Sunday, May 10, 2015

Have you ever wondered how all of the money change places make a living?

I have and this weeks Mishpacha magazine answered my question. Mishpacha interviewed 2 businessmen who lost everything due to the change places and the article explained how they worked. Changing money is a very low profit business with a margin of maybe 1.5%. This means that if you change $1 million a month you only make $15,000 gross and then you need to pay rent, workers, other expenses, etc. Given that, how can the change places in Charedi neighbourhoods, where there are 3,4,5 or more within blocks possibly all make a living? It is hard to imagine that so many millions of dollars are being changed very month. The answer that the Mishpacha magazine gave was loan sharking. The change places have become de-facto banks giving out loans to people who are desperate for money at ridiculously high rates. The businessmen who were interviewed spoke of taking a 20,000 shekel loan for a week at an interest rate of 5% for the week. Over a year that comes out to over 200% interest. Of course when after a week you can't pay back, they roll it over for another week taking another 5% interest etc. You end up using up all your money just to try to pay the interest.

Of course, these kinds of loans are both illegal under Israeli law as well as under halacha but it doesn't stop anyone. Unfortunately, many in the Charedi world are desperate for money and get sucked in.

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