Yamsuan pushes measure to rescue micro entrepreneurs from ‘five-six’ lenders

Bicol Saro Partylist Representative Brian Raymund Yamsuan has pressed the swift approval of a measure that would rescue micro entrepreneurs from predatory ‘five-six” money lenders by offering them a better way to gain easy access to low-interest loans.

Yamsuan said House Bill (HB) 7363 aims to provide this “better way” by authorizing the Department of Trade and Industry (DTI) to extend credit to micro and small enterprises (MSEs) without collateral and through easy-to-pay, low interest terms.

HB 7363 or the proposed ‘Pondo sa Pagbabago at Pag-asenso Act’ (P3) is intended to benefit small sari-sari store owners, carinderia operators, market vendors and other small community-based entrepreneurs, he said.

“The proposed P3 program under this measure will free micro entrepreneurs from the clutches of ‘five-six’ money lenders and loan scammers and offer them the opportunity to expand their businesses through easy-to-pay, low-interest credit,” said Yamsuan, one of the principal authors of the measure in the House of Representatives.

“if they are able to expand their businesses, then they would have to hire more workers. This means more jobs, more investments and more consumers spending money. The long-term gains under the P3 will make the program a prime driver of our economic growth,” added Yamsuan.

Yamsuan pointed out that the bill would benefit more than 90 percent of businesses classified as MSEs.

MSE owners usually resort to ‘five-six’ lending schemes that only drive them deeper in debt because of excessively high interest charges and other hidden fees. ‘Five-six’ lenders usually charge an interest rate of 20 percent per month. This means that if one borrows P5, one will have to pay back P6, hence the term ‘five-six.’

Under HB 7363, the Small Business Corporation (SBC), which is DTI’s financing arm, is tasked to extend no-collateral loans, the amount of which shall be set and regularly reviewed by the Micro, Small, Medium Enterprises Development Council (MSMEDC).

The usual loanable amounts offered to MSEs ranged from P5,000 to P200,000 when the DTI was still operating a similar program in the past.

To ensure that P3 would be easily accessible to MSEs, the bill authorizes the SBC to accredit Partner Financial Institutions (PFIs) to extend loans under the program. These include rural banks, thrift banks, development banks, cooperative banks, cooperatives, non-stock savings and loan associations, microfinance institutions and other qualified lenders.

The effective interest rate imposed on P3 loans as proposed under the bill shall not exceed 1 percent per month for direct lending, and 2.5 percent per month if borrowed from accredited PFIs.

Interest earnings from the program shall accrue to the P3 Fund to be created under the measure. The initial amount deposited to the Fund will come from the SBC.

“With the goal to achieve greater outreach to all provinces and barangays of the country, financial technology-enabled systems and processes can be utilized in the implementation of the P3 program,” the bill states.

HB 7363 was passed on third and final reading by the House in March last year. Its counterpart bill in the Senate is still awaiting plenary approval.