Find yourself deep in credit card debt? Struggling to repay your loans? Crores of your fellow citizens, are struggling to repay their loans. Do these citizens stay only in cities and metros? No definitely not. Crores of your fellow citizens stay in towns and villages. They too borrow heavily, maybe not from banks, but from moneylenders. But borrowing is borrowing…. These loans have to be repaid. You and crores of your fellow citizens are still struggling to repay your loans. You are not alone in this struggle….
There’s surprising news for you… You might have heard of the oil and gas rich Gulf country, Qatar. We are separated from Qatar by the Arabian Sea. What’s great about Qatar, is that it has vast oil and gas reserves and only 3 Lakh citizens to enjoy it. Citizens working in the Government and Private sector, draw huge salaries. Healthcare for Qataris is absolutely free. Education is free. Housing and car ownership is subsidized. There is almost no tax… Can there be a better life than this…..
What about us…We pay a bomb for medical expenses. Our salaries are much lower than what most Qataris draw. Education is costly. Houses are expensive. I don’t need to speak about our taxes...Qataris spend lavishly on smart phones and designer clothing. They have no shortage of electronic gadgets. Qataris celebrate family weddings in a lavish manner. With all the money they earn and all the subsidies they enjoy, what’s surprising about this?
Here’s a shocker…. There is a lot of social pressure on Qataris to spend heavily. Qataris need to have the best watches, the best mobile phones and the fastest cars around. Come what may… Qataris cannot afford to appear poor. So what do Qataris do when money is not enough… Is it possible for a Qatari not to have enough money? Yes…if you spend more than you earn. Qataris go on lavish holidays to European countries and splurge on weddings. Qatar has conventional banks (just like what we have in India) and also Islamic banks. Qataris borrow from conventional banks to meet their lavish expenses. What about banks? Banks offer loans to citizens, which are several times their annual salary. They do not ask for any collateral on these loans. Loans are a Free for All. Qataris can borrow as much as they want from banks. Now Qataris have a big problem… A problem we faced for decades…. Qataris cannot repay the money they have borrowed from banks.
How did this sad state of affairs come about? Till mid 2014 the price of oil and natural gas was very high. Qataris could afford a lavish lifestyle. Then the bad news… Oil prices crashed. Recently oil was as low as $35 a barrel. It was more than $120 a barrel a couple of years ago. Government is struggling with subsidies. Some Government Companies are even laying off employees.
What can you learn from this? If you spend recklessly and have to borrow for your lavish lifestyle, you will soon fall in debt. There is a famous saying “If you buy things you don’t need, you have to sell things you need”. Qataris learnt this the hard way. Soon banks lent money only against borrowers salaries. The maximum repayment period on loans was 6 years. Authorities even launched a program in 2013 called "Debt is Disgraceful" where donations were collected to help citizens pay back their debts.
Any lessons for you?
Under : Financial Planning