ArticlePublisher preview available

Loan-sharking in a time of crisis: lessons from Rome’s illegal credit market

Authors:
Isabella Clough Marinaro at John Cabot University
Isabella Clough Marinaro
Read publisher preview
Download citation
To read the full-text of this research, you can request a copy directly from the author.

Abstract

One of the consequences of Italy’s on-going financial crisis has been rising civil society activism and media attention to the growing phenomenon of families and small businesses becoming indebted to illegal moneylenders. Much of the public discourse focuses on indications that major organized crime groups are strengthening their participation in this sector and appropriating homes and business assets as a means of laundering money and expanding their presence in the legal economy. This article examines the multiple and complex factors that leave rising numbers of small business owners with few alternatives to seeking illegal sources of credit in order to continue operating financially. Focusing on the city of Rome and drawing on in-depth interviews with support groups and former debtors, as well as on a wide range of documentation and statistical data, it provides a multiscalar analysis of the ways in which local social norms concerning informal credit and the exigencies of day-to-day business practice on a micro scale are interwoven with the macro-level effects of legislation, banking practices, and the capacity of institutions mandated to fight illegal lending. It questions whether an adequate system of alternatives to borrowing illegally exists and the extent to which the official mechanisms in place to disincentivize this practice are effective.
A preview of this full-text is provided by Springer Nature.
Learn more
Content available from Trends in Organized Crime
This content is subject to copyright. Terms and conditions apply.
Loan-sharking in a time of crisis: lessons from Rome’s
illegal credit market
Isabella Clough Marinaro
1
Published online: 26 May 2016
#Springer Science+Business Media New York 2016
Abstract One of the consequences of Italy’s on-going financial crisis has been rising
civil society activism and media attentiontothegrowingphenomenonof
families and small businesses becoming indebted to illegal moneylenders.
Much of the public discourse focuses on indications that major organized crime
groups are strengthening their participation in this sector and appropriating
homes and business assets as a means of laundering money and expanding
their presence in the legal economy. This article examines the multiple and
complex factors that leave rising numbers of small business owners with few
alternatives to seeking illegal sources of credit in order to continue operating
financially. Focusing on the city of Rome and drawing on in-depth interviews with
support groups and former debtors, as well as on a wide range of documentation
and statistical data, it provides a multiscalar analysis of the ways in which local
social norms concerning informal credit and the exigencies of day-to-day business
practice on a micro scale are interwoven with the macro-level effects of legislation,
banking practices, and the capacity of institutions mandated to fight illegal lending.
It questions whether an adequate system of alternatives to borrowing illegally
exists and the extent to which the official mechanisms in place to disincentivize
this practice are effective.
Keywords Usury .Loan-shark .Illegal lending .Illegal credit .Rome .Italy .
Economic crisis
Trends Organ Crim (2017) 20:196–215
DOI 10.1007/s12117-016-9279-y
*Isabella Clough Marinaro
isaclomar@gmail.com; iclough@johncabot.edu
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... Hence, the current debate mostly relies on anecdotal or impressionistic evidence, interviews, media reports, or case studies (e.g. Marinaro, 2017;UNODC, 2020). The difficulty of gathering confidential data from entrepreneurs affected by OC leaves entrepreneurs' attitudes and willingness towards different ethical decisions largely unexplored, especially regarding the potential trade-off between the criminal welfare and the welfare state in crisis periods. ...
... Some companies, even of medium-large size, may resort to OC financing because, in a situation of financial difficulty, leveraging on OC capital allows them to alter free competition. In other words, sometimes debtors actively approach illegal lenders because OC is perceived as helping rather than exploiting (Marinaro, 2017). ...
... In addition, Italy has a weaker welfare system compared to social democratic welfare states, such as Scandinavian countries. Heavy bureaucratic and tax burdens make operating in the legal economy difficult (Marinaro, 2017). During the pandemic, the Italian government has implemented substantial economic measures by imposing the suspension of insolvency or bankruptcy procedures, extending the deadlines for pre-insolvency workout agreements with creditors and debt restructuring agreements, postponing the payment of taxes and allowing debtors to amend/renew their underlying industrial and financial business plans. ...
