The 5-6 model

My recent visit to Carbon market was interesting. I’ve seen a lot of improvements being done by the city government. The roads leading to the stalls are now cleared up; the floors in the wet market are now tiled; the flow of traffic is getting better but most of all, the piles of garbage that used to steal our view are already nowhere in sight. Carbon is now cleaner and more organized than before that you can trade it with your favorite supermarket. Looking at the physical improvements, I surveyed the life of the vendors and small tradesmen if the improvements also meant more business for the goods and wares they sell.

While I heard that some were displaced as the improvements were implemented, many lauded the effort to be advantageous for the ordinary shopper. “Mas hamugaway sa mga komprador kay sa una” (Carbon is now more comfortable especially for the buyers unlike before.). What about sales? How meaningful are these improvements to your livelihood? Most of them said that it’s quite the same.

The grocery booths interestingly were the least affected but sales have continuously declined. “Daghan man gud ang moadto sa mga malls kay aircon man ngadto. Usahay mas barato ngadto kay mas makabulto man silag palit.” (Buyers prefer to buy them in the malls because of the airconditioning. Sometimes the malls are cheaper because they can afford to buy in bulk.)  

“Utang” (debt) is another and the most common problem vendors are facing at Carbon market. “We have nowhere to go but to the 5-6 people.” 5-6 is the first and last resort for most vendors who are in need of quick cash. The lenders are mostly Indians riding on motorcycles. They are pejoratively called “Bombays” or “Turkos.”

They move around the city and in the province to offer credit to people with businesses like sari-sari stores, tailoring, eateries, etc. It is an informal lending scheme common in the Philippines where you pay P6 for the P5 you owe to the Indians at an agreed period (usually less than a month). It may seem harmless but it is both a symptom and a disease altogether.      

Symptom because it indicates distrust and apathy of the present credit and banking system to enterprising Filipinos. It is hard to make a sense out of the whole situation that it had to take the guts of Indian foreigners to understand what’s credit-worthiness is all about in this side of the world. Why can the Indians lend to microenterprises while the Filipino credit system cannot? It is also a disease because the 5-6 system imprisons the marginalize sector to a credit system that’s usurious and unfair. Worth noting is the fact that most vendors live on a hand-to-mouth basis. Simply put it, what they earn is just enough for them to survive for the day.

Imagine a vegetable vendor who thrives on P3,000 - 4,000 a month and owes P3,000 to the Indians. He has to earmark like P600 a month in interest alone -- which is worth like a week of the family’s food supply. The vendor is forced to borrow because he is always short of money for the needs of his family. In other words, the lending scheme offered by the Indians is not in essence a means to support the capital requirements of the vendors but to enable them to meet both ends.

The system of credit offered by the Indians is simple and uncomplicated. “I go to you and borrow money from me. I go to you to collect from you everyday.” says Sunjay with the archetypal Indian accent. He wafts 100 kilometers a day from Cebu city to Argao to lend and collect. He speaks the dialect well and blends like a native. He is Filipino only covered in Indian skin. 

I believe that this model is worth studying and exploring to benefit microenterprises by offering at same banking rates or slightly higher to cover the physical administration of the accounts. But we need to believe in the willingness of the Filipinos to pay. The success of Nobel Laureate Muhammad Yunus’ Grameen Bank is based on the philosophy of trust in the human potential. “All human beings, including the poorest, are endowed with endless potential, and that unleashing the creativity in each individual should be the answer to poverty.”

The failure of many microcredit stems from the lack thereof.

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