August 12, 2019
CALL this fight: P-3 vs 5-6.It could be a battle that is as consequential as a Manny Pacquiao fight for a world championship belt. We find it enormously interesting that the Duterte administration, through the Department of Trade and Industry ( DTI), has launched a program called “P-3’ to combat ‘5-6,’ the notorious lending scheme that is widely practiced in the underground economy.
Under the 5-6 lending scheme, as every Filipino knows, P5 borrowed today by a small business entrepreneur, like vendors in our public markets, is paid back P6 within the day. This translates to an effective 20 percent interest daily on every loan.
For decades, government policymakers have puzzled over how to come up with a program to effectively fight 5-6. Past efforts have been mostly ineffective, however.
Now, the Duterte administration is bidding to fight the battle on its own.
At a recent forum organized by the Daily Tribune, Trade Secretary Ramon Lopez disclosed that the economic team of the Duterte Cabinet has launched a program to combat 5-6, with its own lending scheme.
The initiative stems from an order issued by the President to his economic managers to craft a program to effectively wipe out the exploitative moneylending scheme, which is prevalent throughout the country among our poor communities.
In a speeeh back in 2017, DU30 declared:
“What I want to end, if God will give me at least the years to finish my term, is this 5-6.”
“That is my burning desire.”
It is claimed that the President, while he was mayor of Davao City, was able to halt the operations of 5-6 lenders in the city.
In response to the President’s request, the economic managers came up with a a micro-financing scheme called ‘P-3.’
The scheme is called Pondo sa Pagbabago at Pag-asenso (P-3), according to Secretary Lopez. The program seeks to utilize existing micro financing enterprises as conduits for lending.
“Examples of these MFIs are cooperatives and market vendor associations. We lend money to them which they retail. In one year, the scheme has spread to reach about 86,000 borrowers,” Lopez said.
P-3 started with a capital of P1 billion in 2017. It was managed by the Small Business Corp. (SBC) under DTI.
In practice, P-3 became a wholesale funding scheme with MFIs as conduits.
In 2018, another P1 billion was infused into P-3. As of end 2018, the scheme had P2 billion in capital but it was able to lend P3 billion.
This means, says Lopez, that the money has rolled over due to the high 96 percent repayment rate. As of the end of 2018, P-3 has developed 350 conduits and it is attracting more, he said.
Among the borrowers of the scheme are the families of soldiers killed or wounded in action in Marawi City and businesses in Boracay island affected by the six-month closure of the resort destination.
P-3 will soon also have rural banks as conduits to widen the reach of the program.
The economic managers want to saturate with funds those areas where 5-6 is most prevalent.
Under P-3, the conduits or MFIs get from P3 million to P10 million for re-lending, while each individual borrower can borrow from P5,000 to P200,000 depending on their capability to repay under the P-3 scheme.
P-3 today can boast of many successes in its lending activities. Some small businesses have thrived and grown under the program.
Now, Secretary Lopez is lobbying for the institutionalization of the P-3 scheme through an act of Congress.
If the proposed P-3 legislation successfully hurdles Congress, the program will secure sufficient financing for its lending activities. P-3 will then reach entrepreneurs in the grassroots and the marginalized communities.
There are various questions for the legislative proposal to hurdle. Anecdotal evidence will not be enough to secure the confidence of lawmakers. Seasoned legislators will need proof that the P-3 scheme can fight the 5-6 scheme toe-to-toe.
The test is finally one of effectiveness.
If it can prove its merits as a small-business lending scheme, Pondo sa Pagbabago at Pag-asenso will deserve the full backing and support of the national government.
Then, this government can boast that it is mightier than 5-6.
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