PRESIDENT-ELECT Rodrigo Duterte intends to prohibit Indian nationals locally referred to as “Bombay” from their money-lending practice, which is popularly called “5-6.” Generally, “5-6” collects an exorbitant interest rate of 20 percent from its borrowers.
Duterte said that “5-6” is a curse that impoverishes Filipinos who are already down on their knees in poverty. I cannot agree more.
Indeed, it is hard to contest the reason Duterte wants Indian nationals to stop the practice. But unless he can offer a much better lending program that can match the popularity of “5-6” among Filipinos struggling to survive their harsh financial situation, I doubt very much if his plan will succeed.
There is a principle in physics that says, “Nature abhors a vacuum.” In Filipino: “Hindi pwedeng palitan ang isang bagay kung walang ipapalit na mas ayos.” For example, some people are demanding that the Black Nazarene’s annual procession be stopped. But unless an appropriate and fitting practice is put in its place, the practice will continue to be observed by the people to satisfy their spiritual and psychological needs. In short, it will be impossible to eliminate it.
And so is “5-6.”
Let me count the ways why “5-6” is likely to live on, whether President-elect Duterte likes it or not. In fact, I predict that the practice will survive the Duterte administration.
First, unlike banks, the “5-6” loan provides almost instant cash with a very short (most of the time, one day or less) waiting period. For a family who needs urgent capital, time is essential. In contrast, bank loans take time to obtain due to petty bureaucracy—like signing documents, interviews, obtaining a passbook, presentation of two IDs, etc.
Second, the loan that can be obtained is almost limitless as long as the borrower and the “Bombay” have already established mutual trust borne out of long productive partnership. Similarly, because of this mutual trust, renewing one’s loans is automatic, wala nang maraming kiyaw-kiyaw pa (without much ado)!
Third is the “easy” payment scheme of small amounts. For the borrowers, this is “OK lang” because they don’t feel the heavy burden of paying big installment regularly. Besides, the amount to be paid is based on the estimated daily earning of the borrower.
There is a popular saying among “5-6” borrowers: “Ang Pinoy na nagigipit, sa ‘Bombay’ kumakapit.”
I fully agree with President-elect Duterte that “5-6” is a pernicious practice that tramples on people who are already down. But he must face the painful reality that “5-6” is a multiheaded hydra, whose head will grow back unless the main reason for its existence—namely, poverty—is stumped.
One of the world-class examples of a successful microfinance program in the world is the Grameen Bank of Bangladesh. It was founded by Mohammed Yunus, a Bangladeshi.
Grameen Bank focuses its loan program on impoverished women of Bangladesh. It has very wisely disqualified men from its program because it believes that men, being prone to vices like alcohol and gambling, would most likely default on their loans, unlike the women. Grameen Bank has a very high collection record of 96 percent.
Way back in 2005, together with several friends, we tried to replicate Grameen in three provinces in the Philippines. The attempt failed because the majority of the women-members could not pay their loans. Reasons: Many are addicted to mahjong, Lucky-9 and tong-its!
Any loan program the Duterte administration will introduce must reckon with the sad reality that many Filipinos are deadbeats when it comes to the payment of loans. They reason that nobody goes to jail for not paying loans, especially government loans!
Carlos D. Isles (carlosisles@gmail.com), a writer, poet and professional harmonica player with a degree in philosophy from San Jose Seminary (Ateneo de Manila), was a consultant of World Bank- and ADB-funded community development projects in Pakistan, Bangladesh, India, Sri Lanka, Indonesia and the Philippines.