Prohibit ‘5-6’ loans

To help the poor stand on their own, they should be freed from the exploitation of abusive money lenders. Congress should pass a usury law putting an interest rate limit on loans of P35,000.00 and below.”

That’s Cristina Antonio talking, a young human rights lawyer involved in advocacies aimed at uplifting the welfare of the poor in her northern Luzon province of Cagayan. The reason for the P35,000 loan threshold is this: It is the amount needed as capital by farmers of one-hectare farms, and it is a fair amount with which to start a small business.


The Philippines’ thriving underground economy is proof that the Filipino masses are enterprising people who can make a living even under challenging circumstances. Those who make up the informal economy include the wet market vendors, sari-sari store owners, sidewalk retailers, itinerant hawkers, and home-based salespersons.

These small merchants survive despite exploitative business conditions. First, many of them are forced to give bribes to corrupt public officials as a precondition to operate. Second, they are forced to source their capital from loan sharks who charge exorbitant interest.


Imagine the greater improvement in their lives, and the progress it will bring to society in general, if the determined efforts of the Filipino masses to improve their lives are not hindered by corruption or stunted by usurious interest.

The potential sources of income of the masses are the labor of their hands, the land they cultivate, and the capital they use for business.

If they are unskilled laborers, their manual work will yield income that will hardly be enough to pay for their daily needs. They need capital to obtain education in order to infuse their labor with skills or know-how that will bring about an upgrade in their income.

If they own land but not the capital to fund the cost of farm cultivation, they are deprived of the genuine income that their harvest will bring because they are saddled with loans tied to exploitative conditions. They are forced to obtain their fertilizer and insecticide inputs from loan sharks and are also obliged to sell their harvest to the same loan sharks, both at prices that will result in assigning all the rewards to the money lenders and leaving nothing but hardship to the farmers.

If they do not have land or employment opportunities for their labor, their only option is to engage in business. But if they do not have access to reasonable capital, they are forced to take out “5-6” loans that burden them to pay a whopping 20-percent monthly interest.

Capital is the lifeblood that supplies possibilities of uplifted lives for the masses.

If the enterprising segment of the poor can attain a modest level of income security notwithstanding the burden of usurious loans, just imagine the vastly improved income they can achieve if they are freed from the bondage of abusive money lenders. Making capital accessible to the masses at reasonable rates will reduce widespread poverty.


The Monetary Board of the Bangko Sentral ng Pilipinas regularly tinkers with monetary policy, with the purpose of cutting interest rates on loans accessible only to wealthy borrowers to as low as 6 percent per year. In contrast, the Monetary Board has long suspended the Usury Law and, as a result, it has allowed soaring interest rates to be charged on loans availed of only by the poor to as high as 240 percent per year. Congress must pass a law that limits interest on small loans of P35,000 and less.

It is true that the Department of Trade and Industry and the Land Bank of the Philippines have microloans for the poor. But the complicated documentary requirements and procedures prevent the poor from availing themselves of these loans.

Early this year, President Duterte assailed and threatened to arrest money lenders who charge “5-6” interest. But after the verbal fury, there was no follow-through with concrete action.

If Mr. Duterte is intent on helping the poor, he must ditch the life-denying policy of his oppressive war of drugs and instead push for a life-sustaining program that gives the poor access to nonoppressive capital.

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TAGS: 5 6, Flea Market of Ideas, Inquirer Opinion, interest rate, Joel Ruiz Butuyan, loans, Usury
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