How do we handle employees who keep on patronizing loan sharks? This happens all the time despite the company having a better loan system with only one percent interest, payable in one year through salary deduction. Please advise. — Blue Lantern.
To manage employees who continue to borrow from loan sharks despite cheaper alternatives, you have to discover the root causes of this issue. Could it be there are friction points in your current system? Are you dealing with a chronic serial borrower to finance an ugly habit? What else?
Discover them by talking to those concerned. It could be that they are resorting to loan sharks due to their lack of financial control, magnified by the inefficiency of your system, privacy issues, or existing conditions that disqualify them from taking another loan.
First things first. You may want to organize regular financial literacy seminars to help workers on basic budgeting and avoiding high-interest debt traps. This can be done with the help of partner-banks or other financial institutions.
You can also explore the following approaches:
One, bureaucratic delays. Compare your policy with loan sharks who deliver instant money with zero questions asked. If your one percent company loan takes several days to process because of extensive requirements, desperate employees in need of emergency cash will bypass it.
Two, privacy issues. Some employees feel ashamed admitting their financial distress with their direct boss, finance, or the human resource (HR) department. If these officials have to approve personal loan requests, chances are, workers will seek privacy through loan sharks.
One solution is to allow confidential applications through a self-service HR portal or third-party loan partner.
Three, emergency cash provisions. Improve loan access so employees can access quick micro cash advances (like P5,000 maximum) without management having to approve every personal emergency.
To avoid abuse, this must be limited to a one-time availment per year, at zero interest, and a salary deducted of not more than three months.
Four, ATM card confiscation. External loan sharks often demand physical possession of the employee’s ATM card so they can have direct access to their payroll account.
Recommend contacting the issuing bank immediately about securing the account and replacing compromised credentials, while seeking appropriate legal or financial assistance where necessary.
Five, buyout program. Help the worker escape his predicament by arranging a one-time “reset” loan designed to pay off aggressive external creditors. Allow certain exceptions so a distressed worker can repay the loan over a longer period through payroll deduction.
If necessary, help the worker sever ties with the loan shark by filing an affidavit of loss of his ATM card needed by the bank to issue a replacement card.
Six, workplace ban on lending. Prohibit informal money lending even from other employees, external loan sharks, or people who conduct similar activities on company time and premises. Ban loan sharks or other collection agents from entering the workplace.
Seven, disciplinary measures. Treat employees who act as loan shark agents or operators of unauthorized internal lending schemes as violating workplace conduct rules. When unchecked, the situation contributes to low productivity.
Eight, confidential financial counseling. Partner with an external counselor or a non-government organization so employees with heavy debt issues receive professional advice. Ensure strict confidentiality so the company need not see their details.
WORKERS’ DIGNITYAvoid shaming and disciplinary threats. Shaming drives people to go underground. It erodes trust and worsens financial stress, leading to higher absenteeism, lower productivity, and possible resignations.
On the other hand, employees who borrow money should not be punished merely for being in debt. Employees who exploit colleagues, engage in coercive collection, or violate legitimate workplace rules are a different matter and may be subject to proportionate discipline after due process.
When financial anxieties consume an employee’s focus, his engagement drops significantly.
Therefore, a supportive stance like giving workers easy access to the company’s low-interest loan and practical education encourages voluntary uptake of the better option. Providing these accessible avenues ensures everyone that asking for help will not jeopardize their standing or career advancement.
More importantly, treating people with dignity protects both employee well-being and organizational culture, delivering lasting results far more effectively than punishment ever could.
Ultimately, compassionate financial policies cultivate organizational loyalty, reduce costly turnover, and build a resilient workforce grounded in mutual respect.
Consult Rey Elbo for free. E-mail elbonomics@gmail.com or DM him on Facebook, LinkedIn, X or via https://reyelbo.com. Anonymity is guaranteed, if requested.