The Duterte Administration recently announced that it would stop to the 5-6 business in the country. It basically involves lending money with a twenty percent (20%) monthly interest and is generally identified with Indian nationals who are into such business.
The government is launching a massive microfinance program, which is designed to be a “better” option for Filipinos who resort to 5-6 loans as the government loan charges significantly lower interest rates.
Is the issue against the 5-6 business limited to the high interest rate?
Those who patronize the 5-6 business will tell you that 5-6 loans, particularly those offered by Indian nationals, are attractive despite the 20% monthly interest rate because of its responsiveness to the needs particularly of small entrepreneurs.
What will be the requirements for Filipino entrepreneurs to avail of the microfinance loans to be extended by the government? It will not be much of an alternative to 5-6 loan because the latter has no documentary and other requirements. It is simply a matter of the one extending the loan to ascertain that the loaner is a bona fide entrepreneur or resident of a particular market or place.
Is the government loan designed to accommodate deferment of loan amortization? The 5-6 loans are attractive to small entrepreneurs because they can skip scheduled loan repayments particularly during days when business earnings are not good. They can also adjust, at their discretion, how much installment payment to make depending on their business income for the day.
The government intention to help small entrepreneurs particularly by offering them with lower interest rate loans for their working capital needs is indeed laudable. However, is it “friendly” to small entrepreneurs like market vendors?
Can the government effectively stop the 5-6 business in the country? Is stopping this business in the best interest of Filipino entrepreneurs and the country?
If the alternative offered by the government is not suited to the economic realities faced by Filipino entrepreneurs, it will not achieve its purpose.
What is clearly needed is for a system that will make those who extend 5-6 loans to give their share in the national coffers just like other Filipino businessmen and employees. They should be taxed.
(Dr. Ramon Ricardo A. Roque, CESOI, Diplomate)