Collection Agency? I’m not sure this term rings a bell in Kuwait for a simple reason: the government is doing an exceptional job collecting money for companies. Consequently, this deems the existence of collection agencies unnecessary! The good news: For once our government is actually doing something remarkable. The bad news: It is not supposed to do it!
The arabic headline above is from the front page of Kuwaiti Al-Qabas daily newspaper. It reads, “136 thousand individuals prohibited from traveling- the largest statistic in Kuwait’s history.” So why are these folks banned from traveling outside Kuwait? Don’t rush- we don’t have that much murderers in Kuwait! These individuals simply have some debt outstanding: a phone bill, a credit card balance, a car payment installment- you name it. Yes, this stuff happens in Kuwait. So what’s wrong with the government becoming a forceful and FREE collection agency? A WHOLE LOT.
Doing business entails various risks. One of these is credit risk. The presence of credit risk inherently limits the amount of risk companies take when they extend credit to individuals. Without it, companies will give credit to virtually anyone regardless of their credit history/financial abilities. Companies operating in Kuwait don’t need to worry about the ability of a client to pay their bills because if they don’t, they can’t travel and you know how much Kuwaitis relish traveling! Not only that, but they can even go to jail.
By doing this, our government is endorsing companies to overwhelm Kuwaitis with credit. A car dealership will sell a Porsche to an underprivileged young man, banks will provide a low-income earner with a KD 2000 credit card, and mobile phone companies will allow customer bills to reach high levels. Companies are doing all this and more because the collection of their money is taken for GRANTED courtesy of the Kuwaiti government!
And then of course you have Parliament members ask our one and only spoiling government for debt forgiveness. Rather than focus on the end-result, Kuwait’s parliament members should tackle the causes of Kuwaiti indebtedness which I believe partially stem from our government’s role as a free collection agency.
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Loading ...Tags: Collection Agency, Debt, GCC, Kuwait
Good point! If we have the best collection agency around why would banks waste time in researching the applicant’s financial capabilities?
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Keynesian Reply:
October 5th, 2009 at 4:55 pm
Exactly!
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I suspect this statistics is back dated to pre-invasion. As for the non-Kuwaities, the statistics includes the ones that owed the banks/credit companies prior to the invasion and left the country for good, never bothered to pay after they settled somewhere else.
What happened to the credit rating company (private, later bought by Al Dar, not sure!) that was set-up in 1998/9 in Kuwait to collect information on individuals to be sold to finance providers?
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Keynesian Reply:
October 5th, 2009 at 5:07 pm
It isn’t! According to Al-Qabas, this statistic is YTD. It runs from January to August 31st. 63,000 are Kuwaitis and 49,000 of those individuals have debt outstanding of less than KD 5,000.
As for collection agencies, I guess some may exist. However, the point is that they have to do LESS work since they can easily call someone up and inform them that they are intially going to be ban from traveling and perhaps even go to jail.
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[...] abolished. There is severe moral hazard in our nation and its a vicious downward spiral cycle. Our government acts as a free collection agency for businesses. Our parliament sponsors morally hazardous acts such as sending families for [...]
I run finances at a private company here in Kuwait and deal with extremely high credit risk given the sector we work in. Your article seems to make collection and having a travel block on someone as a simple matter. In order for a person to be prohibited from travel, the creditor has to file a lawsuit against that person/company, and prove to the courts that the company is indeed owed money. The credit risk is much higher here in Kuwait given that there is no system that business can rely on to asses credit worthiness. Furthermore, from a legal point of view, anyone who writes a check while his account has insufficient funds would be sued by the creditor AND the government as it is considered a public offense (undermining trust in commercial operations). Without these regulations, I guarantee you that Kuwait would be one of the worst places to conduct business, and trust me it’s not too far off now.
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