Bangladeshi bank charges 10% interest per month

Rakib and Kanak don’t know each other, but both come on the same day to Transient Workers Count Too with similar stories. The chief similarity was that they both had borrowed from Brac Bank whose branches and billboards can be seen all over Bangladesh. This bank is a major loan-maker to Bangladeshi men needing to pay job agents.

“Total I pay agent S$4,800,”  Kanak begins, of which he “borrowed one lakh from Brac Bank.” One lakh is 100,000 Bangladeshi taka, equivalent to S$1,720. According to him, the family put up their home as collateral, depositing “paper”, (the title deed , perhaps?) with the bank.

Then the shocker: “Every month must pay interest 10,000 taka.”  That’s ten percent interest per month.

The loan must be returned at the end of one year. But the principal sum to be paid back is not one lakh, but “must pay back one lakh twenty thousand.”

Why 20,000 taka more?

“Like that,” Kanak shrugs.

Ten minutes later, your writer speaks with Hossain Rakib, 24. He too had borrowed one lakh from Brac Bank. He too had to pay 10,000 taka per month as interest, and return 120,000 taka at the end of the year.

And like in Kanak’s case, the bank “keeping my house papers.”

Both men are now under great stress. They have lost their jobs in Singapore, mere months after coming here, and have no means to pay back their loans. What will happen to the families and their homes now?

Rakib’s pay slashed three times

Rakib arrived in Singapore for his second job here in July 2016. Prior to that, it had taken him months waiting in Bangladesh to get this job with Global Tech Marine Services Pte Ltd. Aminul, his ‘dalal’ (an informal job broker in Bangladesh) had linked him up with a man named Pintu, also Bangladeshi but who was working in Singapore. Pintu had the connections to get him a job, and asked for 350,000 taka.

It took a while for Rakib to raise the money, including borrowing from Brac Bank. Over a period of time, he managed, depositing 50,000 taka in installments to a bank account nominated by Pintu.  This bank account was in Bangladesh, so all payments occurred within the home country.

“After I pay everything, then Pintu send me the air ticket and give me back my passport,” explains Rakib.

When did he take your passport?

“At the beginning, when I agreed to the job.”

At Global Tech Marine, “first five months have work, but then the project finished and no more work,” says Rakib, explaining the problem he is now facing. But even at the beginning, there was a problem already. “My IPA say the basic salary is $600, but two days after I come Singapore, boss give me paper to sign. The paper say my salary now $400.”

IPA stands for In-principle Approval for a Work Permit.  It is issued by the Ministry of Manpower as a letter to the worker before he comes to Singapore. Containing details of the job waiting for him, the IPA letter provides details about salary and benefits that the employer had provided to the ministry while applying for a Work Permit. Here is the relevant section of Rakib’s IPA with our notations in red:

The significance of what Rakib is saying is that the employer declared to the ministry that they would be hiring him at a basic salary of $600 a month, but almost immediately after Rakib had paid Pintu and come to Singapore, the company demanded a new contract from him at $400 a month. Such an act is known as contract substitution and is considered banned by the International Labour Organisation under the 1930 convention against forced labour, which Singapore ratified in October 1965. Contract substitution is also considered an indicator of human trafficking under the Palermo Protocol. [More details in footnotes]

Rakib protested and the employer agreed to lift his basic salary to $450 a month, still short of the $600 promised in the IPA. However, Rakib didn’t want to lose the job, and so stayed on to work.

We ask Rakib if he can show us a copy of the substituting contract.

“He [boss] not give me any copy,” he replies.

We are not surprised; that’s quite typical.

Soon after, a new issue arose. Rakib noticed an arbitrary $90 deduction on each month’s payslip (imaged below). When he asked his boss what that was for, the boss told him that “every company do that,” (it is not true) and therefore that was enough justification to take $90 (20% of his basic salary) off his pay. Yet, if one looked again at the IPA above, it clearly says that monthly deduction for “other” purposes would be S$0.

