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| An integral part of the economy |
Recent news about the “5-6” Bumbay financiers have been the staple of headlines. These are the ubiquitous motorcycle riding financiers for many of Filipinos. These Indian nationals have been part of the trade and business landscape of the country for almost 100 years. They have a niche carved in the “informal” lending business so critical to the “underground” economy.
It is already recognized that the underground economy employs more Filipinos than the top 100 corporations. In fact, the Micro enterprises comprise more than 80% of businesses in the country. But where and when did this start?
Contrary to current belief, there was a similar mode of financing more than 100 years ago. Being an agricultural country, Filipinos also obtained loans then. But it was not in the form of money. Loans were given in the form of palay. Small farmers would borrow palay to be repaid in palay twice a year since there were 2 seasonal harvest times. The palay borrowe will be repaid with interest also in the form of palay.
But the shift gradually from agriculture to commercial due to urban migration also necessitated such small scale borrowings and lendings. Instead of farms, Filipinos in the urban areas would put up stores and food stalls. The traditional lending institutions such as banks would never touch these small enterprises since the risks were high, processing in terms of credit investigations and even loan monitoring had a higher overhead than the expected credit yields. Of course, these businesses would never have the needed security or collateral.
Thus, the Bumbays came into the picture. They of course would lend and then collect every day the loans payments. They would be part of the community in such fact that they provided a service to the community by easy lending terms but at interest rates as high as 12% per month. In so doing, they would also have the funds to further expand their clientele in financing.
This is where the problem lies. A segment in the economy that needs financing but with traditional institutions unable to serve their needs. An informal source of financing that is considered illegal but is also seen as indispensable.
The government must fill in the gap with relaxed credit rules and guidelines that will enable Filipinos to bridge the credit gap that is so important I economic development. This is the only way that the underground economy still survive and even thrive. It must be noted that a vast segment of the population survives only because of this economic sector.
