Even businessmen borrow money, let alone those who work at a minimum wage each day.

Utang is a part of Filipino culture prominent enough to have caught the attention of Pres.
Rodrigo Duterte.

. It does not matter if the repayments are as small as 20 pesos a day, they will diligently come at
the borrowers doorsteps everyday. Sometimes they will even offer furniture, small appliances,
and other household items and the payments will be just the same-everyday.

If you borrow Php500, you have to pay with the additional 20% interest: 500 x .20 = 100. You
have to pay Php600 in daily installments. Why did it become so popular? Since the repayment is
on a daily basis, the cash to be paid seems smaller than it really is. It is easier to part with a 20
peso bill each day rather than Php600 in a onetime payment. Also, there is no need to hassle
yourself with any required documents unlike in banks.

Money Lenders Vs Banks

Private lenders can offer short term loans, with least required documents- sometimes none with
the case of Bombays. On the other hand, not so many Filipinos are keen to take loans from
banks, this is due to the hassle of required documents and a long time of process. Banks also
dont usually give short term loans.

Alternative to 5-6 lending

A background check on the borrowers creditworthiness is seldom conducted. Often,

its enough that he has a permanent address, not a transient of the place

Trade Secretary Ramon Lopez wants to put an end to this kind of transaction because it translates
to an interest rate of 20 percent a month, which is way above commercial lending rates.

To meet this objective, Lopez said the government would set aside P1 billion next year to lend
money to micro and small enterprises at 2-percent-a-month interest, with P2,000 as the minimum
loan. According to reports, 98 percent of registered businesses in the country are micro, small
and medium enterprises and they employ more that 50 percent of the national workforce.

The principal reason for the popularity or acceptability of this transaction is convenience. The
borrowers do not have to look for the lenders. The latter go to the public markets or places where
they think there are people who need quick cash and have the capacity to pay the loan. On the
other hand, if a prospective borrower wants to apply for a loan with a financing company or a
bank, he has to dress up (or at least look presentable) and visit its office, which is not only
inconvenient but can sometimes be intimidating.
The proposed alternative to 5-6 lending scheme should be carefully studied before its
implementation to avoid precious taxpayers money going down the drain or winding up in the
pockets of unscrupulous politicians.

Bumbay loans sharks thrive due to our financial apartheid

The Philippine banking system practices its own form of apartheid. For the rich and adequately
collateralized only. The banks do not lend to the poor because the poor can only mortgage their
desperation and their poverty.

What more if there is no law that makes it mandatory for banks to lend to the other sectors as
desperate and credit-hungry as the small farmers?

In fairness po sa mga bumbay, marami sa ating mga kababayan ay napagtapos nila ang
mga anak nila sa pag-aaral sa tulong ng 5/6 na yan. Ang tiyaga kasi nilang galugarin ang
mga suluk sulok ng maynila at iba pang lugar para lang makapagpautang pero siyempre,
malaki rin ang risk nila (i.e. holdap/ma-1/2/3, makikilan ng mga tambay etc.) Paran na rin
masasabing necessary evil kumbaga. Tama ang analysis nyo, isipin nyo kung
amgpapautang ang bangko ng worth P100M sa mga mahihirap, ang daming paper work
at sakit sa ulo. Kumpara sa magpautang sila ng P100M let say sa SM, less ang ang sakit
ang ulo at merong collateral pa. Sa mga mahihirap, ang collateral ay tiwala, pangako at
chansa na hindi matakbuhan

Judith on January 15, 2017 10:14 am

And yet I hear those poor people say that these Indian nationals were able to help them
get through with life. Can the government do the same thing they do like collecting every
day or every week and also give small loans without any background check? The middle
class is shrinking because we pay for everything and even the SSS, for example, has to be
salvaged by the members even though our contributions were used to fund businesses of
favored people. I pity the poor but because they are many hence more votes, the battlecry
is to subsidize the poors needs most of the time. When can the middle class who have no
tax shields actually experience direct help from the government through the taxes we paid
in various forms like VAT, income tax, property tax. Once the middle class diminish, the
government will have less people to tax to subsidize the poors needs. That time is
actually being felt right now as we slowly join the poor since our properties can be
 auctioned off if we cant pay our property tax and our jobs cant be sustained by our
employers.

Duterte wants discussion with Indian govt on 5-6 lenders

President Rodrigo Duterte said on Saturday that he wished to talk with the Government of
India about 5-6 lenders operating in the Philippines, most of whom were allegedly Indian
nationals or migrants.

"OK lang naman yung magpahiram sila ng pera," Duterte said in an interview broadcast on a
national network. "But ang bagong style kasi nila, pahiramin nila ng pera yung pobreng
Pilipino, tapos pabilhin pa nila ng refrigerator, mga appliances. So doblado ang kalbaryo ng
mga Pilipino."

