On 14th March 2017, the South China Morning Post reported the bust of a loan syndicate that preyed on migrant domestic workers. The syndicate lent HK$10 million at interest rates of up to 120 per cent per year, while the highest legal interest rate set by the Money Lenders Ordinance of Hong Kong is 60% p.a. SCMP reports that two ringleaders led the syndicate and recruited other domestic workers to coerce 1,200 domestic workers over the period of March 2016 to October 2016 to take out loans. This operation by the police is reported to be part of a six-month crackdown against triads and organised crime ahead of the visit by state leaders. (Read the full article: here.) Enrich welcomes this development of cracking down of organised crime and the prevalence of law over the hundreds of predatory lenders that profit from victimising migrant domestic workers as well as other low-income groups in Hong Kong.
At Enrich, we hear the stories from the victims of predatory lenders first-hand through our Financial Counselling service and Helpline. Our Financial Counselling service and Helpline are open to migrant domestic worker and their employers in face of financial crisis situations. We have developed information materials on the Rights and Responsibilities of Borrowers in Hong Kong as well: English: here, Bahasa Indonesia: here.
Many are surprised by the extreme levels of debt that migrant domestic workers can fall into when their monthly salary is only just over HK$4000. The sad truth is, there are multiple factors at play, including wider systematic issues.
At the micro-level, migrant domestic workers are not equipped with information on their rights, responsibilities, and risks of taking out financial loans, and they are burdened with financial responsibility to provide for immediate needs of loved ones back home, on top of their own living expenses. As can be seen in the SCMP article, these women were so unaware of their right to keep their passports and employment contracts, and that the interest rate was far above the legal limit.
Outside of this, 1 in 2 migrant domestic workers arrive in Hong Kong with an average debt of HK$15,000 to recruitment and training fees. Migrant domestic workers have told us of incidences of unethical employment agencies colluding with lending companies to coerce migrant workers to take out a loan as soon as they arrive to pay off these recruitment debts first. For many migrant women, the employment agency is the only people they know in Hong Kong when they first arrive here making it very difficult to refuse or question them.
It is also incredibly easy for migrant domestic workers to qualify for loans of large sums of money. Migrant domestic workers can be eligible for a HK$40,000 loan as her first loan and without credit checks between lenders, she could take out multiple loans. At even the legal interest rate of 60% p.a., which is justified with domestic worker due to their visa reliance on a two-year contract, a vicious cycle of debt takes shape very fast.
Though Enrich strongly encourages a shift to a culture of saving, we recognise too that sometimes, there is just no other way but to take out a loan to make a critical payment – because there are no savings or alternatives to fall on. In the 10 years of running and refining our Financial and Empowerment Education Programmes, we have learned there is no simple approach – and the solution must be a holistic one with the partnership and collaboration of key stakeholders.
Following the bust of this criminal loan syndicate, we call for greater attention to these debt traps set for migrant domestic workers in Hong Kong. We are thankful to all our supporters, partners, volunteers, and migrant domestic worker groups for working together with us to protect the financial rights of migrant domestic workers.
By Lenlen Mesina, Executive Director, Enrich
Here are the Rights and Responsibilities of Borrowers in Hong Kong: English: here, Bahasa Indonesia: here. Find more information on dealing with debt in our Resources for Employers: here, and Resources for Domestic Workers: here.