Loan Sharks Still Plague Loja’s Markets Despite Government Microcredit Push

If you’ve ever wondered why prices at your local market sometimes seem disconnected from the broader economy, part of the answer may be loan sharks.

The Problem

Usurious lending — locally known as chulco — continues to plague the markets of Loja city and surrounding cantons despite the government’s rollout of subsidized microcredit programs aimed at displacing informal lenders.

According to a Diario Crónica investigation published this week, market vendors in Loja regularly borrow from informal moneylenders at interest rates that vastly exceed Ecuador’s legal limits. While Ecuador’s Central Bank sets maximum legal interest rates by sector (currently around 24-28% annually depending on the credit type), chulqueros (loan sharks) routinely charge 5-10% monthly — translating to 60-120% annually.

Why Vendors Turn to Loan Sharks

Despite the availability of formal credit, market vendors choose informal lenders for several reasons:

• Speed: A chulquero can provide cash in minutes. A bank or credit union application takes days to weeks
• No paperwork: Informal loans require no credit history, tax returns, or collateral documentation
• Accessibility: Loan sharks operate inside the markets, visiting vendors at their stalls daily to collect payments
• Desperation: Many vendors need small amounts ($50–$500) to restock inventory immediately and can’t wait for formal lending processes

The Government’s Response

The Noboa administration has pushed several microcredit initiatives through BanEcuador (the state development bank) and cooperatives to provide formal alternatives:

• Crédito de Desarrollo Humano — small loans for vulnerable populations at subsidized rates
• Microcrédito Productivo — loans up to $20,000 for small businesses at regulated rates
• Mobile banking initiatives — bringing formal financial services to rural and market areas

But the programs haven’t dislodged the chulqueros. Vendors report that the government’s offerings come with too much bureaucracy, too many requirements, and too little flexibility for the reality of market commerce.

The Human Cost

Vendors caught in the chulco cycle face:

• Harassment and threats when payments are late
• Confiscation of merchandise as informal collateral
• Debt spirals where new loans are taken to pay off old ones
• Violence — in some cases, chulqueros have been linked to criminal organizations

Loja’s Fiscalía (prosecutor’s office) has investigated usury cases, but convictions are rare because victims are reluctant to testify against lenders they depend on for daily survival.

What This Means for Expats

• This affects your cost of living. When market vendors pay 60-120% interest to restock their stalls, those costs get passed on to consumers through higher prices for produce, prepared foods, and goods at local markets
• If you employ local staff, understand their financial reality. Domestic workers, gardeners, and other local employees may be trapped in informal debt cycles. Some expats have helped employees access formal banking as a path out of usurious lending
• Don’t participate in informal lending. Well-meaning expats sometimes lend money to local acquaintances. While the impulse is generous, informal lending can create complicated dynamics and, in some cases, legal exposure
• Use formal markets and cooperatives when possible. Supporting vendors who use formal credit helps break the chulco cycle
• Loja’s market economy is vibrant and worth engaging with. Despite these challenges, Loja’s markets — including the famous Mercado Central — offer some of the best prices and freshest produce in southern Ecuador

Source: Diario Crónica