A lending business in the Philippines is fairly easy to start although many don’t use legal channels instead opting for direct lending called locally 5/6 lending originally coming from Indians where people would borrow 5 then have to repay 6 on short-term loans. These types of ventures exist due to the issues of lending in the Philippines and the inability for many to get credit without collateral. At the same time many Filipino’s are bad payers which is why you see the rates reach as high as 20% a month in some cases. Not just on monetary I have also seen stores go bankrupt due to bad debts on credit for food. This is why Wala utung is commonly seen (No credit) on notices in some stores.
For a legitimate business assessment of the market and also having a good lawyer to prepare the paperwork for your loans is important. Not only because the documents will be written in a legal manner but also countersigned by the lawyer if any legal action is required at a later date. One thing many people aren’t aware of though is “person to person” lending you can sue if an agreement is in place even if your not fully operating as a business. For example a cousin wants to loan from you for a couple of months then having them sign an agreement will give you a legal right to sue them if they don’t repay the loan.
A lending business in the Philippines also comes with many risks such as abuse, threats or even some killings as well as financial risk. The rewards can be financial freedom for the venture owner if managed correctly and by proper assessment of each client to reduce risks of none payment or issues such as people leaving the country.
I would advise the first steps of setting up a lending business though to locate a good lawyer via word of mouth and reputation and discussing your business operations with them to get an idea of the viability of your business. At the same time have there already been lenders doing the same in the area? did they fail due to bad debt? any way to compare notes on bad lenders so you don’t take on some of their bad clients?
The business will at some point also lead to repossessions of items and this is a part of the business many overlook. Do you have people willing to collect goods for you? Its an unpopular part of the business but also one that makes sure people continue to pay on time. If people become aware that you do not pursue people legally you will find your business literally collapse overnight as everyone stops paying their debts because they know you won’t prosecute. Balancing all of the above correctly can lead to a viable business at the same time lending can often be too risky for most.