Once again, Rakib didn’t want to lose his job and did not press the matter further. The employer must have known of the worker’s vulnerability; the boss would not otherwise have attempted what he attempted.

For five months, “work quite OK,” Rakib says. There was overtime and despite the reduction in basic salary and the arbitrary deduction, he could earn about $750 a month, inclusive of overtime. Of that, he had to set aside $172 (or about 23%) to make the monthly interest payment of 10,000 taka.

Then at the end of November, the project ended and there was no more work. The boss sent him out to work at a construction site — possible offence here: illegal deployment — but there really wasn’t much work there either. “I was there only eleven days, but only three days have work to do, other days just sleeping in room.”

The boss probably realised that this kind of casual transfer was no solution either, so he told Rakib and other employees he was going to send them back to Bangladesh.

Naturally, that left Rakib very unhappy. His hopes had been slashed three times: contract substitution, arbitrary monthly deduction of $90 a month, and now his hoped-for one-year job had been cut short well before he even managed to recover his sunk cost of 350,000 taka.

He went directly to the Ministry of Manpower to lodge a complaint. Then he came to TWC2 to learn how he could press his case successfully. His case is ongoing, and we do not yet know how it will end.

Kanak is even worse off

At least Rakib managed for earn about $750 a month for his first five months, Gupta Kanak Sen didn’t even enjoy that. He too had “worked” about five months before he could take it no longer.  After coming to Singapore in May 2016, he found himself with Adorna Marine Engineering but in each month, “only work about ten days.”

“Sometimes, work two days, then stop. Or work three days, then stop.”

In his IPA, the stated salary was $480, but monthly wages were erratic. “Boss sometimes give me little bit and little bit, for makan [food], not for salary.”

On 29 October 2016, Kanak and seven other men marched off to the Ministry of Manpower to lodge complaints. Their cases were settled relatively quickly and the boss paid him $1,500 on 9 November. Kanak isn’t sure how this figure was arrived at, but seemed to trust that it was correct because the ministry oversaw the process.

Two months on, he is still in Singapore. Why? The ministry allowed him to transfer to another job but apparently he couldn’t find one. He is classified as a marine (i.e.shipyard) worker, and right now the entire marine sector in Singapore is in freefall.

Kanak comes to TWC2 today all dejected, saying he just wants to go home. The boss has agreed to buy him an air ticket.

Not that things will be any better back home. He had paid a total of S$4,800 in “agent money”, of which $1,720 was borrowed from Brac Bank. Interest payments for the bank loan are overdue and there is no prospect of repaying the principal in a few months’ time.

Not being in their shoes, we can’t even begin to know how all this feels.

On contract substitution:

In this area, Singapore law is poorly worded:

Part IV of the Fourth Schedule to the subsidiary legislation ‘Employment of Foreign Manpower (Work Passes) Regulations 2012’ states:

6A.—

(1) The employer shall not —

(a) reduce the foreign employee’s basic monthly salary or fixed monthly allowances to an amount less than that declared as such in the work pass application submitted to the Controller in relation to the foreign employee; or

(b) increase the amount of fixed monthly deductions to more than that declared as such in the work pass application submitted to the Controller in relation to the foreign employee,

except with the foreign employee’s prior written agreement.

(2) Before implementing such reduction or increase, as the case may be, the employer shall inform the Controller in writing of the proposed reduction or increase, as the case may be.

The problem with the above phrasing lies in “prior written agreement”, for it does not clearly distinguish between freely given agreement and so-called agreement where an employee is exploited for his vulnerability (e.g. incurred debt) and effectively compelled to put his signature to whatever is demanded of him. Our hope is that in actual implementation, ministry officials will apply this distinction, but it would be better if the distinction is explicit.

One sliver of hope is that the employer had not fulfilled limb (2) of this rule — informing the ministry before implementation. This ought to render the substituted contract null and void — provided ministry officials care to enforce this limb in Rakib’s case.

