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North Korean moneylenders hire gangsters as muscle in loan sharking schemes

North Koreans pay tribute to the statues of Kim Il Sung and Kim Jong Il in Mansudae Grand Monument on the occasion of the 69th founding anniversary of the DPRK in 2017. (Luban/Wikimedia Commons)
May 12, 2019
This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.

With economic conditions in North Korea taking a turn for the worse due to international economic sanctions, loan sharking is on the rise as rich North Koreans offer loans with extremely high interest rates to cash-strapped citizens.

They are enlisting the help of gangsters to find people who desperately need quick cash. The gangsters are also useful as muscle to intimidate borrowers to make their payments on time, or even to rough them up if they can’t pay, sources say.

“Moneylenders in Siniuju are working with the local gangs,” said a source from North Pyongan province in an interview with RFA’s Korean Service. Sinuiju is a key North Korean gateway city to China.

“[They] are protected by the gangsters, pushing loans for both ordinary people and even state-run factories and companies,” the source said, noting that it is “incomprehensible” that even government-owned entities are borrowing high-interest money.

The source said that many businesses in the region have fallen on tough times brought on by U.S. and UN sanctions.

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The sanctions, aimed at depriving resources and cash that could be funneled into North Korea’s nuclear program prohibit the import of certain materials and commodities into North Korea.

“[The] foreign currency-earning businesses and private traders [that] are having business setbacks and financial stress this year are looking to borrow money to start up new businesses,” the source said.

“But when debtors fail to bay back monthly interest rates as high as 5-10%, the lenders then mobilize the gangsters to go forcibly take the money with threats and violence,” said the source.

Another source, also from North Pyongan said that the deal is very good for the local gangs, and likened the gangs to a personal army for the lenders.

“If the gangsters are able to collect the principal [from late debtors], the lenders give them 30%. They basically can give orders to the gangsters,” the source said.

“Collecting the borrowed money and interest through violent means has become a [full-time] job for local gangsters. They are able to threaten debtors and even take away their homes and property. It is a really serious [problem],” said the source.

The source said that if the gangs accumulate a few hundred thousand dollars, they can use the money to increase their own influence and authority.

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“They bribe judicial authority officials so that they can own interest in local businesses and have free reign to [enforce their will] with violence,” said the source.

Paying gangs or bribing soldiers for protection is nothing new, according to a source from South Pyongan province.

“Since the early 2000s, smugglers, wholesalers and moneylenders in big cities like Sinuiju and Pyongsong buy protection from good fighters and soldiers when they need to make important deals,” said the source.

The source also said that without protection from gangsters, the moneylenders would still need to bribe local authorities to help them collect what they are owed.

“[Moneylenders] are often the victims of theft as more people are facing financial difficulties. But judicial authorities only care when they receive bribes. They often ignore reports of theft.”

The source implied that the gangsters are more reliable and effective at ensuring a positive return on investment.

“Inevitably, the lenders must provide funds to gangsters if they want to continue in the loan-sharking business.”