ARRESTING Indian nationals who provide business loans to micro-entrepreneurs will mean killing decent folk who are struggling to eke a livelihood in the underground economy, the labor group Partido Manggagawa said Wednesday after the government announced a crackdown.
The labor group said that while they agree that usury must end, thousands of small entrepreneurs would also likely close their businesses.
“Their existence has become socially-compatible over time compared to the hooded riding in tandems who roam communities to kill their targets, PM spokesperson Wilson Fortaleza said, noting that the usurious system called “5-6” where every P5 of principal will be paid P6, or an effective short-term rate of 20 percent.
The labor group suggested that an alternative system must be formed or the Duterte administration will only be creating new problems for small people.
“We believe an alternative program can easily replace the 5/6 system. A national bank or a national lending program that caters to the needs of the poor can surely take its place. Without this needed replacement, the government will only push the system further into the black market where more notorious financial sharks operate,” he said.
He also said that an elaborate national employment program must be organized to bring down the number of workers in the vulnerable sectors of the economy.
“The Bumbays [Indian money lenders] operate without permits and we have the anti-usury law that prohibits the system but this is the kind of arrangement that flourishes in the mainly underground market that dominates the Philippine economy.
“They make small loans to small people. This is the practical economic reason why the system gained mutual agreement in poor communities where a big number of unemployed and underemployed members of the labor force are in desperate struggle for sources of livelihood,” he said.
Fortaleza also asked where small-time businesses will go for their small financing needed to jump-start or sustain a small, unregistered enterprise, like a sari-sari store, eatery or repair shop.
He said these small entrepreneurs definitely are not welcomed by commercial banks because of their inability to meet loan requirements, including collateral.
Of close to a million registered businesses in the country, more than 90 percent are considered micro-enterprises or those with capitalization of less than P 3 million and employing not more than 10 people.