JP/5/RENTEN

JP/5/RENTEN

People in Batam swimming with the loan sharks

Fadli
Batam

Many small-time traders and businesspeople in the Riau provincial
city of Batam continue to turn to loan sharks when they need
money, even though they know they will be charged exorbitant
interest rates.

The rampant practice of usury, known locally as renten, in
Batam has been attributed to the complicated bureaucracy at local
banks.

Nirmala (not her real name), a housewife, borrowed Rp 2
million (US$210.50) from a loan shark to pay the credit
installment on her motorcycle.

"I had to borrow the money from the loan shark despite the
high interest rate. I was forced to borrow money from them
because if I don't pay the credit installment, my motorcycle will
be repossessed by the motorcycle dealer," she said.

She said she turned to a loan shark for money because the
process was fast and easy, unlike borrowing money from a bank.

The process of borrowing money from a bank can be confusing
and daunting for many people. People are required to provide
banks with collateral such as a house or land, and if they are
unable to provide such collateral it is likely that their loan
application will be rejected.

People also complain about the complicated bureaucracy at
banks. They are required to submit loan applications along with
certificates, letters of reference and numerous other documents
proving that they are able to pay back a loan.

"All of these things keep me from borrowing money from banks.
Borrowing money from a loan shark is fast and easy, and we don't
need any documents to prove that we are able to pay back the
loan," said Nirmala, whose husband is a teacher at a vocational
high school in Batam.

The only complaint Nirmala has about loan sharks is that they
charge very high interest rates.

With so many people in Batam seeking loans from non-bank
sources, numerous loan sharks have swum into Batam and opened
businesses. They seek profit from the difference between the
money they borrow from the banks and the money they lend to the
customers.

Ucok (not his real name) is one of an estimated 200 loan
sharks in Batam. Ucok, who lives in the Citra Pendawa Asri
housing complex in the Sekupang district, opened his business in
the city several years ago.

He calls his business the Savings and Loan Cooperative, which
makes it sound more respectable and legal. Ucok said his
"cooperative" loaned between Rp 100,000 and Rp 5 million to
individual customers.

However, there are several requirements before people can
borrow money from him. If a person wants to borrow between Rp
100,000 and Rp 300,000, they do not need to provide collateral.
If they borrow between Rp 300,000 and Rp 5 million, they will
have to hand over some form of collateral that is at least equal
in value to the amount of money they wish to borrow.

"We give the customers the money the same day that they
provide us with the collateral," Ucok said.

Ucok employs 10 people, all from his hometown of Balige in
North Tapanuli regency, North Sumatra province. The employees
actively drum up business among vendors in traditional markets
who are desperate for cash.

One of the main concerns for the government is that many of
the people who turn to renten for money do not use the cash for
their businesses, but rather to make consumer purchases.

The chairman of the Batam Authority, Ismeth Abdullah,
acknowledged that renten was rampant in the city, despite
government efforts to stop the practice. But he said the
government was powerless to stop the practice because there was
no law saying renten was illegal.