Venture resilience, criminal approaches and the welfare state: entrepreneurial decisions and opinions one year after the COVID-19 outbreak
Article
  • Jan 2023
  • J Small Bus Enterprise Dev
Purpose This study aims to investigate the resilience of Italian companies one year after the coronavirus disease 2019 (COVID-19) outbreak by examining the companies' choices and opinions regarding the welfare state, criminal approaches and mergers and acquisitions (M&As) during the pandemic. Design/methodology/approach The authors proposed a conceptual framework based on a combination of private vs public protection and business resilience theory and adopted a concurrent embedded mixed-method approach, using an online survey of 219 entrepreneurs. Findings The authors find the respondents showing high resilience to the crisis and strongly unaffected by organised crime's (OC's) predatory role; the State seems to have quickly and effectively met the financial needs of sampled Italian companies, at least in the short term. Practical implications Whilst welfare can be highly effective for companies to combat crime, regulators should recognise that public protection may decrease with time, leaving companies open to long-term challenges. Originality/value The authors believe that our study makes a significant contribution to the entrepreneurship literature because this is the first study to explore how entrepreneurs deal with financing problems in a context characterised by a strong impact of the COVID-19 pandemic and OC pressure.
View
... De studie is dan niet van dermate kwaliteit dat er waarde kan worden gehecht aan de uitkomsten van het onderzoek. Van Met name de artikelen van Teichmann (2017, 2018, 2019a, 2019b, 2019c) gaan specifiek in op de verschillende sectoren waarin witwaspraktijken plaatsvinden, terwijl de andere artikelen (Custers, Pool & Cornelisse, 2018;Marinaro, 2017;Neumann & Sartor, 2016;Petrunov, 2011;Soudijn, 2014;Stack, 2015;Zabyelina, 2015) meer het specifieke proces van witwassen behandelen. Tot slot wordt bekeken in hoeverre de resultaten van de geïncludeerde studies overeenkomen of kunnen komen met het driefasenmodel. ...
... Er zijn in totaal twee artikelen gericht op de Nederlandse context (Custers, Pool & Cornelisse, 2018;Soudijn, 2014). Italië is ook twee keer onderzocht (Marinaro, 2017;Teichmann, 2017). Vijf artikelen gaan in op witwassen in Zwitserland (Teichmann, 2017, 2019a, 2019b, 2019c. ...
... Zes artikelen zijn kwalitatief van aard (Custers, Pool & Cornelisse, 2018;Marinaro, 2017;Petrunov, 2011;Soudijn, 2014;Stack, 2015;Zabyelina, 2015). Dit betreft voornamelijk onderzoek door middel van kwalitatieve interviews en kwalitatieve analyses van onder andere politiedossiers (Custers, Pool & Cornelisse, 2018;Neumann & Sartor, 2016) en strafzaken (Stack, 2015;Zabyelina, 2015). ...
Eggens, N. (2020). Verschillende modus operandi van witwassen: een systematische literatuur review.
Thesis
Full-text available
  • May 2020
Witwassen is een vorm van witteboordencriminaliteit en is vaak te herleiden naar andere delicten, zoals drugscriminaliteit en mensenhandel. De omvang van witwassen wordt geschat op miljarden euro’s en het bestrijden ervan staat dan ook hoog op de politieke agenda. Empirisch onderzoek naar de verschillende modus operandi van witwassen is echter schaars. Deze systematische literatuurreview tracht een stand van zaken te geven over de huidige beschikbare kennis om zo wellicht een bijdrage te kunnen leveren aan de beleidsvorming. Hierbij zijn twaalf empirische artikelen geïncludeerd die samen tien studies vormen. De relevante informatie van deze artikelen is geëxtraheerd en systematisch gedocumenteerd volgens een vast data-extractieformulier. Uit de resultaten blijkt dat er verschillende modus operandi van witwassen bestaan. Witwassen komt voor in verschillende sectoren, zoals de banken- en de vastgoedsector. Daarnaast vindt trade based money-laundering plaats middels antiquiteiten, kunst, goud, sieraden en diamanten. Echter zijn er een aantal kenmerken, waaronder de cruciale rol van contant geld en het mengen van legitiem en illegaal geld, terug te zien bij deze verschillende witwasmethoden. De gevonden resultaten komen grotendeels overeen met bestaande literatuur en leveren ook mogelijk aanvullingen op. Er dient echter uitgebreider onderzoek te worden verricht om een beter begrip te kunnen krijgen van de verschillende modus operandi van witwassen.