ILO Convention #29 against Forced Labour, 1930

In this convention, which Singapore ratified in 1965, a signatory state “undertakes to suppress the use of forced or compulsory labour in all its forms“. A problem may lie in the definition of forced labour, which is somewhat vague. The text of the convention says “the term forced or compulsory labour shall mean all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”

It’s not hard to construe contract substitution as within its meaning, but it does not single it out as a banned mode of compulsion.

However, in a March 2016 complaint citation against Qatar (paragraph 2) made at the International Labour Office (the secretariat of the International Labour Organisation), we find this interesting paragraph, which shows that contract substitution is considered within the ambit of forced labour:

…  From the moment migrant workers begin the process of seeking work in Qatar, they are drawn into a highly exploitative system that facilitates the exaction of forced labour by their employers. This includes practices such as contract substitution, recruitment fees (for which many take out large, high interest loans) and passport confiscation.

The complaint is titled: “Complaint concerning non-observance by Qatar of the Forced Labour Convention, 1930 (No. 29)” thus pinning it within the 1930 convention. What it describes is also exactly what happened to Rakib and Kanak in Singapore.

The International Labour Office lent its imprimatur to a document titled “Legal brief underlying better work compliance assessment tool: forced labour”  dated 2013. Here too it mentioned contract substitution:

… Although the lack of consent and coercion are distinct  elements under Convention 29, they may overlap. If workers agree to work under threat of  penalty, they have not offered themselves voluntarily.

Further on,

Deciding whether work is performed voluntarily often involves looking at pressures that make it difficult for workers to choose not to work, for example, physical confinement in the workplace, psychological compulsion (e.g., threats), deception or false promises about types and terms of work, non-payment of wages, or withholding of workers’  identity documents.

Then, it cites among examples of penalties that could be imposed on workers and thus used to coerce them, “financial penalties, e.g., burdening workers with unmanageable debt or delaying wage payments to keep workers on the job…”

Palermo Protocol 2000

Article 3(a) of the ‘Protocol to prevent, suppress and punish trafficking in persons, especially women and children, supplementing the United Nations Convention against transnational organised crime’ states:

“Trafficking in persons” shall mean the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation. Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs; 

(Words relevant to the above story are underlined.)

Singapore ratified the Convention against Transnational Organised Crime in August 2007 and acceded to the Palermo Protocol in September 2015. Very similar words were incorporated into the Prevention of Human Trafficking Act 2014, whose Section 3(1) says,

3.—(1) Any person who recruits, transports, transfers, harbours or receives an individual (other than a child) by means of —

(a) the threat or use of force, or any other form of coercion;
(b) abduction;
(c) fraud or deception;
(d) the abuse of power;
(e) the abuse of the position of vulnerability of the individual; or
(f) the giving to, or the receipt by, another person having control over that individual of any money or other benefit to secure that other person’s consent,

for the purpose of the exploitation (whether in Singapore or elsewhere) of the individual shall be guilty of an offence.

In July 2017, MOM took issue with this statement in the above article:

“Their cases were settled relatively quickly and the boss paid him $1,500 on 9 November. Kanak isn’t sure how this figure was arrived at, but seemed to trust that it was correct because the ministry oversaw the process.”

MOM wrote to say:

MOM’s intervention led to the employer settling the salary claim in full, amounting to $2,112.50, higher than the amount of $1,500 stated in the article. We had also explained to him how the amount was determined and he understood, and did not raise further queries.

TWC2 responds:

There are multiple possibilities why a different figure was mentioned by the worker in our interview. Perhaps $2,112.50 had been split and our interview happened to have been conducted between two instalments. Alternatively, Kanak, who comes across as relatively trusting, failed to remember the exact amount. Our article indicated that whatever he was paid was satisfactory to him; that he did not raise further queries would be consistent with this. Sometimes, a worker is just relieved that the ordeal of fighting for unpaid salary is over, and he is able to get on with his life. The details no longer matter, even if he doesn’t fully grasp them.

Regardless, this is a tiny detail in a larger story: about the usurious interest rate charged by a bank, and the debt trap that workers find themselves in. It might be more helpful if MOM could tell us what they’re doing about eliminating high recruitment fees, which lie at the root of the issue.