Beating the loan sharks

Right in front of the Department of Finance along Roxas Boulevard’s service road, there used to be a makeshift sari-sari store — made from a hodgepodge of plywood and recycled tarpaulin — selling candies, cigarettes, and deep-fried fish balls. It was one of several stalls in the area.

I would often buy a candy or a drink from this store before walking to my car for my drive back home. Sometimes, I stopped for fish balls dipped in onion-filled vinegar. This was years ago when I used to cover the finance beat. I don’t know if the stall is still there. I was such a regular customer I had gotten to know the couple behind it.

They had shared with me bits and pieces of their story — where they met, where they live, and how they survive the daily grind.

But what really stuck with me is how they rely on the 5-6 system to bankroll their business. Most of what they earn is spent to pay off their debt. The 5-6 in their case is an Indian national who provides loans to sari-sari storeowners like them. Taking a loan is fast and easy. But it is unreasonably high — for every P5 borrowed, they must pay P6 or a roughly 20 percent interest.

Cashalo

It’s not an unusual story. When I was covering the Department of Education before, I had countless stories about public school teachers buried in debt because of loan sharks taking advantage of cash-strapped people.

Tycoon John Gokongwei hopes to change the situation by freeing millions of Filipinos from loan sharks.

I recently sat down with Gokongwei’s son, Lance, and brother, James Go, as well as officials of Oriente, a Hong Kong-based start-up, to learn about Cashalo, a mobile application that provides loans to Filipinos.

Gokongwei-owned JG Summit Holdings Inc. and Oriente, set up by Skype founder Geoffrey Prentice have partnered to set up Cashalo which hopes to accelerate financial inclusion in the Philippines by providing loans to the unbanked sectors in the country.

The partnership is targeting Filipinos who often rely on loan sharks because they have no access to banks.  In the Philippines, more than 70 percent of adults have no bank accounts.

Go, chairman of JG Summit, said the joint venture really hopes to help unbanked Filipinos.

Lance said it’s consistent with the vision of his father to help Filipinos through different business models as what the tycoon did when he braved the airline business and put up budget carrier Cebu Pacific.

“It’s a shared vision to really transform Filipinos’ lives by providing them access to affordable financing,” Lance said.

Just like Skype

 Geoffrey said that after putting up Skype, he didn’t want to put up another start-up again because it wasn’t easy.

But the idea of democratizing access to financing – as what Skype did when it made communication easy and cheap – made Geoffrey change his mind.

It’s all about unlocking financial freedom for many Filipinos, he said.

 Using their mobile phones, borrowers can avail of  loans ranging from P3,000 to P5,000 which can grow to bigger amounts later on. The interest rate is 2.95 percent, cheaper than prevailing market rates.

 Through the platform, proponents aim to enable millions of customers, including those with no credit history, to participate in the global economy by having access to financing.

 Geoffrey said the venture targets to have half a million users by the end of the year and 1,000 employees to handle loan verification and processing, among others.

 It’s an interesting venture and I truly hope it works.  Filipinos are tech-savvy and many have smart phones. While many don't have bank accounts, they already have mobile phones so it’s a good starting point.

 I also like the name - cashalo, a play of the words “cash” and “kasalo.”

 Other conglomerates have set up similar ventures – Ayala-led Globe Telecom and Jack Ma’s Ant Financial, as well as MVP Group’s PLDT.

 Lance said the market is huge and the opportunity to help could be shared by many players.

 I hope they all succeed.

Government regulators should complement all these digital platforms with heightened efforts to crack down on unscrupulous loan sharks.

 Newly appointed Securities and Exchange Commission chairman Emilio Aquino has already cracked the whip on boiler room operators and other individuals involved in investment scams when he was commissioner. I hope the efforts continue until they finally beat the 5-6 system and the loan sharks.

James Go, on semi retirement

 Speaking of the Gokongwei group, I was happy to chat with JG Summit chairman Go who looked very relaxed now that he no longer needs to run the day-to-day operations of the conglomerate founded by his brother John.

 In casual sports jacket and polo – different from his usual and more formal suits – Mr. Go gladly shared that life is pleasantly different for him now that he is no longer CEO.

 It seems he has more time now for his other interests – literature, art, music, among others.

 “I can wake up not thinking of what I need to do during the day,” he shared.

 But Lance quickly injected – “But 90 percent of the time he decides to go to the office anyway.” And they both burst out laughing.