent) (ibid.). The survey indicates that the average loan size from moneylenders is smaller than loans from banks, but higher than other informal lending sources such as ROSCA and family members (ibid., 70).
The Egypt Human Development Report 2008, produced by the United Nations Development Programme (UNDP) and the Institute of National Planning, Egypt, states that small enterprises which employ fewer than 50 people face difficulties getting loans from formal lending institutions and "rely on personal resources and informal financing mechanisms" (UNDP/Institute of National Planning 2008, 150). The report notes that according to a 2003-2004 study of a sample 5,000 enterprises, 2.6 percent of small businesses rely on "informal loans" as their source of initial capital (ibid., 150-151). Savings (67.1 percent) and inheritance (21.0 percent) are listed as more common sources of initial capital, while formal loans account for 3.5 percent (ibid.).
The Representative from the EOHR stated that the legal ramifications depend on what type of documentation the moneylender possesses (EOHR 26 Jan. 2009). For example, if a debtor writes bad cheques, he can be taken to court and face imprisonment (ibid.). According to the Representative of EOHR, there are laws in Egypt prohibiting loan sharking (ibid.).
Further or corroborating information on the legal ramifications for a person indebted to a loan shark could not be found among the sources consulted by the Research Directorate.
Police complicity with loan sharks
According to the Representative from EOHR, police do not commonly cooperate with loan sharks (ibid.). Further or corroborating information on police complicity with loan sharks could not be found among the sources consulted by the Research Directorate.
Multiple sources, including the United States (US) Country Reports on Human Rights Practices for 2007, Freedom House and the EOHR indicate that corruption is a problem in Egyptian society (US 11 Mar. 2008; EOHR 28 Aug. 2008; Freedom House 2008). Transparency International (TI) gives Egypt a 2.8 out of 10 in its 2008 Corruption Perception Index (CPI) and ranks Egypt as 115 out of 180 countries in the world (listed from least corrupt to most corrupt) (TI 2008). Freedom House reports that corruption is "all pervasive," and that "daily acts of corruption are part of every Egyptian's life" (Freedom House 2008).
This Response was prepared after researching publicly accessible information currently available to the Research Directorate within time constraints. This Response is not, and does not purport to be, conclusive as to the merit of any particular claim for refugee protection. Please find below the list of sources consulted in researching this Information Request.
Arabian Business. 17 August 2007. Christina Corbett and Mohammed Aly Sergie. "Banking on Piety."
American Chamber of Commerce in Egypt. June 2007. Abdel Aziz Nosseir. "Seeing Green." Business Monthly.
_____. January 2003. Daliah Merzaban. "Cash of Civilizations." Business Monthly
Egyptian Banking Institute (EBI) / Social Fund for Development (SDF). 2005. The National Strategy for Microfinance.
Egyptian Organization for Human Rights (EOHR). 26 January 2009. Telephone interview with a representative.
_____. 28 August 2008. "Members of the Parliament and Human Rights Activists Call for the Establishment of National Committee to Combat Corruption."
Freedom House. 2008. "Egypt." Freedom in the World 2008.
Gage Canadian Concise Dictionary. 2002. Toronto: Gage Educational Publishing Company.
PlaNet Finance. May 2008. National Impact Survey of Microfinance in Egypt.
_____. N.d. "About PlaNet Finance."
Transparency International (TI). 2008. Corruption Perceptions Index 2008.
United Nations Development Programme (UNDP) / Institute of National Planning, Egypt. 2008. Egypt Human Development Report.
United States (US). 11 March 2008. Department of State. "Egypt." Country Reports on Human Rights Practices for 2007.
Additional Sources Consulted
Oral sources: An economics professor at the American University of Cairo and a lead economist at the Egyptian Center for Economic Studies were unable to provide information.
Internet sources, including: Al-Ahram Weekly [Cairo], American Chamber of Commerce in Egypt, ArabicNews.com, Business Today Egypt, Daily News Egypt, Egyptian Centre for Economic Studies, Factiva, Gulf News [Dubai], Middle East Times [Washington, DC]