Dreaming with your eyes open

An important consumer debate is currently ongoing in the Shura Council where a bill is being discussed to limit the mark-up of cost on products purchased on instalment. With over 40% interest built into instalment plans, your purchase of furniture or mobile phone may well be flouting the CBB guidelines.

Now, members of the financial and economic affairs committee of the Shura Council are putting together a bill that will protect the consumer from the inflated prices charged by traders and in the process, making repayment easier for the consumer so that non-payment doesn’t become an issue, leading to legal fees and court cases.

Let’s face it – instalment purchase plans are just a fancy name for giving consumer loans. Unlike business loans and even car loans, where the car and office equipment is hypothecated to the lender to secure the loan, consumer loans are junk loans – after all, what is the resale value of your BD 2,000 living room furniture or your used mobile phone once a new model hits the market? In my father’s generation, loans were taken only for tiding over business and personal emergencies.

Bahrain’s famed pearling industry was powered by the loans which the No’khada (Dhow Captain) or ship agents took to fit out and provision their pearling dhows at the start of the season. If there was a health crisis or perhaps a wedding in the family, the first resort was to “crowdfund” the occasion with loans from family and friends.

If all else failed, only then would people reach out to moneylenders. Borrowing money for luxuries was frowned upon as careless and unprincipled. In our present times, values have changed and you can now get a bank loan for everything from air tickets for a holiday to auto loans to credit cards that let you spend money that you don’t actually have.

It is a pity that entrepreneurs wanting to start a business have to jump through many more hoops to secure financing than a youngster on her/his first job who takes out a car loan. Overloaded with debts, many people find their best-laid instalment plans crashing in these COVID times.

Traders, already fighting a low tide in business, will find it difficult to make ends meet when instalments are not paid. I would urge consumers too to practice restraint and think sensibly about the lifestyle they can afford. It is alright to dream – but do so with your eyes wide open so that reality is not an unpleasant shocker