Growth of Indian lending business is one of the reasons why most of tthe Philippines’ micro, small, and medium enterprises remain afloat.
Speaking with the STAR, the Federation of Indian Chambers of Commerce (Phil) Inc, President Rex Daryanani, explained how valuable these businesses are.
Specifically, the easy lending terms of these businesses fueled the growth and survival of most of the nation’s SMEs.
According to him, these Indian microlenders are now around 30,000 in number.
Through their lending businesses, the so-called underfunded and unbanked in the nation gain access to funding opportunities.
This is precisely one of the reasons why the chamber is working hard with the government to make the Indian money lending industry legitimate.
‘5-6’ The Crux of Indian Lending Business
One of the first goals that the chamber and the government are to eliminate the term “5-6.”
The term has a bad reputation, associated with a negative connotation for years.
Daryanani said he already personally discussed with President Duterte the viability and prudence of legalizing Indian microlenders. He highlighted their worth in the nation.
Even if people look at the “5-6” practice with disdain, it is undeniable that the Indian lenders are one of the reasons why small businesses are still surviving.
The “5-6” lending practice is not favorable for a good reason. After all, it refers to the practice whereby the moneyed Indian nations charge an interest of 20 percent per month. This is hardly a small fee.
A borrower of P5 will have to pay P6 the next month. Borrowers certainly do not only need P5.
However, Daryanani said this is no longer a practice that Indian lenders are committing.
Indian lenders are no longer behaving this way. Instead, they are imposing rates already as competitive or even better compared to other known lending firms.
He said that the chamber is hard at work to see that the Indian money lenders will register their businesses with the Securities and Exchange Commission.
The president is firm in his belief that these lenders should be made legal. Lenders play an active role in fueling the underground economy.
Removing Illegal Lenders
The SEC, on the other hand, has also been simultaneously hard at work on cracking down illegal lenders.
They are the ones not duly authorized to engage in financing business.
In the process of this crackdown, the SEC also ordered online lending operators to stop offering and advertising their lending business through the Internet.
They are called to remove promotional presentations online. They also need to delete the lending applications they are operating.
Meanwhile, after President Duterte directed the banishing of the “5-6” lending system, the Department of Trade and Industry has thought of a valid replacement called “Pondo sa Pagbabago at Pag-asenso” program.
This program offers affordable micro-financing for the nation’s micro, small, and medium enterprises.
The DTI designed this program to give businesses located in the top 30 poorest provinces access to secure financing options.
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