ISSN: 1391 - 0531
Sunday March 02, 2008
Vol. 42 - No 40
Financial Times  

Folly of unsolicited interest-free loans

By W.A. Wijewardena

The chief of this government body was over-excited. All his financial problems are to be solved by a stranger who had come from a foreign land. He had offered him a loan of some US $ 2 billion, interest free, maturing in many, many years. This offer was so favourable that it should not be missed at all. He wanted the blessings of the approving authority for this gracious offer.

“All they wanted was a letter from you that our country needs this financing. Then, they would mobilise these funds and make them available to our body,” he addressed the head of the approving authority with a pleading look. It was clear that what the approving authority had to do to receive this unthinkable benefit for the country was the issue of just a simple letter. Why, then, miss this opportunity?

But the head was still non-committal as if he did not care even a pinch about this loan. This lack of interest shown by the head angered the chief. “This is a one in a million opportunity. So, we shouldn’t miss it,” he addressed the head again.

“How did this come about? Did you ask them to come up with a proposal?” the head spoke finally.

“No, he just had found our body and thought that we needed this funding very badly at this point of time. You know our body is heavily indebted to banks. On top of it, we incurred losses during the last few years. Our capital base is now completely eroded. That’s why we value this offer so much,” the chief answered.

“So, this is an unsolicited offer. Why do you think that they’re so kind to you to make that offer?” the head queried.

The chief was taken aback by this question. It appeared that he did not expect that type of probing by the approving authority. “I don’t know,” was all he managed to say.

“Look….” the head continued, “International financing is not that easily available. The capital markets have set highly prudential rules to follow when such loans are raised. Besides, there’s a very high demand for such loans too. So, isn’t it strange for this canvasser to offer it as an interest free loan, when he could have jolly well lent it on interest?”

The chief remained silent for he did not have a plausible answer to that question. So, the head of the approving authority continued. “These people are international crooks. They’re engaged in money laundering. That is, they have ill-gotten money and now they want to bring it to the normal system and our letter which is indeed a guarantee helps them to do so, because it is issued by a sovereign government. After you issue this letter, you won’t see even the colour of the guys.”

“The way he spoke was very convincing. It didn’t occur to me that they were on to some kind of a game,” the chief responded.

“Yes, they’ve been trained to behave like that. You don’t suspect their genuineness. And I’ve seen them successfully canvassing with even very senior and seasoned politicians.

They fall prey to their well-orchestrated promising talk. We get letters from many politicians sponsoring such loans. So, before we give our comments, we do a thorough search. On all these occasions, we could not even find a proper address of those people who make those offers running into billions of dollars. After that we confidentially advise the politicians not to pursue those offers,” the head explained.

“But, they had even showed me a letter from a bank. If they’re frauds and tricksters, how can they continue to play this game continuously?” the chief said.

“Didn’t you check that letter from the bank very carefully?” the head made a further query. “Those letters are almost and always forgeries. When they’re not forgeries, they get those letters from banks which are located in places which are havens for money laundering. Like Canary Island or West Indies. In those cases, it is very difficult to verify the genuineness of those banks,” the head explained.

The chief showed all visible signs of having threaded on an unknown territory and just missed being fired at by a crafty enemy. So, the head continued. “Sometime back, there was this famous story of two Kazakhstanians, a man and an extremely beautiful woman posing as his wife and functioning also as his interpreter, offering crude oil to our oil corporation very much below the market price. The corporation, out of desperation, had fallen for that offer. We asked the same simple question. When there is high demand for oil in the international market, why should they sell the same at bargained prices to us, instead of selling it in the international market? There was no acceptable answer. So, the matter was not pursued and the country saved itself from an unpardonable faux pas that would’ve created a mammoth scandal”.

“I’m now ashamed of myself for not being a little cautious. I may have unwittingly got into a very hot soup,” the chief finally admitted heaving a sigh.

“You don’t have to be ashamed. Anyone who has no knowledge of how international financing is done would be duped by these crooks. There was an occasion when even a former head of this approving authority was taken for a ride by them. All we want to ask is a very simple question. Why on earth they develop a love for us and finance us, when they could easily lend this money in the international market and earn a good interest income?” the head further clarified.

“This means that we should keep ourselves away from these canvassers?” the chief queried.

“Certainly,” the head said. “If we aren’t cautious enough, we may unwittingly fall prey to their schemes. Their target group is senior public servants, corporation chiefs, politicians and ministers.

So, they should be careful not to fall into this trap. If we want international funding, we should go to the international market proper. It has a cost. But incurring that cost is worth it,” the head of the approving authority said.


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