Unemployed workers swim with hungry loan sharks

Tran Thanh Huy, a 40-year-old garment worker at the Tan Thuan Export Processing Zone in Ho Chi Minh City's District 7, was furloughed when factory orders plummeted in October.

And his wife has been earning less than VND5 million ($211.42) a month ever since her factory cut working hours amid a shortage of orders earlier this year.

Huy now works as a motorbike taxi driver, but he barely breaks even after paying for fuel and food.

Huy usually counts on his year-end bonus in order to buy new clothes for his children and to afford a trip back home to the family’s hometown for the Tet (Lunar New Year Holiday), which falls in January 2023.

But both are out of the question this year: Huy won’t be receiving a bonus, and neither he nor his wife have any savings.

Huy has borrowed money from friend to get by in recent months, but as the expensive holiday approaches most families are more strapped for cash so "it’s gotten harder to do so," he says.

Each day has its own expenses, and Huy now has barely enough to get through a 24-hour period. Forget actual "spending money" on anything extra to make life more comfortable or enjoyable.

A major problem for unemployed people like Huy is that banks won’t touch them with a 20-foot pole. If he wants to borrow money, he must present his employment contract and proof that he’s been paid a salary for at least the last 3 months.

Countless others who’ve lost their jobs or been furloughed like Huy are finding themselves in the same hopeless and helpless situation as 2022 comes to a close.

Last week, Huy needed VND10 million to help his family visit their hometown in the countryside. He took a chance by calling a number on a flyer advertising "quick loan services." A stranger had been handing out the fliers to workers coming and going at the industrial park’s gates few days earlier. The fliers stated the loans came at a rate of 20% annual interest.

The person who answered the call told Huy he could obtain VND10-15 million instantly. As collateral, the "loan service" would take only a copy of his government ID.

It sounded like a good deal until the voice on the other side of the line explained that because Huy had no stable income, no health insurance card, no receipt proving he’d paid his electricity bill on time, and no proof of a permanent HCMC residency address, he’d have to pay 60% interest per year.

The HCMC Labor Union says that Huy is one of more than 108,000 workers in the city struggling with reduced working or job losses as the depressed economy has led to a dramatic drop in factory orders.

According to the Vietnam General Confederation of Labor (VGCL), the ongoing order shortage affected more than 630,000 workers in 28 provinces and cities from September-November this year.

A November survey by the Institute of Workers and Trade Union found some 59% of workers had not saved a single dong to cope with emergencies.

The survey of over 6,200 factory workers revealed that if they lost their jobs, 11.7% could hold out for less than a month, 16.7% for one to three months and 12.7% for more than three months.

Some 38% said they were in debt, and 14% of those doubted they could repay their debts in time.

Average incomes in the group fell to VND5.9 million from VND6.7 million in the third quarter, but their monthly expenses stood at around VND10.3 million.

In a similar study, the Institute for Social Life Research recently surveyed 400 workers in HCMC and found that 60% of them had no savings.

Amid the year-end financial crunch, nearly 40% of workers said the were in the "nothing extra" phase and had cut out all unnecessary expenses. In addition, 16% percent said they were currently spending their savings to get by and more than 25% said they have to borrow from "many places," often not official banks.

‘Black credit’

Nguyen Duc Loc, head of the Social Life Research Institute, said that many factories had cut orders in the last few months of the year, causing workers to lose their jobs. Meanwhile, workers have to borrow money because the Lunar New Year Festival is approaching. Without proof of income, it’s far easier to turn to unethical and illegal usurers on the "black credit" market than it is to even think about approaching a bank to only face often rejection.

Pham Thieu, the administrator of an online group serving Tan Thuan Export Processing Zone workers with almost 34,000 members, said that aside from leaflets littering their workplaces, workers are often turned onto black market credit online.

Every day, he deletes 30–40 posts advertising money lending services to the online community group.

He said loan sharks bombard workers with text messages and phone calls if they find out the person has recently lost their job or is in desperate need of cash.

A man in Thu Duc City observes a factory gate plastered with a mosaic of loan shark advertisements in July, 2022. Photo by VnExpress/Le Tuyet

Nguyen Thanh Tam, who owns a boarding house in HCMC's District 12, said loan sharks even leave their adds in front of homes in residential neighborhoods. Sometimes, they even approach people in person as the workers go to and from work.

Tam installed cameras and fingerprint locks to prevent loan sharks and their minions and cronies from entering his property and harassing his customers.

He said the saturation of advertisements and "loan service providers" has created an environment in which more and more people are going to be trapped by these criminals.

"There won't be any way out if you borrow money from them," Tam warned locals.

Tam said he once had a boarder who borrowed VND13 million from a loan shark. He’s kept in touch with this former customer of his and says that now, 10 years later, this borrower still pays VND2.5 million per month in interest alone. Forget about the principal.

To add insult to injury, this acquaintance of Tam’s, a 50-year-old woman, recently had to borrow another VND7 million to pay her son’s hospital fees after an accident.

Ads promoting loan shark "service" litter part of a wall below a no-littering sign in Thu Duc City, June, 2022. Photo by VnExpress/Quynh Tran

Deputy Minister of Public Security Luong Tam Quang told an even at which Prime Minister Pham Minh Chinh met directly with workers this summer that loan shark’s main trick was lending money without collateral. This way it’s easy for them to target borrowers on apps and social media while charging asphyxiating interest rates.

He also made note of some of the problem’s more sad and shocking developments.

"Sometimes [‘black’] interests rates are 90% to 100% per month, or even 700% to 1,000% per month."

"Black creditors use any means they want to obtain money [they claim is] owed to them," he said, citing a list of criminal activities including but not limited to: threats, psychological terrorism and even outright theft as workers withdraw funds from their payroll checks at ATMs.

Over the last three years, the Ministry of Public Security has dealt with 2,740 loan shark cases involving almost 5,000 people. The ministry has prosecuted nearly 2,000 cases involving almost 4,000 defendants. This includes more than 1,000 cases of usury, in which most victims were hapless workers.

In order to keep workers from taking out loans at high-interest rates, the State Bank of Vietnam and The Vietnam General Confederation of Labor recently set up a credit package for workers worth VND 20 trillion. The package allows workers to borrow up to VND70 million at low-interest rates.

Tam says that most debtors are under no illusion about the consequences of borrowing "black credit." But, they feel they have no choice.

He says they often don’t borrow very high amounts, but they usually do so because they need money immediately. Even some who could access a legal bank loan don’t because they don’t have time for the lender to review their application.

"With black credit, all it takes is one phone call and the money will be transferred right away," Tam said.