Ignacio R. Bunye

Speak out

LUCING, a vegetable/fruit vendor, obtains her day’s working capital from Aling Charing, a known lender in the community. Lucing borrows P1,000 in the morning. With the borrowed money, she goes early to the town’s public market and buys a day’s supply of vegetables and fruits for resale to her neighbors.

If she sells everything, she makes P1,500 for a day’s work. In the evening, Lucing forks over to Aling Charing, or her collector, P1,200 as payment for the loan, leaving Lucing P300 to partially cover the following day’s food and other family expenses.

That in a nutshell is “5-6”--so called because for every P5 borrowed in the morning, the borrower has to pay back P6 later in the day.

For many, it is the only source of credit which can be obtained fast, with no collateral, no complicated application forms. But the price is very steep. Lucing may not realize it. But she pays a whooping interest of 7,200 percent per annum every time she borrows from Aling Charing!!!

Curbing “5-6” is really a challenge both for the government as well as the public and private banking system. Of late, there has been increasing emphasis on inclusive finance to meet the needs of millions of unbanked. But this requires enormous resources. More sectors have to be involved in the effort.

In its own humble way, the city government of Muntinlupa had started to do its share of the heavy lifting.

Starting 2014, City Mayor Jaime R. Fresnedi resumed the city’s Joint Resource Financing Program with an initial allocation of P20 million. Since the program started, more than P40 million has been lent to 4,500 plus micro-entrepreneurs. Fresnedi is targeting not less than 10,000 borrowers by 2019.

The program makes available small business loans, starting at P3,000, to residents with at least one year experience in small business.

Once the applicant passes the credit check, the applicant attends a “business incubation” training session where compulsory savings, among many others, is emphasized.

The loan is absolutely interest free.

In lieu of interest payment, the applicant signs an undertaking to deposit weekly in his/her own savings account in an accredited bank the total equivalent of five percent of the amount borrowed. The savings are earmarked for further business expansion.

Repayment of principal is done in equal weekly installments over a period of two to six months, depending on the size of the loan.