Alexandoy
VIP Contributor
In our society there are lots of lenders here who are mostly foreigners (from a specific country in Asia). The system of loan is usurious but those foreigners get rich with the so called micro financing. The interest rate is 10% but sometimes it is as high as 20% in a month or 2 months. It is called 5-6 because you borrow 5 and you will be paying 6 which is 20% of the loan amount.
One example is a borrower would buy TV so he borrows 10,000 pesos. The lender would collect the installment everyday – of 200 pesos for 60 days. The total would be 12,000 pesos but the interest earned by the lender is more than 2,000 or 20% because he is receiving the daily installment. The usual vendors of the micro financiers are the market vendors who are willing to pay daily installments because their income is daily from selling in the market. A study by our government said that this kind of loan is killing the poor who needed capital for their small business.
One example is a borrower would buy TV so he borrows 10,000 pesos. The lender would collect the installment everyday – of 200 pesos for 60 days. The total would be 12,000 pesos but the interest earned by the lender is more than 2,000 or 20% because he is receiving the daily installment. The usual vendors of the micro financiers are the market vendors who are willing to pay daily installments because their income is daily from selling in the market. A study by our government said that this kind of loan is killing the poor who needed capital for their small business.
