Financial Crime World

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Financial Sector Vulnerabilities Drive Rise in Loan Sharking and Extortion in Peru

Peru’s financial sector is facing a crisis of vulnerability, with widespread extortion and loan sharking on the rise due to desperate borrowers seeking credit from unscrupulous lenders.

Rising Cases of Extortion

According to data from the Attorney General’s Office, cases of extortion skyrocketed 370% between 2021 and 2023, with over 22,000 reported incidents in 2023 alone. The majority of these cases were linked to “gota a gota” loans, also known as “drop by drop” loans, which have been driven into Peru from Colombia.

Gota a Gota Loans: A Notorious Form of Extortion

Gota a gota loans are notorious for their extortionate interest rates and aggressive debt collection tactics, with borrowers often being forced to pay back several times the original loan amount. The Interior Ministry has reported that around 500,000 people in Peru owe gota a gota loans, with many seeking out these loans to pay off other debts.

Economic Downturn Exacerbates Situation

The country’s financial sector has been hit hard by the COVID-19 pandemic and subsequent economic downturn, leaving many Peruvians without access to credit from formal institutions. A cap on interest rates approved by Congress in 2021 has only exacerbated the situation, making it even harder for banks to grant loans.

Desperate Borrowers Turn to Loan Sharks

As a result, desperate individuals have turned to loan sharks, who are now increasingly being driven out of business by recently arrived Venezuelan gangs. These groups, such as Tren de Aragua, have been exploiting members of the Venezuelan diaspora in Peru, taking advantage of their lack of access to credit and residency status.

Experts Warn of Worsening Situation

The situation is set to continue into 2024, with experts warning that the rise in loan sharking and extortion will only worsen as more Venezuelans arrive in Peru without access to credit.

Call for Action

As the situation continues to deteriorate, authorities must take action to address the root causes of this crisis and provide alternatives for those in need of credit.

Key Statistics

  • 22,396 cases of extortion reported in Peru in 2023
  • 370% increase in extortion cases between 2021 and 2023
  • Around 500,000 people in Peru owe gota a gota loans
  • Over 1.2 million Venezuelans living in Peru lack access to credit from formal institutions
  • Only 5% of Venezuelans have been able to receive credit from formal financial institutions

Sources

  • Attorney General’s Office
  • Interior Ministry
  • World Bank Group
  • USAID
  • Consultora Nacional de Criminologia
  • Videnza Instituto