View
... In Italy, there are also some attempts to consider the phenomenon of usury sociologically, mainly employing a qualitative methodology. Marinaro (2017) shows two usury distinctions in Italy in her research. Firstly, it is highly connected with organised crime, especially in the country's south. ...
... As to the impact of the socio-demographic position of a household, the current analysis has demonstrated that the top earner's age, sex, origins, education and employment status, household type and location in the country are relevant predictors for usury vulnerability. These findings align with previous research on usury vulnerability in other countries, thus confirming quantitatively the relevance of socio-demographic factors for understanding usury vulnerability, demonstrated previously mainly in qualitative studies (Basa et al. 2012;Littwin 2008;Marinaro 2017;Rowlingson et al. 2016). ...
Usury vulnerability: measuring and modelling the phenomenon in Italy
Article
Full-text available
Usury has been predominantly studied as an economic or legal phenomenon and only recently has gotten into the spotlight of sociological research. This article aims to contribute to the current literature by operationalising usury vulnerability and analysing household factors impacting it, using the European Union Statistics on Income and Living Conditions (EU-SILC) data for Italy. To construct usury vulnerability, we examined variables measuring a household’s financial and material well-being. As to factors impacting the phenomenon, we included those reflecting a socio-demographic position of a household (household composition and territorial position within the country, age, sex, education, and employment status of the top earner). The estimation results indicate that all micro-level factors matter in terms of usury vulnerability. Therefore, by identifying the most vulnerable social groups, the model might help develop relevant policy interventions to fight the spread of usury, especially in times of economic decline.
View
... On a macro level, one of the factors which encourage people to take a loan from loan sharks is a crisis as happened in Italy (Marinaro, 2017), as well as in the UK during the 2008 crisis (Saunders, 2021). Borrowing through a loan shark is not a solution as it adds new problems (Dasmaran et al., 2019). ...
Is Loan Shark an Alternative? The Intentions to Take a Loan from Loan Sharks in Indonesia
Article
Full-text available
  • Sep 2022
Research rarely reaches the discussion of loan sharks. This study describes how intentions are influenced by service, word-of-mouth, and subjective norms, with knowledge of usury acting as a moderating variable. This quantitative study involved 150 respondents. The data collected was analyzed by using structural Equation Modeling (SEM) with SmartPLS 3 Software. According to this study, service significantly affected intention to take a loan from loan sharks but had no influence on word-of-mouth. Though it has no influence on intention, the subjective norm has a significant influence on word-of-mouth. The service on the intention is mediated by word of mouth, which has an influence on the intention. However, word-of-mouth does not act as a mediating variable between subjective norms and intentions. The intention to use the services of loan sharks is significantly moderated by knowledge about usury, which also significantly moderates word-of-mouth and subjective norms. It did not, however, moderate the influence of service on intentions. As a result, it is recommended that the government create Islamic financial institutions not only for the middle class and upper class but also for the lower economic class, which is vulnerable to loan sharks.
View
... Specialized literature and reporting often treat illegal money lending, usury or loan sharking as ancillary criminal activities of OCGs (Marinaro, 2017). The extent of the problem is, therefore, as we have already mentioned, probably underestimated. ...
