MANILA, Philippines - The Philippine embassy in Riyadh is warning Filipinos in Saudi Arabia that “5-6” loans are prohibited in the conservative Muslim kingdom.
The embassy issued an advisory yesterday following numerous requests for assistance from Filipinos in Jeddah who encountered problems in settling loans or acting as guarantors for the loans of other individuals.
The term “5-6” refers to lending money at very high rates of interest.
“To avoid being accused of usury, lenders have resorted to lending cash with the borrower signing a promissory note to pay installments with a total greater than the amount of cash borrowed,” the embassy statement said.
This practice comes in different forms, and sometimes the undertakings are for installment payments on appliances, furniture or other items instead of cash, it said.
Almost all cases require a guarantor who would also be liable for payment of the total amount as the undertaking binds the guarantor to the obligations of the borrower.
In case that the borrower defaults on any installment and the lender files a private rights case with the police, the borrower and guarantor are held accountable and face an indefinite time in prison until the amount is fully settled. Usually, the persons involved in the loan are detained due to the private rights complaints by the lender.
The embassy reminded Filipinos that it is not authorized to guarantee the obligation and cannot settle the loan, as this is the responsibility of the borrower or guarantor.
“Given these considerations, the embassy strongly appeals to Filipinos to avoid engaging in these types of transactions to avoid serious problems in (Saudi),” it said.