Manila: Filipinos in Saudi Arabia have been warned by embassy officials against engaging in lending or borrowing money at usurious rates, as the country has strict rules against exploitative loaning.
In a statement posted in the Department of Foreign Affairs (DFA) website, the Philippine Embassy in Riyadh said lending as well as borrowing money at usurious rates is considered a criminal offence in the Kingdom.
The embassy specifically mentioned the Filipino custom of borrowing and lending on the so-called "5-6" arrangement wherein both parties agree that the individual getting the loan will pay six parts of every five drawn from the lender over an agreed upon period.
Although such practice is not considered legally acceptable in the Philippines, it has been an accepted fact that small lenders and borrowers contract to this arrangement. Sadly, this practice of usurious lending has made its way among Filipinos in Saudi Arabia. There are an estimated 1.4 million Filipino guest workers in the oil rich Kingdom.
In the DFA advisory, it had been mentioned that officials had been receiving numerous requests for assistance from Philippine nationals working in Saudi Arabia concerning problems they encounter with regards to contracting loans of acting as guarantors for loans of other individuals.
"To avoid being accused of usury, lenders have resorted to lending cash with the borrower signing a promissory note to pay installments with a total greater than the amount of cash borrowed. This practice comes in different forms, and sometimes the undertakings are for payment of installments for appliances or furniture or other items instead of cash," the advisory said.
It further said that in almost all cases, a guarantor is required who would also be liable for payment of the total amount as the undertaking binds the guarantor to the obligations of the borrower.
In case that the borrower defaults for any installment and the lender complains to the police, the borrower and/or guarantor are held accountable for this private rights case and face endless imprisonment until the amount is fully settled. Usually, the persons involved in the loan are detained due to the private rights complaints by the lender.
"The Embassy informs Filipinos that it is not authorized to guarantee the obligation and could not settle the amount demanded for the satisfaction of the loan, as this is the responsibility of the borrower and/or guarantor.
Given these considerations, the Embassy strongly appeals to Filipinos to avoid engaging in these types of transactions to avoid serious problems in the Kingdom," the advisory said.