A re-post of the article published in Inquirer.net on August 22, 2011 regarding the dragging problem of Filipinos on credit cards.
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Abu Dhabi, United Arab Emirates—Before she arrived in this mecca of
migrant labor at age 48, Evelyn Naces, a Filipino nurse, had never owned
a credit card. Soon she had 14 credit cards—and like thousands of other
foreign workers here, a trip to debtors’ prison.
The Philippine Embassy held a financial literacy program in June. Some workers borrowed at rates of 50 percent or more.
“When they put me in shackles, that was the worst,” said Naces, who
had $27,000 in unpaid bills, mostly from helping her grown son start a
business back in the Philippines that later failed. “I felt so
degraded.”
For years,
banks
all but threw credit cards at the foreigners who come here in droves to
work the malls and fill the office towers. The workers, many of them
raised in poor countries and new to easy credit, spent beyond their
means.
Staggering losses followed, with jail terms common for those who could not pay.
Whether cast as reckless lending or heedless borrowing, the stories
of these foreign workers offer an unusual glimpse of the hidden
emotions—webs of pride, guilt and family obligation—that follow millions
of migrants across the globe.
Some shopped for pleasure, but many ran up bills by answering pleas
from poor relatives for needs as varied as livestock and medical care.
The ability to say “no” seldom felt like an option.
Still others, feeling uprooted, built houses back home that they
might never occupy. Some mothers who left their children behind tried to
salve guilty feelings with expensive gifts.
Vicious cycle
“The family back home often thinks the migrant is earning a lot and
raises its expectations,” said Grace Princesa, the Philippine ambassador
to the United Arab Emirates (UAE), who has made debt reduction a part
of a government campaign to improve conditions for migrants.
“The poor migrant goes deeper into debt just to answer. It’s a vicious cycle,” Princesa said.
Such was the case with Naces, now 52, a single mother who left her
infant son with her parents and went to Saudi Arabia to make money to
support him. By the time she arrived in the UAE in 2007, he had already
grown up without her.
Though she could not get a credit card in Saudi Arabia, she could
scarcely avoid one in the UAE. Salesmen stalked nurses outside hospitals
and worshipers after Mass at a Filipino church.
Naces bought furniture, clothes and meals for herself, but her
biggest expenses involved her son, whose affection she feared she had
lost. She built him a house in the Philippines and bought five cars with
credit cards so he could start a rental business.
“I felt guilty for being away and not raising him,” she said. “I was trying to compensate.”
Both mother and son went to jail—he on drug charges and she for debt.
Debtors clog jails
While the government does not disclose how many debtors have been
jailed, a legislative body several years ago estimated that 10,000 of
them were in the courts or prison.
The Dubai police chief has complained that debtors needlessly clog
the jails, and employers have warned the Ministry of Labor that debt
problems distract employees.
About 85 percent of the UAE’s population—and 99 percent of the
private workforce—consists of foreign workers, and local officials keep
watch for signs of discontent.
“The employers were saying, ‘This is a priority to us,’” said Qassim Jamil, a senior official in the labor ministry.
The Central Bank tightened lending rules this year, and the labor
ministry sponsored a financial literacy program for migrant leaders.
“What do we want? Freedom!” Ambassador Princesa chanted at a session
for Filipinos. “Freedom from poverty! Freedom from credit card problems!
Freedom from bank problems!”
Aggressive lending
If migrants spent heavily, lenders encouraged them. Traditionally,
credit card use was low (in part because of Islamic strictures against
charging interest), but banks spotted a new market and moved
aggressively.
With foreign banks like HSBC and Citigroup fighting locals for market
share, the number of cards leapt to four million in 2008, a fivefold
increase in five years, according to the Lafferty Group, a London
research firm.
But the UAE lacks a reliable credit bureau, so lenders could not tell how many cards or how much debt the borrowers carried.
“Banks were falling over themselves to lend, and they didn’t have proper credit checks,” said Andrew Neeson, a Lafferty analyst.
Courted with gifts and teaser rates, few borrowers understood the
costs. The average interest rate in the Emirates last year, at 36
percent, was more than twice the global average, and banks routinely add
another 10 percent for disability and death insurance.
With penalties, some workers were borrowing at rates of 50 percent or more.
Intoxicating
Anyone can be tempted by easy credit, but migrants raised in poverty can find the glittering malls here especially intoxicating.
“The first time I used my card, I felt amazed,” Naces said. “It’s a feeling of excitement, power—greatness even.”
Rex Arcenio, a Filipino optometrist, accepted a gold card because it
came with a Montblanc pen and a limousine ride to the airport for his
annual leave.
“It was like a status symbol,” Arcenio said.
He ran up $50,000 in debt—for his children’s education, his brother’s
cancer treatment and a house in Manila—and was briefly jailed.
Bouncing check
Technically, debtors go to jail for bouncing the blank “security
checks” they must sign when accepting a card. If borrowers fail to pay,
banks can deposit the checks for the sum owed, and bouncing a check is a
crime.
Whether foreign or Emirati, borrowers must repay the debt after leaving jail, though banks often accept reduced terms.
Skilled workers here are generally treated better than in neighboring
countries like Saudi Arabia, which can make their debt travails a
shock. Jail conditions in the UAE are described as comfortable, but the
accused often appear in court in leg irons.
“My world collapsed,” said Arcenio, a proud man in a white lab coat.
Aisha Alambatang, 54, who served a month for one card in February,
could be jailed again for others. A Filipino nurse with three grown
children, Alambatang spent most of their childhood years abroad,
supporting them from Saudi Arabia.
When she arrived in the UAE eight years ago, she got a raise and six credit cards.
‘My heart was broken’
Alambatang built houses for herself and her daughter, and helped the
children start several failed businesses. Then she paid for two
daughters to move to Abu Dhabi to job-hunt.
Soon she had a monthly salary of $2,200 and debt service of more than
$3,000. When Alambatang arrived in court, her daughter was already
there.
“When my daughter saw me with a chain on my foot, I felt like my
heart was broken,” she said. Worried about returning to jail, Alambatang
gets palpitations when she sees the police, and she sleeps with her
daughter for comfort.
“I’m not in jail anymore, but here,” she said, hand over her heart, “I’m more in jail.” New York Times News Service
