Gov't urged to end '5-6' practices

MANILA, Philippines - Senatorial bet Eddie Villanueva on Thursday said the government should institute a policy to end the culture of  “kapit sa patalim (gripping the knife’s edge)” that is so prevalent among poor Filipinos by putting a stop to "5-6" and other unconscionable lending practices.

Villanueva said such schemes lure borrowers into deeper financial problems, adding that the poor are particularly vulnerable to borrowing money despite the very high interest rates offered by "5-6" lenders or loan sharks because they do not have access to formal lending institutions.

“They worry about where they can get money to feed their families, to send their children to school or how to make ends meet because of their measly salaries so many of them are forced to borrow from 5-6 even if they know that the interests are very high. Kumakapit na lang sa patalim para maitawid ang kanilang pangangailangan,” he said.

Parents who wish to give their children better futures also face the dilemma of borrowing money from loan sharks to pay for school tuition.

“Colleges are not free. Tuition at state colleges and universities can run as high as P1,500 per unit, that’s over P30,000 per semester if you take a full load,” he added.

Villanueva said these situations are further worsened by the borrowers’ desperation and even lack of education, allowing them to be convinced that interest rates of 20 percent a month – as in the case of many 5-6 loans – are acceptable.

Villanueva, in particular, is pressing for the revival of a 1916 law that provides ceilings on interest charges on loans.

If elected to the Senate, Villanueva said he will file a bill to set a limit on the amount of interest rates charged on loans.

He said his proposed Anti-Usury Law will cover institutional lenders such as banks and credit unions, peer-to-peer lenders, and credit card companies as well as individual lenders, and prevent them from charging exorbitant interest rates on loans they extend to borrowers.

Villanueva said one of the general features of the proposed Anti-Usury Law will include the fixing of a legal ceiling limit on how much a can lender impose as interest rate. That limit can either be based on inflation or the 91-day Treasury bill – whichever is lower.
 

Show comments