Out of the debt trap. The financial capabilities against financial abuses
Conference Paper
Full-text available
  • Jun 2021
This article explains that the absence and low levels of financial literacy and awareness prevent consumers and entrepreneurs from fully satisfying their consumption and investment needs and, more generally, prevent them from realizing their life projects by constricting them into the ‘debt traps’. Therefore, consistent with the capability approach (Sen, 1993, 1995), financial literacy is considered, first and foremost, an indispensable part of the general endowment of ‘functionings’ to reach well-being. The paper also stresses the importance of combating financial illiteracy to counter the spread of illegal finance. Once again, as far as Senius’ theory is concerned, the spread of illicit finance should be interpreted as an external condition unfavorable to the diffusion of the ‘capabilities’ supporting households and entrepreneurs' financial choices. Unfortunately, during the current pandemic, loansharking, usury, and other criminal finance crimes have spread dramatically. Especially in the most fragile socio-economic contexts, where, moreover, organized criminal groups are stronger and more deeply rooted, and unfortunately, needy families and entrepreneurs stay in these ‘debt traps’. Finally, the paper indicates possible new initiatives that would increase financial literacy as a capacity-building tool following the Edufin Committee of 2020 and the OECD recommendation 2020. It could increase financial resilience, conscious consumption, and active citizenship and democratic opposition to financial abuse and crime.
View
... Најчешћи узроци сукоба су нерашчишћени имовински односи, наплата преосталих дуговања из неког пословног односа или доспелих дуговања по основу заједничких транскација (Бошковић, Бановић, 2001: 149). Међутим, дужничко-поверилачки однос може настати и из легалног пословања када повериоци, у немогућности да наплате своја законита потраживања, врше цесију и уступају трећим лицима новчана потраживања која у законом предвиђеном поступку нису могли намирити (Marinaro, 2017). Неретко је реч о трећим лицима која се баве овим видом криминалитета, те уз одговарајућу новчану накнаду наплаћују дата потраживања вршењем кривичног дела изнуде. ...
View
View
The spirit of Islamic economics versus loan sharks: investigating intentions to use loan sharks in Aceh, Indonesia
Article
  • Jun 2024
Purpose This study aims to determine whether the relationship between the Muslim community and moneylenders is important even though the practice of moneylenders is clearly forbidden in Islam. This study examines a model consisting of two major theories, namely, the theory of planned behavior (TPB) and marketing theory, and the existence of the religiosity variable as a moderator. Design/methodology/approach This study uses a structural equation modeling (SEM); SEM was chosen because it has effectiveness in revealing estimates of direct and indirect effects and shows moderating values. Manual questionnaires were distributed to 385 Acehnese who use loan shark services. Findings The combination of TPB and marketing theory constructs has a significant influence on the intention to use loan shark services. Then, the existence of the word-of-mouth variable significantly mediates the relationship between service and subjective norms and the intention to use loan shark services. In fact, the position of the religiosity variable has a significant negative effect on the intention to use loan shark services, and in terms of the moderating effect, it has been demonstrated that religiosity weakens the relationships between the services provided by loan sharks and the intention to use loan shark services. Research limitations/implications This study has several limitations. First, sampling is still limited and can still be expanded. Second, it is difficult to get data and there are people who refuse to be sampled. Third, this study succeeded in capturing the phenomenon of the behavioral intentions of people who have a religious spirit but are still associated with moneylenders. Practical implications This research provides material implications for the Aceh Government, especially in managing public funds. Indeed, Aceh is a productive province that has produced policies and regulations that encourage the Sharia economy; it is just that the use of social funds and Islamic philanthropy in Aceh has not been maximized, which has led to the growth of a network of moneylenders. Because of this, Aceh, which has been successful in producing the law for Islamic financial institutions, should also be successful in destroying the moneylender network by synergizing to create alternatives and financial solutions for the community, especially the lower and middle classes. Social implications This research explains that the level of religiosity can dampen and reduce the intention to use loan shark services; therefore, it is important for the community to understand the dangerous impact of using loan shark services and expand the role of community leaders in socializing the idea of lending money to loan sharks. Originality/value Due to the lack of studies on the behavior of Muslims using the services of moneylenders, therefore, this study provides new knowledge of the literature on the economic behavior of Muslim communities who continue to use the services of moneylenders. This study develops TPB theory and marketing theory in one model and involves the religiosity variable as a moderator.
