The tire trade is increasing Pakistan and a recent story with a victim of loan sharks sheds light on the ‘tire interest trade’, reported by SAMMA
The story revolves around Raees, who is a 41-year-old resident of Sher Shah in Karachi. He explains how his family went from owning three Mazda buses running of different routes of the city towards the severe debt with no way out.
He further says that even if he sells all of his buses and house, he still wouldn’t be able to repay the debt.
Where did it all start?
It all started with Raee’s father initiating a committee where people agree to put a fixed amount each month and gives a chance for one of them to take the whole money every month, circulating the money in the group.
However, things began a different turn for Raee’s father when one by one the committee members went away, and he had to pay more to fill the gaps.
Eventually, the input outweighed the output and the family realized they might be facing a financial crisis soon.
Raees’ father was recommended to purchase trailer tires on credit and sell them in cash. This method could allow him a loss of Rs30,000 but fix his cash flow crisis.
Raees’s father kept purchasing tires on credit, expecting to gain his money back. He said, “It took us fifteen years to repay the loan and extract ourselves from this vicious cycle that began with a pair of tires.”
Moreover, Raees revealed how the scammers take advantage of people. He stated that, firstly, the loan shark or creditor gives people tires on credit for Rs10,000, even though the value of tires would be 7,000.
Once the loan shark takes back the money, the tires are sold back to them for 7,000, making the rest Rs3,000 as interest payment in the future.
The deal takes place solely on contract, but loan sharks aim to lend money and take interest on its debt repayment.
Why tyres transactions?
Noorullah, an oil tank owner gives insight that loan sharks use tires as a commodity to do interest-based lending due to the appearance of the tire as a reason for the deal. This takes away the negative connotation attached to the interest-based on sole cash and makes it easier to conduct deals living in Pakistan.
Noorullah elaborates that the interest charged in a month of these types of transactions is equal to the profits charged by a bank. “On a loan of Rs100,000, Rs10,000 is charged monthly. Since securing a loan from a bank is a lengthy process and requires a lot of documentation, people in dire need of cash become victims of the tire mafia.” he says.
The hubs of Loan shark tradings in Pakistan :
Karachi’s Shireen Jinnah Colony, Mauripur, Pipri, and Sohrab Goth are the biggest places where interest trade takes place.
Creditors take a similar appearance to a bank while making these transactions to people. The commodity of the transaction is not limited to tires and includes various other goods.
Other than Karachi, Quetta, Lahore, and Peshawar also have hubs concerning loan sharks or creditors.
In some cases, when the money given on interest is in great amount, trucks, cars, and trailers are used as commodities instead of tires.
In a few tribal districts, Kalashnikovs and opium are used.
Transporters explain that the transactions that cost up to billions of rupees take place on personal guarantees. If there is doubt in guarantees, then vehicles and properties are taken as mortgages. Even if the transaction takes place without the papers, the creditors always find a way to get their money as they have the support of jirgas and hold a strong influence in the area.