A moneylender is a person or a group that usually offers small personal loans with high interest rates and is different from the banks and financial institutions that usually provide such loans. The high interest rates charged by them are justified in many cases by the risks involved.
They play an active role in lending to people who have fewer access to banking activities, such as those who do not have a bank account or are not underbanked or in situations where the borrower does not have a good credit history. They sometimes lend money to people who gamble and who are often compulsive debt buyers.
Many countries have laws in place that require loaners to be registered, and set a ceiling on interest rates that may be imposed. For example, in India licensed lenders are regulated by the Money Lenders Acts of each state.
A paper from Abdul Latif's Jameel Poverty Action Lab found that people living in poverty tended to borrow money from loan sharks (as well as relatives) rather than banks. For example, in the Udaipur samples they used, 18% of those who borrowed money were borrowed from moneylenders compared with 6.4% of official sources (such as banks). In the Hyderabad urban sample, 52% of those who borrowed money borrowed from loan sharks compared to 5% of commercial banks.
Video Moneylender
See also
- Bank
- loan shark
- Microfinance
- Money changer
- Payday lender
- Loan predators
- Time deposits
- Riba
Maps Moneylender
References
Source of the article : Wikipedia
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