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Why are so many domestic workers in debt?

Domestic workers can face financial difficulties for many reasons. According to our research, 83% of Hong Kong’s migrant domestic workers are in debt. Often, the debt cycle starts with recruitment. For newcomers, upon arrival in Hong Kong they may already be in debt due to very high fees charged during the recruitment process (training, placement fees, etc.). They may be forced to take loans with high interest rates to repay these costs. With no access to formal credit (bank loans) in Hong Kong, helpers may resort to (licensed or unlicensed) money lenders. Through Enrich participants, we also sometimes hear that an employment agency may bring them to a loan company as soon as they get here to sign a loan contract to cover recruitment fees - this is essentially money which they don’t actually receive but which they are compelled to pay back for 3-6 months. Often they are not even given certified documentation for their loan.

Also, money lenders make loans very easily accessible to migrant domestic workers in Hong Kong. Basic requirements are employment contracts and HKID. If they are good borrowers, they may be invited by these loan agencies to renew their contracts and apply for another loan. This could be very tempting to the workers, whether or not they really need the money. 

Repayment of these loans can take months and sometimes years, depending on the size of the loan, and can involve bullying and threats from loan sharks. 

Lack of financial literacy is a huge factor in indebtedness - for example, unaware of the legal responsibility, many domestic workers sign as guarantors for a loan contract. These guarantors can often end up paying for the remaining repayments due because the principal borrower has failed to fulfill their obligation. 

Additionally, emergencies happen such as medical emergencies or natural disasters - without an emergency fund in place, many domestic workers have to resort to loans in these situations.

In the meantime, domestic workers are also expected to send money home as soon as they arrive in Hong Kong; most support at least 4-5 family members and often do not feel they can tell their families about their financial situation here. 

Financial education is preventative and can provide future protection for your helper and even yourself as an employer! Learn more about our impact and how you can sponsor your helper to attend our courses.