2016 News File
Baba eyes option to lure people
away from 5-6 lending scheme
By DAVE S. ALBARADO
TAGBILARAN CITY - With the government's eye now focusing on 5-6 lending scheme, the city is joining the effort in providing an alternative micro-lending scheme.
City Mayor John Geesnell "Baba" Yap II reveals plans to put up a micro-financing facility for people in an effort to stop the 5-6 lending, which has been the new focus of the Duterte administration.
President Duterte expressed his opposition to the 5-6 lending that has been pushing people in the fringes to poverty.
Yap said in an interview with The Bohol Tribune he has been against usurious practices depending on the use of the funds.
He said the plans involve coming up with a livelihood program where loans can have low interest rates. However, he said the city has yet to finalize the plans.
He said it is best to give the people options as far as finding funds.
Providing the right options may be able to wean people away from going to 5-6 lending schemes as the city eyes to provide lending facilities with the lowest interest rates possible.
WAGING A NEW BATTLE
On Monday, in a meeting with his cabinet, President Duterte ordered the "arrest" of "foreigners involved" in the 5-6 money lending scheme according to a Facebook post of Agriculture Sec. Manny Piñol.
Piñol quoted Mr. Duterte as saying: “Sobra na yan. Pautangin ng 5-6 (interest rate) tapos bentahan pa ng mahal na mga appliance. Patay talaga ang pobre dyan (That’s too much. Lending money at 5-6 and then even selling to borrowers expensive appliance. That will really kill the poor).”
In the post, the agriculture secretary said, “There are about 50,000 motorcycle-riding Punjabis involved in a money-lending scheme where borrowers pay back a P5,000 peso loan with a P1,000 interest in one month collected on a daily basis.”
As of press time, the post accompanied with a photo of an Indian man riding a motorcycle, already amassed more than 12,000 likes and other responses with shares.
HOW 5-6 LENDING WORKS
The "Bombay" financing has been the last bastion of people especially micro and small businessmen in the country. Severely resource challenged business people, most of which operating in local public markets survive with loans from informal financiers known as 5-6.
The "pautang" practice of 5-6 has been around since the early 70's. While limits to the interest rates have been repealed, the underground financial scheme has flourished and known to immediate neighbors. As the usury law was repealed, the 5-6 scheme boomed not just in the outskirts but to urban locations as well. It has become ubiquitous to the point that it has been accepted as part of Pinoy culture.
The 5-6 means you need to pay P1,000 as interest for P5,000 borrowed.
People should never resort to this kind of borrowing, said eCompareMo.com.
However, the convenience and the favorable terms may tempt people to borrow money from 5-6 lenders. White the terms are attractive, it can be a can of worms open to high interest rates and unreasonable fees.
The President is not happy with this lending scheme as it only pushes the poor people down into a quagmire and making things difficult for them to recover from the debt.
Government has set up P 1-B fund as a starter fund for micro-lending activities aiming to kill the 5-6 as early as November last year.
Trade secretary Ramon Lopez said the program, called “Pondo Para sa Pagbabago at Pag-asenso,” would offer lower interest rates than the 20 percent under the current 5-6 scheme.
Lopez said about five or six established microfinance institutions are being eyed to be part of the program.
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