More women fall victim as they circumvent rules out of desperation

Rinzin Wangchuk

After closing her small furniture unit in Samdrupjongkhar,   Pema Deki, 50,  (name changed) came to Thimphu to invest in properties. She and her husband constructed a five-storied building in Babesa and another in Babena.

The construction landed them in deep financial crises. Pema Deki sold their Babesa building to a private real estate firm to clear the huge debt in 2019. However, the proprietor of the firm failed to pay her full advance of Nu 8.7 million (M) and loan installments to the Bhutan National Bank. Instead, according to Pema Deki, the proprietor advised her to take a private loan.  He promised to pay the interest.

Pema Deki then approached a woman whom she knew through her sister. Pema Deki borrowed Nu 13M from the woman for two months at a monthly interest rate of 10 percent.

The woman, 52,  issued two cheques amounting to Nu 15.6M to be withdrawn from Bhutan Development Bank Limited. The moneylender had clubbed the 10 percent interest to the principal amount making it Nu 15.6M. The first cheque of Nu 7.2M was withdrawn on the same day the sales deed was signed. The second cheque amounting Nu 8.4M was withdrawn after four days.

“After withdrawing Nu 15.6M, the woman took back Nu 2.6M which was the 10 percent interest for two months,” Pema Deki said.  The loan was given on the pretext that their four-storied building along with land in Babena was sold to her with a sales deed signed.

Pema Deki was able to repay the interest portion of Nu 1M. “Because of Covid-19 pandemic and my family problems, I could not repay the loan,” she said.

The woman then filed a case against Pema Deki at the Thimphu dzongkhag court in October 2021. The case was resolved through court-annexed mediation (mutual understanding). She alleged that the woman, whom she calls a “loan shark” forced her to agree to the court’s mediation. “She assured me to reduce the interest rate from 10 percent to five and lend me an additional amount of Nu 7.5M if I accepted the judgment,” she told Kuensel.

After agreeing to the suggestion, the lender calculated the five percent interest for 24 months on Nu 13M and three percent for six months on the time given in the court’s order which came to Nu 30.9M.

Based on a mutual agreement signed, the court ordered Pema Deki to pay Nu 30.9M to the moneylender within six months. Failing to do so would mean transferring the ownership of the four-storied building in Samtenling to the plaintiff.

Kuensel learnt that the judgment is being enforced.

Thriving loan sharks

Like Pema Deki, many women reportedly fell victim to money lenders, mostly women whose business is thriving in the face of stringent lending policies.

Victims said that there are nine women loan sharks in Thimphu – from Babesa to Chuniding to Serbithang, Olakha, Changzamtog and above the farmers market area.

All the women lend money at exorbitant interest rates. In 2018, Pema Deki borrowed Nu 10M from the Olakha lender at an interest rate of seven percent per month. At that time, she did not face major problems since she repaid the principal amount along with a total interest of Nu 4.9M for seven months.

A prominent businesswoman in Thimphu also fell victim to the Babesa lender. She took a loan of Nu 28.5M at seven percent interest. The case had reached the court where the court ordered her to pay Nu 65M to the same woman who lent to Pema Deki.

In another case, a 44-year-old woman was reportedly detained for not being able to repay Nu 6.5M she borrowed from a woman loan shark in Serbithang. Although she paid her interest, Nu 1.3M, the total amount has reached Nu 15M. She is also facing two more cases with two different loan sharks. Her business partner and her sister Pema Deki’s plaintiff, the Babesa lender, also dragged her to the court after she failed to pay the principal amount of Nu 19.5M along with the agreed interest. The total amount has crossed Nu 55M.

Private moneylenders and borrowers are mostly landlords, business people, and gamblers.

Hoodwinking the system

The central bank prohibited the informal business of lending money allowing only those who registered with RMA with the enforcement of Private Money Lending Rules and Regulations (PMLRR) in 2016. RMA decided to do it knowing that private money lending businesses operated with agreements, executed legally between parties but with borrowers contending before courts that they never borrowed or the amount was inflated with unreasonable monthly, weekly and even daily interest.

The so-called loan sharks then devised a new method to circumnavigate the RMA rule. Both illegal lenders and borrowers resorted to making sales deed on the pretext that they sold buildings, land or vehicles. “In my case, the agreement was drawn as if I sold my building along with land in Babena because RMA’s rule did not allow private money-lending without license,” Pema Deki said.

Lenders also insist on conditions that borrowers arrange their own witnesses and make them sign multiple documents so that they could use in courts as evidence against them should they fail to repay the loan. The other tactic is, when the loan sharks release the amount, transactions are done through bank cheques which they can later use as evidence of the transaction.

When borrowers fail to repay their loans, loan sharks take them to court accusing the borrowers of not clearing complications over ownership of their properties to transfer to the borrower. Once the court accepts the case, the parties resort to annexe mediation which could later be accepted by the courts.

The amount of money increases after the mediation. This is because the loan shark adds up all the interest amount taking advantage of the situation. Based on the agreement, the court then issues the order specifying the time of repayment.

Monetary cases demand in-depth investigation

Meanwhile, victims or borrowers accept their mistakes of involvement in illegal money lending.  But they cannot submit the truth to the court since they need the money. Borrowers are left with no options but to agree to the terms and conditions dictated by the lenders.

In a recent case, the district court dismissed a case after knowing that the sales deed was faked. The borrower had submitted evidence of audio recordings and evidence proving the money she borrowed was on the pretext of property transaction. “The recordings also indicated that one or two lenders are using the black money financed from outside the country to lend us with high-interest rates,” one victim claimed.

The Supreme Court in early this year penalised both the lender and borrower embroiled in a private money lending case involving Nu 1.2M and imposed hefty fines after establishing the agreement between the parties drawn on the pretext of the land transaction was actually for private money-lending.

The highest appellate court, for the first time, overturned the judgments of the lower courts and seized the principal amount. The court ordered the principal amount to be deposited to the government coffer.

Some victims pointed out that the courts should study the case properly including authenticating evidence of taxes paid before accepting monetary cases.  Another said that if the transaction amount is huge, the court should direct RMA and Department of Revenue and Customs (DRC) to ascertain lenders’ source of income and tax details.

In an earlier interview, one judge had said that the money lending cases are complex, as parties execute agreements deceptively and put courts in a fix. He also said that if courts consider the agreement null and void, the borrower is going to benefit. “If we accept the agreement, we would be legalising money-lending cases. Justice is about protecting rights,” he had said.

One victim said that she paid Nu 4.9M in interest for Nu 10M she borrowed from the Olakha lender for a period of seven months. “I will go to RMA and find out whether she paid taxes or not,” she told Kuensel.