About 30,000 illegal money lenders have been offered the opportunity to register their business to make them officially part of the financial system.
The Federation of Indian Chambers of Commerce Philippines Inc. said the group had asked the illegal lenders to formalize their businesses with the Securities and Exchange Commission, issue invoices and receipts and start paying the proper taxes.
“We have the moral obligation to help these people. They are Indians, predominantly punjabis and the minority are the sheikhs. But mind you, there are also Filipinos, Chinese and Korean illegal money lenders,” federation president Rex Daryanani said during the general membership meeting held Thursday night in Pasay City.
One of the federation’s aims, he noted, was to free the Indians from the branding stigma of being called “bumbay” and “loan sharks” as a result of the “5-6” lending practice introduced by the Indians a long time ago.
He said the term 5-6 was coined because of the system lending that collects money or payment on a daily basis until the sixth day or Saturday, when the lender gets his 20 percent interest.
“That does not happen anymore. The way it works now, even with the smallest micro entrepreneur, is if you borrow P10,000 you have to pay that in 120 days at P12,000. That is an effective rate of 5 percent per month. That is a very sound practice if you look at how a small entrepreneur will finance his business,” said Daryanani adding the lender does not penalize the borrower in case on non-payment.
The system, he added, was based purely on trust without documents.
“And while there had been issues of harassment on these people, it only become more clear that lenders with P1 million capital each means P30 billion being sucked out of the system,” said Daryanani.
The federation lauded that the Trade Department’s initiative to help legitimize iĺlegal lenders and bring them into the system as mainstream players.
It also acknowledged the department’s novel proposal of endorsing the P3 program as a venue for micro-entrepreneurs to have access to capital at very low interest rates.
The program has allotted an initial P1 billion for retailing by conduits through SB Corp., the Trade Department’s lending arm. The program is open to former 5-6 lenders that have registered their business with the SEC.