Tuesday, January 04, 2005

Riddle me this

I am catching up with my magazine reading and I finally got to the December 2004 issue of BusinessToday magazine which has an interesting article on the leasing business in Oman. Interesting because it has quite a few eye opening facts that I didn't know about, and also because in true Omani journalistic manner it gives so much more information between the lines than it does on face value. Check this out.

"If you take the instances of the first cheque bouncing, the rate of default is as high as 30%, in the interiors it is higher." - CEO of Muscat Finance. In other words, one out of three people in Oman who buy their cars with credit from a leasing company defaults on the very first payment. Unbelievable.

So why does this happen? The CEO of Al Omaniya Financial Services puts it this way: "This is because people do not plan their finances and their debt obligations are higher than their ability to pay back." True. Makes sense. But then again, earlier same article mentioned that "the time taken to disburse loans in case of cars has been brought down to as low as half an hour if the requisite papers are in place." The required papers are: "payslip, employment ID and bank statements for the last six months." OK, so despite the fact that you have such high default rates you are still able to give a guy a loan of thousands of Omani rials to buy a car so long as you know his salary and you've seen his statement for six months and have a pretty good idea of his spending habits. Something doesn't compute. Hmmm.. let me try to understand it again. You know how much the guy makes. You know how much he usually spends. You give him a loan and still in one out of three cases he'll default from the first month. What exactly are your lending criteria? United Finance's CEO explains the lending criteria: "The criteria is that after servicing all his loans, the customer should have RO. 120 with him, as this is the minimum sustainable amount for living, according to the provisions of the Minimum Wages Act." And there you have the crux of it. No further explanation needed.



Without Comment

From the same article:

A new ruling states that a person cannot be tried twice in a criminal court for the same offence.. According to the new ruling, if a person availing of a car loan bounces a few cheques and a leasing company files a criminal case against him, the leasing company cannot take him to court again for a similar offence. It then has to resort to a commercial court.. where getting a judgment can take up to three years.

2 comments:

Desert Island Boy said...

You're speaking of Double Jeapordy, where a person cannot be tried for a particular crime over and over again, once a verdict has been passed.

If I am accused of assaulting my neighbour on January 31st, I can be tried for it, and whatever verdict is given stands. If he is found beaten up again on February 28th, I could still be a suspect. It's a different case.

Double Jeapordy exists so that if I am acquitted of the Jan 31 event, my neighbour can't prosecute me again for it as a criminal offense.

At least this is how it works in the United States. Take Kobe Bryant for example. He was initailly charged with sexual assault in Colorado but eventually acquitted as the prosecution dropped the case. The woman could still, and will, prosecute in civil court. But that has no bearing on Kobe Bryant's legal record. It's a different matter altogether.

To bring this back to your example, it is absolutely ridiculous that I can push the limits of decadence and then bam, I'm in the clear.

Government logic, I tell you.

Anonymous said...

Amazing, I am off to buy a car!