One of the most profitable businesses in the Philippines is lending. The Indians who control a lot of the lending at lower levels are generally called the 5 – 6 (borrow 5 pay 6) The interest rates vary but generally upto 20% a month they concentrate mainly on people who are unable to get loans. E.g. market traders and small stores.
The next type of lending is mainly via pawn shops with interest of around 3% for a weeks lending and they take items such as jewellery as collateral.
There are several things to be aware of if you decide to get involved in lending. First of is your competition. There was recently 2 stalls selling BBQ pig next to each other which involved people shooting at each other over the business. Believe me the lending business is the same if not tougher.
Control your credit limits. Around P10,000 maximum is what i would advise as it stops people getting into uncontrollable debt but also not really worth having you killed over as a killing at the moment runs at around P5,000 (half the cost of the debt).
Pick your customers wisely. What a lot of people do is look for people who have been in work for 3 years or more. In other cases they are business owners. All people who are pretty much a guaranteed repayment.
Collect regularly. Some people are controlling ATMs of people who deduct they’re payments then release the salary. Although I’m not keen on this type of operation but I can understand why some people do it. The other is to collect payments daily or pay day to make sure your paid.
Avoid getting into big loans especially if it involves land etc. As often the land will be owned by more than one person and often the other members aren’t aware. Can be very dangerous as you only have to pick up a local paper to read about shootings amongst family members over land disputes. Never mind you being the owner of the land via debt recovery. Nasty mess and not one to get into.
Can you get rich from lending? Its possible but so is having your belly cut open or riddled with bullets. The main secret is not getting involved where possible using agents or relatives who are keen to do this business but also ones you can trust. Its also important to play fairly as your agents are the ones taking the risk with their life. Pay well maybe something on a commission rate aswell as above all make sure they are operating safe. The more obscure people are over who backs the money will also keep them and you safe. Nobody likes causing trouble with people they don’t know. So hiding facts is important.
Isn’t a lending business abusing the poor? Simple answer to this is no.. the system is built in a way within the Philippines that prevents the average person (the poor majority) from getting any kind of loan. So emergency loans etc. have to come from a lender or via loans within family. Also you have to bare in mind a lot of these loans are done for “wholesale” allowing for example fruit and veg vendors to buy in bulk. They then add an extra few pesos onto the sale price and infact like most things its the consumer who ends up paying. Realistically a lot of the vendors would either be bankrupt or unable to operate without micro loans. You have probably experienced it yourself at some point in life when a job or something else was close to reach but you lack the finances to get a car fixed or maybe cost of travel or accommodation for a week to help you back on your feet. Well then you understand why paying 20% on the cost of the loan at the end of the month suddenly makes the loan more attractive as by that time you have repaid the debt and now in full employment.