View
View
View
Debtfare States and the Poverty Industry: Money, Discipline and the Surplus Population
Book
Full-text available
  • Sep 2014
Winner of the bisa ipeg book prize 2015 Under the rubric of ‘financial inclusion’, lending to the poor -in both the global North and global South -has become a highly lucrative and rapidly expanding industry since the 1990s. A key inquiry of this book is what is ‘the financial’ in which the poor are asked to join. Instead of embracing the mainstream position that financial inclusion is a natural, inevitable and mutually beneficial arrangement, Debtfare States and the Poverty Industry suggests that the structural violence inherent to neoliberalism and credit-led accumulation have created and normalized a reality in which the working poor can no longer afford to live without expensive credit. The book further transcends economic treatments of credit and debt by revealing how the poverty industry is extricably linked to the social power of money, the paradoxes in credit-led accumulation, and ‘debtfarism’. The latter refers to rhetorical and regulatory forms of governance that mediate and facilitate the expansion of the poverty industry and the reliance of the poor on credit to augment/replace their wages. Through a historically grounded analysis, the author examines various dimensions of the poverty industry ranging from the credit card, payday loan, and student loan industries in the United States to micro-lending and low-income housing finance industries in Mexico. Providing a much-needed theorization of the politics of debt, Debtfare States and the Poverty Industry has wider implications of the increasing dependence of the poor on consumer credit across the globe, this book will be of very strong interest to students and scholars of Global Political Economy, Finance, Development Studies, Geography, Law, History, and Sociology.
View
View
View
Out of the shadows: a classification of economies by the size and character of their informal sector
Article
Full-text available
  • Oct 2014
Given that 60 per cent of the global workforce is in the informal sector, this article develops a typology that classifies economies according to, firstly, where different countries sit on a continuum of informalization and, secondly, the character of their informal sectors. This is then applied to the economies of the 27 member states of European Union (EU-27). Finding a clear divide from east to west and south to north in the EU-27, with the more informalized and wage-based informal economies on the eastern/southern side and the less informalized and more own-account informal economies on the western/Nordic side, it is then revealed that formalization and more own-account informal sectors are significantly correlated with wealthier and more equal (as measured by the gini-coefficient) countries in which there is greater labour market intervention, higher levels of social protection and more effective redistribution via social transfers. The article concludes by discussing the implications for theory and practice.
View
View
View
View
View
Debt: The First 5000 Years
Book
  • Jul 2011
Every economics textbook says the same thing: Money was invented to replace onerous and complicated barter systems—to relieve ancient people from having to haul their goods to market. The problem with this version of history? There’s not a shred of evidence to support it. Here anthropologist David Graeber presents a stunning reversal of conventional wisdom. He shows that 5,000 years ago, during the beginning of the agrarian empires, humans have used elaborate credit systems. It is in this era, Graeber shows, that we also first encounter a society divided into debtors and creditors. With the passage of time, however, virtual credit money was replaced by gold and silver coins—and the system as a whole began to decline. Interest rates spiked and the indebted became slaves. And the system perpetuated itself with tremendously violent consequences, with only the rare intervention of kings and churches keeping the system from spiraling out of control. Debt: The First 5,000 Years is a fascinating chronicle of this little known history—as well as how it has defined human history, and what it means for the credit crisis of the present day and the future of our economy.
View
The next economic disaster: Why it’s coming and how to avoid it
Article
  • Jan 2014
Current debates about economic crises typically focus on the role that public debt and debt-fueled public spending play in economic growth. This illuminating and provocative work shows that it is the rapid expansion of private rather than public debt that constrains growth and sparks economic calamities like the financial crisis of 2008. Relying on the findings of a team of economists, credit expert Richard Vague argues that the Great Depression of the 1930s, the economic collapse of the past decade, and many other sharp downturns around the world were all preceded by a spike in privately held debt. Vague presents an algorithm for predicting crises and argues that China may soon face disaster. Since American debt levels have not declined significantly since 2008, Vague believes that economic growth in the United States will suffer unless banks embrace a policy of debt restructuring. All informed citizens, but especially those interested in economic policy and history, will want to contend with Vague’s distressing arguments and evidence.
View