A lot of indiciduals and small businesses in the Philippines rely on informal money lenders, like what they call “5-6”, everytime they come short or in need of additional funds.
The term ‘5-6’ comes from the practice of borrowing PhP 5,000 (5) and paying back PhP 6,000 (6) in installment, incurring a 20 percent interest. You can see how this could be a profitable business for some individuals.
Over the years, the number of informal lenders have increased — just like the loan interest — and the government has taken notice.
According to an ABS-CBN News report, “even before he became president, it is clear that President Rodrigo Duterte doesn’t like lending schemes like ‘5-6’ because it becomes a burden to Filipino families.”
More than 3,000 money lenders in the database of the Securities and Exchange Commission (SEC) do not have the necessary documents to run a legit lending business. With this, the SEC has decided to take action and crackdown on illegitimate money lenders.
The SEC will conduct “entrapment operations — covert — you really have to probably try and borrow [money] and get all the details,” says SEC chairperson Teresita Herbosa.
One of the goals of the crackdown is to lower interest on loans.
The SEC will work together with the Philippine National Police (PNP), National Bureau of Investigation (NBI), and local government units to get rid of lenders operating without a license.
If caught, the unregistered and/or unlicensed lenders will be get a penalty of PhP 10,000 to PhP 50,000 or jail time between six months to 10 years, according to the Lending Company Regulation Act of 2007.