Senator Panfilo Lacson also said that it was unfair of the government to target Indian
nationals involved in 5-6 lending as Filipinos and Chinese nationals were also engaged in the
practice. DVM, GMA News

There are also few academic studies looking at the impact of the "five-six" lending scheme. One
of these is a paper that came out in the Kyoto University's Kyoto Review of Southeast Asia
journal in October 2003. The paper, entitled "The 'Bombay 5-6': Last Resource Informal
Financiers for Philippine Micro-Enterprises," and written by Asian Institute of Management
associate professor Mari Kondo Indian "five-six" lenders began to increase their market share of
such loans only after the 1997 Asian financial crisis

this study found that hosting Indian 5-6s with their different risk diversification
strategies could be an asset for Filipino society, especially during economic
downturns. The owners of micro-enterprises in a developing country are particularly
vulnerable to the external shocks of globalization, and informal financing
mechanisms with global funding sources, such as that of the Indian 5-6 lenders,
may assist in alleviating such volatility."

Group opposes war against 5-6 lenders

Cash-strapped small business owners may end up as collateral damage in the governments war
against the 5-6 system if it fails to implement a replacement for the popular money lending
scheme, according to a labor group.

In a statement, Partido Manggagawa (PM) spokesperson Wilson Fortaleza said the lack of a
suitable alternative for the 5-6 system will do more harm to its usual clientsowners of small
and medium-sized enterprises (SME).

The labor leader is now urging the government to enforce a national lending program, which will
extend loans to SME owners with minimum requirements.

Can Duterte stop 5-6?

There is a principle in physics that says, Nature abhors a vacuum. In Filipino:

Hindi pwedeng palitan ang isang bagay kung walang ipapalit na mas ayos.

But he must face the painful reality that 5-6 is a multiheaded hydra, whose head
will grow back unless the main reason for its existencenamely, povertyis
stumped.

There is a popular saying among 5-6 borrowers: Ang Pinoy na nagigipit, sa Bombay
kumakapit.

Third is the easy payment scheme of small amounts. For the borrowers, this is OK lang
because they dont feel the heavy burden of paying big installment regularly. Besides, the
amount to be paid is based on the estimated daily earning of the borrower.

First, unlike banks, the 5-6 loan provides almost instant cash with a very short (most of the
time, one day or less) waiting period. For a family who needs urgent capital, time is essential. In
contrast, bank loans take time to obtain due to petty bureaucracylike signing documents,
interviews, obtaining a passbook, presentation of two IDs, etc.
Second, the loan that can be obtained is almost limitless as long as the borrower and the
Bombay have already established mutual trust borne out of long productive partnership.

Any loan program the Duterte administration will introduce must reckon with the sad reality that
many Filipinos are deadbeats when it comes to the payment of loans. They reason that nobody
goes to jail for not paying loans, especially government loans!

Govt bares P1-b fund to replace 5-6 lending

Priority beneficiaries include micro-enterprises and entrepreneurs that do not have easy access to
credit, such as, micro-entrepreneurs, market vendors, agri-businessmen and members of
cooperatives, industry associations and co-operators.

SMEs in the Philippines: Going beyond survival

In the Philippines, the number of SMEs grew by 66% from 492,510 in 1995 to 816,759 in 2011.
Similarly, the numbers of those employed by these firms have grown by 45.7% from 2.7 million in 1995
to 3.9 million in 2011.

These growth figures mask a wide array of challenges faced by these firms, notably with the
onset of economic integration in ASEAN. Many Philippine SMEs remain too small, only
meagerly augment household incomes, and are unable to take advantage of opportunities brought
about by ASEAN integration.

Goodbye Bombay!: 5-6 lending scheme new focus of Duterte govt

Loan sharks remain popular among low-income Filipinos

Filipinos continue to seek credit from loan sharks and other informal lenders than go to banks for
their financial needs, according to the results of a World Bank survey.

Data show that 38 percent of the surveys respondents rely on informal sources of credit such as
a money lender, a family member or a friend as sources of financing.

Further, some 34 percent of respondents resort to informal savings such as those kept in
households.

Largely, Filipinos rely mostly on informal sources of financing and informal savings, Nataliya
Mylenko, World Bank senior financial sector specialist, said in a briefing on Wednesday.

Mylenko added that when they look at the data closely, some 56 percent of those surveyed said
they used informal credit and the remaining 44 percent used a mixed of formal and informal
sources of credit.
Data show that 13 percent used microcredit only; 4 percent used formal sources of
credit only; 5 percent combined informal, microcredit, and formal sources; 10
percent used combined informal and micro credit; and 12 percent used both formal
and informal credit sources to borrow money