Blade Companies and Borrower's Misery

Money lending is one of the oldest professions. Its main feature is that usurious interest is charged on unsuspecting borrowers who seldom realize the trap into which they enter. Because of the unbelievably high rate of interest and the impact on the borrower's health and business these institutions and individuals earn the pet name "blades" and when they are institutionalized their organizations come to be known as "blade companies".

The blades become attractive due to their simple and fast procedural formalities unlike in the case of normal lending institutions. We have heard about Shylock in Shakespeare's .play. Modern Shylocks flourish and often with very minimal investment but guts they have a roaring business. The growth of business is markedly seen in Asia. Let us see some interesting features of this killer enterprise.

This practice is also known as shark lending in some western countries. The Asian practice has the main feature of charging interest at rates as high as 3600% in some cases of day to day loans. Normally the interest varies from 30 to 60%.per annum. Often those urgently in need of funds and poor people form the targets for such lending. Security in the form of fixed assets or gold is taken against the loan. Generally the borrower finds it impossible to repay the principal and even the interest.

After some time he faces the alternative of falling into the trap of the money lender by parting with his pledged assets. Thus the blade company expands its assets base. As a token of appreciation as it were, the borower gets a marginal amount after clearing the loan in full and final settlement. Generally the lenders take care by collecting the interest at the time the loan is disbursed leaving only the balance with the borrower.

Banks and other financial institutions are trying to release the borrowers from the evils of blade companies but the procedural delays and complexity deter the borrowers from approach them. Many poor people are ignorant of the sources of cheaper finance. They don't approach the banks.