Debt ranks second among the most widespread problems besetting Filipinos in the UAE.
In Abu Dhabi, Vice Consul Anna R. Guerra, who heads the Assistance to Nationals (ATN) section, said there were nearly 70 cases involving Pinoys caught in a debt trap, paying interest on the interest incurred from loans, mostly due to credit card payments.
The picture is quite the same in Dubai, according to officials at the Philippine Consulate General (PCG).
“As of February this year, we have 30 Filipinos in jail for money-related cases like unpaid dues and bounced checks,” said Vice Consul Marianne Bringas, head of PCG’s ATN section.
Guerra indicated that the figures could well be just the proverbial tip of the iceberg, barely scratching the surface. “Those are the reported cases lang. Hindi lahat pumupunta sa embassy. Hindi rin lahat nakaka-usap namin sa jail. Minsan kasi kung sino lang ang ipa-kausap ng jail officer (during our regular visits),” she explained.
Add to this is what most financial experts say are the Filipinos’ inclination to keep matters of debt to themselves over concerns of being stigmatized in the community.
Putting a finger on the extent of the problem, Atty. Barney Almazar, director at Gulf Law Consultancy, said their firm gets 45 debt-related cases a month.
“Based on my four years handling the monthly legal aid at the consulate and embassy, indebtedness is the most common legal problem of OFs – and this is not only true on low income brackets. Whether they earn big or small, they spend more than their income,” he also said.
In most cases, Almazar said, the situation has worsened. “They are not just facing debts but police cases as well due to bounced checks. Some are even ashamed to let their families know their real situation.”
On average, Almazar said, the distressed OFs’ short term credit card debts are 15 times their monthly salary – this figure, he said, excludes long term debts such as those amortized for more than a year.
Struggling
For his part, Dhiraj Bhatia, managing director at Express Debt Management Consultancy (EMDC), said their company “receives a lot of inquiries from Filipino clients struggling with their financial obligations and looking for a solution.”
EMDC specializes in debt counseling, debt consolidation, restructuring and settlement
“Forty percent of our clients are from Philippines,” Bhatia said.
Forty percent it is too, for Instant Debt Management Services (IDMS), which likewise offers debt consolidation among other financial services.
“Majority of our clients have multiple banking products and end up accumulating debt through a combination of these products. Majority of the customers have more of credit cards debts and less of personal loans,” said Mohsin Bukhari, IDMS founder and director.
“Most of our clients are struggling with their credit card debts,” added Bhatia. “They seem to be stuck in a debt cycle,” he said.
Bhatia said credit card rates in the UAE “are significantly high and it gets quite complicated to get out of it if an individual is just making minimum payments every month.”
The embassy and consulate do not provide debt relief for OFs tied in the problem because doing so would be like paying for their unpaid personal expenses, reason why the matter was not mandated to be included in the government’s Legal Assistance Fund (LAF).
“Di kami nag-a-assist sa mga money cases,” said Guerra, adding that the embassy has a legal retainer giving advice to OFs beset with debt issues.
Good vs bad debt
Renowned Filipino Financial expert, Randell Tiongson , author of the best-selling book No Nonsense Personal Finance, said it all boils down to budgeting and being able to tell a good debt from a bad one.
“Budgeting is one of the most fundamental processes you need to achieve financial peace,” he said. “Review what you spend your money on—our spending is either a need or a want,” he added.
Debt, Tiongson said “is an issue of wisdom: Learn to discern what a good debt and a bad debt is.”
“Good debt allows you to build your assets or improve your cash flow, everything else is bad debt.”
Bhatia noted that for the most part of it, individuals would not be willing to sort their situation on their own by reducing their household expenses and other variable expenses wherever needed.
“It is human nature and everyone wants to stay in their comfort zone,” he said.
But, he stressed, if you are considering obtaining a loan to meet your current financial needs or using a credit card for something, bear in mind that doing so “could add a severe financial obligation.”
“You have to be very cautious. You will have to make sure that you are in a position to repay the loan and keep up with the monthly payments for the term of the loan regardless of any given situation, including loss of job,” Bhatia said.
“Once you default on a loan payment, the debt cycle starts and you will slowly start moving into a trap.” (With reports from Henri Abenis-Macahilo and Anne Lora Santos)
