“Honey, Mama borrowed 750 pesos from a money lender”, my sweet wife revealed to me on our first return visit to Bohol, Philippines.
In my mind’s eye, I had a vision of Rocky Balboa from the first Rocky movie coming to break Mama’s thumbs. I did not like the thought of some collector paying Mama a visit so I pulled two 500 peso notes from my billfold and gave them to my wife.
My wife explained, “This is not enough. Mama borrowed the 750 pesos 10 months ago and now she owes 1500 pesos because of the interest.”
I quickly did the math in my head and responded, “That is 10% interest per month!”
“That is what money lenders charge here.” my wife explained.
I pulled out a third 500 peso note and gave it to my wife and stated, “Please tell Mama not to borrow from a money lender again.”
The logical question one might have from this situation is whether or not I was angry or outraged at the money lender? Some people might be and I can understand why but for me I felt no animosity toward the money lender.
The money lender and Mama had an agreement. The money lender had given Mama the 750 pesos 10 months ago and Mama had agreed to pay 10% a month in interest. I was a little irked at Mama for making such a bad deal, but I guess she felt it was her only option at the time.
Money lending seems like a good way to make money in the Philippines. Money lending is basically selling money on an installment plan to people who need the money up front for some purpose. If one has money to get started one can potentially double the money in 10 months. I do however feel that being a money lender in the Philippines is a risky business. The three sources of concern I would have are customers, competitors and opportunist.
Customers : Money lender customers are people who obviously could not get a loan from a bank or they would not be willing to pay the high interest rates. These people by definition are in somewhat of a desperate situation. They may want the loan to start a business or send someone overseas to work. Their plan may go well and they may pay back the money plus the interest charged for the use of the money. This will probably be what happens most often if not then no one would go into this business and be successful at it. But at some point money lenders are inevitably going to run into people who are unable or unwilling to pay the money back. In this case the money lender will have to exert some form of pressure on the nonpaying customer to get the money owed. People under pressure tend to react in two different way, either fight or flight. The client might choose to avoid paying the lender back by running away to another island there are over 7,000 to choose from this would be bad for business. The other option might to be to fight and that could be a lot worse for the money lender’s business and well being.
Competitors: The law of supply and demand applies to money lenders like everybody else. There are always only a certain finite number of loans to make and the more money lenders there are the less business there will be for each lender. I know of a Filipino who got involved in the money lending business because he figured correctly that it would be more profitable to make loans than to sell fish. One day the man received a death threat from an unknown source that he took seriously enough that he left his family and went into hiding for a year. My assumption is that the threat came from a more established money lender who did not like losing business. When he returned from hiding he decided it would be best not to go back into the money lending business and is now a fish merchant.
Opportunist: The one thing I have heard about safety in the Philippines over and over is that one should not advertise the fact that one has money. Money lenders are basically in the business of selling money to people who are in desperate need of money. When one is in a business where one is selling a commodity in this case money it is necessary to advertise at least to potential customers that the commodity is available. So if someone sees a known money lender it is logical to think this person would have cash on them at any given time. In my opinion, this makes money lenders a target for robbery. This to me makes the business of money lending in the Philippines a risky business.