The Art Of Borrowing
by Ambrosio R. Villorente
Have you ever obtain a loan? If you did obtain, from whom? Did you borrow from your relatives? Friends? Pawnshops? Lending shops? Or Banks?
If you have experienced borrowing from these various loan sources, from which is convenient for you to borrow? Which charges the least interest? Which requires volumes of supporting documents? Which releases the loan at the shortest possible time?
In the farming community, the farmers borrow palay in three modes of payment. One is what they call “dubli”. This is 200 percent interest rate. A family borrows 50 kilograms of palay before the planting season payable after harvest. The borrower pays the lender 100 kilograms, double the quantity. But this is easy to do as no document is needed. The agreement is verbal.
The second mode is “Tersiya”. The procedure is similar with the first mode except that the 30 kilograms palay loaned will be paid for 45 kilograms. This is given when the borrower has already standing palay crop to guarantee sure payment after harvest.
The third mode is the “Uli”. This is given to those relatives such as brother to brother, or father to son or daughter. If 50 kilograms palay is borrowed, the borrower just pays the same quantity as borrowed, free of interest.
These three modes of lending don’t need any documentation. Everything is verbally done. The lender may, however, keep record of his creditors.
Another mode of lending is the “Five Six” (5/6). The lender does not need any supporting documents from the borrower. It is enough for the lender to know that his borrower has the capacity to pay. The lender even visits his clients to extend loan. He knows what kind of person he lends his money. The loan proceed is instantly released to the borrower who just signs in a notebook acknowledging that he borrowed an amount from the lender.
The loan is amortized daily which the borrower pays P6.00 for every P5.00 borrowed per month. The borrowers are usually small businessmen like the vendors.
Another mode of loaning is by non-government organization like the cooperative association. As practiced, the cooperative raises fund for re-lending to its members to start a business in accordance with the objectives and projects of the cooperative. The loaning procedure depends upon the articles of incorporation and by-laws of the cooperative.
Usually, the rate of interest is moderate and reasonable and the schedule of payment is not strictly observed. There are some members who seek membership in a cooperative whose motive is to borrow money. After obtaining the loan, that member or members stop attending meetings, do not repay the loan. This is one of the causes of extinction of cooperative organizations.
The Rural Banking law was enacted to organize rural banks in each municipality in the Philippines to provide the credit requirements of the people at a very low interest rate with a minimum documentation. It is geared to accelerate agricultural development and hasten farm productivity.
The Rural Bank Law provides that the owners of a rural bank must be residents of a community where that bank will be put up. The Bangko Sentral ng Filipinas (BSF) provides 50 percent of the initial investment while the incorporators invest 50 percent. As soon as a rural bank is ready to operate, the BSF will advance operating capital.
However, for reasons the public did not know, almost all rural banks in Aklan was closed. Even the Cooperative Rural Bank of Aklan collapsed and was closed. Only in New Washington, Malinao, Banga, and Ibajay rural banks are still functioning.
Pawnshops lend money to anybody who has jewelry, and other valuable personal belongings to be pawned. It is instant cash to those who pawn a ring, necklace or IPad. Usually, pawnshops lend money at three (3) percent interest per month or 36 percent per year, such that a small loan of P10,000, the borrower must have paid P13,600.00 to the pawnshop.
Moreover, some pawnshops are dishonest. I got a friend who pawned his 24 carat gold necklace in a pawnshop in Sta. Cruz, Manila. After one month he redeemed it. He measured it and found out that his necklace length decreased by two (2) inches. Another friend pawned her 21 carat gold ring, imbedded with five (5) tiny diamond stones to a pawnshop in Kalibo. The ring was her birthday present from her father. After one month she redeemed it. She got back her gold ring with one diamond stone missing and the gold diminished by one (1) gram.
In Kalibo, Aklan, there are several lending shops. They lend money such as for acquisition of motor vehicles, pension loan, mortgage loan, barangay loan, salary loan, and seaman’s loan among others. Lending shops have several loan categories, but they have also kilometric documents required that a probable borrowers might collapse even before obtaining the loan proceed.
For those who wish to borrow from the lending shops, here are what they will ask you to submit: I.D pictures, co-makers’ names, 2 valid I.Ds, Brgy. Clearance, bank statement, ATM card, Residence Certificate, Certificate of Employment, Marital consent, Pension Certificate, Collateral slip, and many others.
Moreover, the interest rate is enormous. I got a friend who borrowed from a lending shop in Kalibo. After several days of preparing the loan document, he submitted it to a lending shop. It was approved. He was granted a small amount of P50,000.00, payable in six months.
He got the money, spent it for some consumer goods. He religiously paid the amotization monthly without fail. After adding all what he paid, it amounted to P86,632.23. The lending shop almost double its money after six (6) months.
This is one explanation why some individuals don’t improve economically. Acquiring loans and spending it for consumer items is poor economics.
It is safe to borrow from banks. However, banks likewise require several documents to submit before it approves loan application. One reason why some people shy away from borrowing from the banks is the hardship in the preparation of documents.
While banks charge from seven (7) to 36 percent interest per year for loans, it offers very low interest rate to money deposited in their banks. Saving deposit for instance only earns less than one (1) percent per year, 20 percent of which is paid as withholding tax. Time deposit only earns four (4) percent per year.
Not only that, to transact business with a bank, a small bank depositor on the average spends one (1) – two (2) hours until he is serve.
For a depositor whose amount is insignificant, better keep your money in your aparador. It needs more time and effort for a small transaction like P5,000 in a bank in Kalibo.
The policy on savings is highly skewed in favor of the wealthy, the bank owners and big depositors. Congress must review the banking law to help equitable wealth distribution. /MP