October 30, 2019 at 07:55 pm
Ray S. Eñano
Online lending in the Philippines offers a more viable option to financially-challenged individuals and small and medium industries.
It has given borrowers a shot at easy financing at less prohibitive cost. It fits in with the financial inclusion objective of the Bangko Sentral ng Pililipinas in giving the public access to a wide range of banking products and services.
But like any novelty, online lending is sometimes misunderstood and arouses suspicions. The latest controversy has cast the overall industry in a bad light.
Nearly a month ago, illegal practices of at least 67 online lenders came out in the open, triggering concerns from several quarters. The National Privacy Commission has received complaints from a number of borrowers on how these online lenders resorted to shaming them if they could not pay their debt, thus violating their data privacy rights.
The Securities and Exchange Commission also raised legitimacy issues against some of the online lenders, specifically those with no known business addresses. Some were armed with mere online applications that served as bases of their lending operations. Because of difficulties to locate them, the SEC had to come out with published notifications, asking the board of directors and corporate officers to appear before it.
The negative reports overshadowed the objectives and the nature of borrowing and lending in fostering economic activity in the Philippines. It is inconceivable how the economy will move and prosper without borrowing and lending activities.
The government as a matter of policy allows and encourages lending and borrowing to promote business activity, and imposes laws and regulations as well to prevent abuses by both sides.
Borrowing in the Philippines, however, is never easy given the rigid standards of banks. Creative business initiators have resorted to the use of the internet, or the information superhighway, for financial intermediation. Borrowers and lending companies meet through the internet. When subject to laws on lending, online lending is definitely a legitimate business activity.
The reported malpractices in the industry did not distinguish the legitimate online lenders from the illegitimate ones. They have been lumped together, triggering concerns about their operations and business reputations.
Legitimate online lenders like FCash Global Lending Inc. said the good guys must be distinguished from the bad ones.
“The company’s business operations are completely legal and regulations-compliant. It is duly registered with SEC as a corporation, and has been issued the requisite license to operate as lending company,” says Dean J.V. Bautista
, lawyer of FCash Global Lending Inc.,
The FCash mobile app can be accessed on any smart devices that run on android and can be downloaded on the Google Playstore under the name FastCash.
Legitimate online lending services, meanwhile, are coming out with a position paper to explain their operations. They plan to participate and contribute their share in any probe or public hearing so that appropriate policies could be drawn on online lending.
Legitimate online lending services, like FastCash, provide fast and easily accessible credits without asking for collaterals unlike traditional lenders, which require collateral for loans that have a market value equivalent to at least 125 percent of the borrowed funds.
Moreover, online lenders provide funds at the earliest time—two or three days after application. This is something traditional lenders could not do.
The restrictive lending policies of banks and other traditional lenders have been a big burden to borrowers, forcing many of them to resort to the informal sector, like those who grant “5-6” credits that are payable in 45 days at 20 percent interest rate. It is a financial arrangement that works but such lenders nationals are few and could not cover the financial requirements of the growing population.
Many online lenders, meanwhile, operate aboveground and form part of the formal lending sector. They pay taxes and issue receipts, and are officially registered with government. They have their business permits along with official business addresses. Because they operate officially, they could sue and be sued. In brief, they are the legitimate online lenders.
The challenge is for these legitimate online lenders to inform the public of their operations and declare their intention to serve the borrowing public subject to existing laws and regulations on lending. They must free themselves of any association with the rogue guys, who until now have not answered the SEC’s call to come out in the open.
For policy-makers, they must come out with ample rules to encourage and not restrict online lending to make the sector part and parcel of the formal economy.
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