Duterte gov’t to counter “5-6” loan sharks with own lending scheme

  • P1 billion funds from the Office of the President will be made available for lending to micro and small entrepreneurs next year
  • The DTI-led loaning program will offer lower interest rates than the 20 percent under the 5-6 scheme
  • It will be called “Pondo Para sa Pagbabago at Pag-asenso”

To complement an earlier directive from President Rodrigo R. Duterte to crack down hard on loan sharks, particularly those engaged in the usurious “5-6” scheme, the government is now moving to put in place an alternative micro lending system which can be readily tapped by even the smallest of entrepreneurs across the country, a cabinet official disclosed.

Speaking at the Quarterly Roundtable of the Wallace Business Forum in Makati City on Friday, Department of Trade and Industry Secretary Ramon M. Lopez said that “Together with (Finance) Secretary (Carlos) Sonny (Dominguez III), Senator Alan Peter (Cayetano) and the Office of the President, we are mounting a micro fund that will replace the 5-6 lending system.”

The Trade chief likewise announced in an earlier speech at the Manufacturing Summit 2016 held early last week that the government has set aside, using funds from the President’s office itself, an initial P1 billion capital which will be made available to micro and small enterprises starting next year — via a government-run lending program billed “Pondo Para sa Pagbabago at Pag-asenso.”

According to Lopez, the release of this P1 billion fund will serve as a test bed for a more ambitious state-run loaning program — P1 billion would be allotted for each region in the coming years, requiring an overall capital of about P18 billion, if this first phase of the initiative “goes well.”

“If the initial P1 billion goes well, the idea is to make it P1 billion per region. So maybe in the next budget season that is what we will request, P18 billion just for funding. But that’s down the road. Initially, we will have to slowly see the market demand,” he said at the trade summit.

Lopez assured that the program would offer lower interest rates than the hefty 20 percent under the 5-6 scheme, although the exact rate has yet to be determined.

loan-article
“Together with (Finance) Secretary (Carlos) Sonny (Dominguez III), Senator Alan Peter (Cayetano) and the Office of the President, we are mounting a micro fund that will replace the 5-6 lending system.”

“As a replacement to 5-6,” he explained, “everything will be the same (in this program) except for the 5-6 (nature). In everything – I mean accessibility, no collateral, ease of getting the funding, and of course we have to make sure collection will be undertaken so we will have to make use of existing, tried and tested micro financing institutions to partner with us and to implement this project with.”

The DTI head further explained: “That budget (P1 billion) will go to a wholesale fund group, it may be SB Corp., and then that wholesale fund will now be lent to about five to six micro finance institutions for eventual retailing. So the government conceptualizes the program and we make them operate and implement it, just like a franchise.”

This project complements President Duterte’s stern orders he gave last October to the Securities and Exchange Commission to go after undocumented “5-6” loan sharks and other illegal lenders in the informal economy who, by law, must first secure primary registration of incorporation and secondary license to extend loans to the public.

Aside from altogether ending the “5-6” industry, Duterte also promised during the campaign period that he, along with then-running mate Cayetano, would work to make a system of affordable loans available.

In one of their listening tours to different sectoral groups back then, the firebrand candidate from Davao City didn’t try to hide his disgust over “anti-poor” loan sharks, whom he stressed often prey on poor folks and small-time entrepreneurs.

He lamented these loan sharks, who are mostly Indian nationals, not only charge borrowers an exorbitant 20 percent interest but also pressure them into buying appliances and other products before being lending them money; thereby adding more burden to their daily expenses.

At one point, the “abhorred” Duterte warned the Indian lenders that “they must stop it or I will bury them alive.”

 

Source 1

2

4


Loading...
Do NOT follow this link or you will be banned from the site!
%d bloggers like this: