MILLIONS of Filipinos can now stop going to loan sharks and other informal lenders who burden them with unreasonable and high interest rates if the government would strengthen microfinance institutions in the country, said Senator Bam Aquino on Tuesday.
“The government should strengthen microfinance institutions to put an end to Filipinos being dependent on 5-6, which exact excessive payments and impose unjust interest that further burden them,” said Aquino.
With the help of Microfinance NGOs, Aquino said poor and small-scale businessmen would have an alternative to secure loans with low interest and without collateral.
Aquino made the statement following reports that around three-million Filipinos, mostly small-scale entrepreneurs, are indebted to loan sharks and informal lenders.
Despite the high interest, many Filipinos are enticed to obtain financing from loan sharks because they are not required to submit documentary requirements and collateral, unlike in banks.
“We no longer need to go to 5-6 because we have microfinance NGOs which are ready to give us loans,” Aquino said.
Microfinance NGOs provide Filipinos access to low-interest, no-collateral loans to pay for housing, medical, and educational needs as well as loans for small businesses.
Aquino is the principal sponsor and co-author of Republic Act 10693 or the Microfinance NGOs Act during his term as chairman of Committee on Trade, Commerce and Entrepreneurship in the 16th Congress.
“The main objective of this law is to discourage the poor from paying high interest to loan sharks and to support the government’s aim to do away with the 5-6 system,” he said.
The law gives incentives to microfinance NGOs to continue helping Filipinos overcome poverty not just through financing but also through financial literacy, livelihood, and entrepreneurship training.
The law also provides microfinance NGOs the needed support and incentives, including access to government programs and projects, technical assistance and exemption from taxes.