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5-6 Money Lending

Everyone, businessman or not, who wants to get out of a financial bind quickly almost always resorts to a 5-6 money lending scheme. 5-6 is a widespread last or no-other-resort money borrowing for micro-entrepreneurs and households in dire need of financing for their daily operations or upkeep. So far, it is the most reliable and poor-friendly lending facility for the most disadvantaged sectors of society who cannot obtain loans from banks and financial institutions due to their lack of tangible assets.

Why is it called 5-6? So-called because of HOW moneylenders lend. They charge a nominal interest rate of 20 percent over an agreed period. The 5-6 moneylenders are more flexible in repayment terms. They are the most persistent, patient, and “generous” in their relationship with their “clients.” Pautang is their bread and butter. They also “give away tokens” or gifts that make the loan recipients feel cared for and indebted. They provide easy terms with no rigid documentary requirements and collaterals. Anytime, they are available and accessible. They are the micro-entrepreneurs best reliable friends when it comes to pautang. They can be your Pinoy neighbor or, in most cases, the typical friend of all, whom everybody calls, Bombay, the Indian national: the big, beardy man in a turban and long dress from our country neighbor in Asia, India. Borrowers don’t care if the lending practice borders on usury.

That is why they are the most sought-after and popular moneylending “institution” in Bicol and the whole country. 

The “Bombay” Connection

Pinoys have known the Indian financiers for easy cash borrowing, with many studies regarding them as crucial to the most marginalized micro-entrepreneurs.

Here is the story of Mario, 38, who works as a company driver. Their family is the typical Bicolano survivor of indebtedness to the max. Yet, to this day, a new generation in their family continues the “Bombay” lending connection. 

His mother, Jenet, now retired at age 63, once owned a small buy-and-sell store in Ligao, Albay. His father, Mario Sr, used to be a vendor and managed a makeshift repair shop at home just beside his wife’s merchandise. As far as he can remember, Hadji had become a frequent visitor bringing promo household items of electric fans and rice cookers as part of his marketing tact. He was the Bombay, friendly but shy, who came to their home or store to lend money, from two thousand pesos to two hundred thousand pesos whenever needed. His presence soon became a regular economic activity in the barangay wherever there were vendors, sellers, and local business people who may be in a most precarious financial situation. Both were children of poor fisherfolks from Pantao, Libon, famous for its unique renewable energy source, flaming water, found only in the municipality. For lack of opportunities, the couple ventured into the buy-and-sell business and transferred to Ligao, a nearby town. Their old lives, Mario said, were a hand-to-mouth existence. The parents brought up their five children through the blood and sweat of their industry; their labor and crude tools were in their homes. Their only ambition was to survive the seven days of the week with a meal for everyone in the family, their children to high school, get married, and have their own families. Without any capital for a start-up, the couple saw the “light” on the neighborhood’s Bombay connection.  

The Bombay they used to call Hadji gave Jenet easy terms for her first loan, payable within 1-3 months of the collection. Whatever income they earned at day’s end; they paid 20% interest. If they default, they renegotiate. Through decades, trust and confidence have built up, despite many difficulties in cash repayments. But they survived and lived.

Mario’s parents belong to the large informal sector comprised of micro-enterprises. These micro-enterprises are part of the collective MSMEs, which the Department of Trade and Industry calls the most significant and critical driver for the country s economic growth. But most of them – the micro-entrepreneurs – are in the most disadvantaged sector. They have the least access and means to grow. Being an informal sector in the industry, they tend to resort to informal means of lending and marketing their wares. The 5-6 borrowing for them is the most reliable and accessible for loans of urgency and survival. Indian nationals dominated the informal moneylending business for the most prolonged period. Most of their clients are the micro-scale businesses like ambulant vendors.

However, for Indian nationals in this business, the benefit is as significant as the risks. Last January, a policeman allegedly kidnapped then shot dead an Indian national and a barangay official in Polangui, Albay who came to the rescue. Other similar incidents involving money lending are better left unreported or just ignored.

Why this informal practice persists is obvious. Do the 5-6 loans help develop, save, or enhance the economic life of households and micro-entrepreneurs? Or do they worsen it? It is neither, but for the countless of our poor struggling business community, the entrepreneurs have no choice. They need additional capital. To incur debt is a burden. Being caught in a cycle of debt is a scourge. Worse, to be bound in cyclical debt is a trap forever.

Naga City and Legazpi City are Bicol’s centers for trade, commerce, and culture. Most of the 62,000 MSMEs in the region are located in these cities. They have a concentration of banks and formal financial institutions from the government and private sectors that anybody with financial needs can approach for assistance. National and international investors are attracted to the vast potential of getting into the business because of Bicol’s huge land and oceanographic resources. But how can small economic players like the MSMEs get on board when financial access is far and elusive?

The DTI’s website announces with pride its priority is to “help future and budding entrepreneurs in visualizing and expanding their business, respectively.” “We are there, every step of the way, helping owners of micro-, small-, and medium-sized enterprises (MSMEs) start their business through the conceptualization phase and walk them through the registration process.”

Unfortunately, for Mario and their family – his siblings and their families --, decades of buying and selling and decades of borrowing from their Bombay friend and his generation of children, life remains the same.

Mario says, “I am now a company driver, out of business, but still poor and struggling to get by the minimum wage. I hope more assistance from the government is more accessible for us, especially for those in the family who are into small businesses.”


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