Colombian Loan Sharks Expanding Internationally

Multiple reports throughout Latin America indicate that Colombian loan sharks are allegedly expanding their operations throughout the region. 

Over the last few years, multiple groups of Colombian nationals have been arrested for usury-related crimes in countries ranging from Brazil to Honduras to Argentina. 

An unnamed Colombian police intelligence official told El Tiempo that authorities have also identified Colombian loan shark groups operating in Peru and Chile. These groups have links to other Colombian criminal organizations such as the Oficina de Envigado and the Urabeños, the report said. 

These groups operate by offering credit to poor and working-class people who lack access to formal banking services. However, the loan sharks often charge abusively high interest rates in a practice known as “gota a gota” or “drop by drop,” named after the way in which victims are slowly bled dry of funds. 

When debtors can no longer pay, loan sharks may begin taking possessions and property as payment or resort to violence, according to reports. 

“Gota a gota” was a practice frequently seen in Medellin, Colombia during the 1980s, an alleged loan shark known only as “Mario the Colombian” told Argentine newspaper Clarin.

“At the time, there was an overflow of drug trafficking money, and someone thought it should be used for loans,” he added.

According to Mario and other reports, usury lending in Colombia and abroad is often linked to other illicit activities. Groups may use it to fund other criminal schemes or to launder dirty money.

InSight Crime Analysis

While some governments have occasionally sought to scapegoat Colombians for crime or other social ills, these reports of Colombian loan sharks expanding their operations abroad are plausible for several reasons. 

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First, usuary lending is a relatively cheap business to set up. The initial amount of money need to finance small loans is inexpensive, compared to setting up drug labs or establishing elaborate smuggling routes. 

Secondly, loan sharks can establish themselves in new countries by piggybacking on other criminal enterprises. Many of the same nations which caught Colombian loan sharks have also recently captured Colombians involved in the drug trade.

Third, while financial development varies widely from country to country, a reported 65 percent of Latin Americans still lack access to formal banking. Despite their abusive practices, Colombian loan sharks are filling a high-demand financial niche. 

Fortunately, Latin America has also seen explosive growth in the number of legitimate micro-lenders. Facilitated by cheap new technology like mobile banking through cellular phones, these lenders are increasingly moving into sectors serviced by loan sharks. If this continues, it is possible that loan sharks may soon be priced out of their once lucrative market.