An interagency body, including a group of Indian business operators, is crafting a transition scheme that would allow “illegal foreign money lenders” to switch to microfinancing.
Trade Secretary Ramon M. Lopez Thursday said the Department of Trade and Industry was working on this with the Departments of Justice and Foreign Affairs, immigration bureau, National Intelligence Coordinating Agency, Bangko Sentral ng Pilipinas, Philippine National Police, Small Business Corp. (SB Corp.) and the Federation of Indian Chambers of Commerce (Philippines) Inc. (FICCI).
Lopez said in a statement they were on talks about initial steps to put a stop on the 5-6 lending scheme, in which borrowers pay an interest of at least 20 percent of the loan amount.
The trade chief said representatives of the various agencies and the Indians met on Feb. 3 to work on the transition “to allow illegal foreign money lenders to legalize their resident status and register their lending businesses with the Securities and Exchange Commission (SEC).”
“The transition period is needed to prevent undue harassment of concerned lenders,” Lopez said.
Citing data from the FICCI, Lopez said the 5-6 system was worth P2.4 billion yearly and involved 30,000 operators nationwide.
“After the prescribed transition period, 5-6 lending must stop and micro-businesses must shift to P3 and other legal microfinancing facilities,” Lopez said.
He was referring to the government’s flagship microfinancing initiative dubbed Pondo para sa Pagbabago at Pag- asenso or P3.
Lopez said the P1-billion P3 program—which initially rolls out in Tacloban City, Occidental Mindoro and Sarangani—was intended to provide micro, small and medium enterprises (MSMEs) with easy access to financing.
This means borrowers need no collateral and the interest is minimal. Financing is available through micro-financing institutions (MFIs) and cooperatives that are accredited by DTI and the SB Corp.
“We should be seeking the frontiers, these people who have not been reached by the MFIs are the same people targeted by the 5-6 (lenders),” Lopez said.
When asked what actions would be taken to address 5-6 lending done by other nationalities, Lopez did not answer promptly.
He said a technical working group (TWG) has been formed and tasked to provide specific guidelines on the compliance and registration of lending businesses.