Many Filipinos are turning to Pawn Shops and Loan Sharks as the cost of living rises

[ASEAN NOW News]

 

It was reported this week that Loans provided by pawnshops increased year on year by PHP4 billion in 2021 as more people needed immediate fund augmentation during the pandemic.

 

In a virtual briefing on Thursday, Bangko Sentral ng Pilipinas (BSP) Financial Supervision Department 9 Director Dindo Santos said their survey among major pawnshops shows a growth in pledge loans or “sangla” in recent months.

 

 

“Moreover, based on the business model of pawning, this serves as an immediate source of funds for individuals. And as we all know, this is used for consumption purposes such as basic needs, for food, education, health, clothing, and shelter,” he said.

 

During the same briefing, BSP Governor Benjamin Diokno said pawnshops' assets reached PHP96.9 billion by end-2021, 4.7 percent up from the previous year’s PHP92.5 billion. 

 

Diokno said pledge loans grew by 2.7 percent year on year to PHP54.5 billion during the same period.

 

He added the industry’s capital increased by 2.6 percent year-on-year in 2021 and “remains adequate to support risk-taking activities.”

 

Many are also turning to loan sharks to borrow.

 

SE Asia problem 

 

The problem is not only in the Philippines but seems to be widespread across SE Asia too. 

 

The pandemic has exaggerated the situation with many struggling just to cover basic monthly expenses.

 

Loan Sharks are making a large profit across Thailand as well.

 

The University of Thai Chamber of Commerce (UTCC) recently revealed that the slowing economy has triggered a surge in household debt of 7.4 percent this year.

 

The university's latest survey of 1,201 respondents during 11 to 23 November found that household debt averaged 340,053 baht (US$11,248) per household, compared with a year earlierat 316,623 baht (US$10,473), which was up 5.8 percent from November 2017.

 

40.8% of debt is underground loans

 

One of the key findings, however, was that while some 59.2 percent of the debt was formal debt borrowed from legitimate financial institutions, 40.8 percent was what was considered underground debt, meaning debt owed to loan sharks.

 

Vietnam has the same problem

 

This week, Vietnam’s Prime Minister Pham Minh Chinh has asked the central bank and the Public Security Ministry to protect workers from loan sharks.

 

An official with the trade union of New Apparel Far Eastern Vietnam Co., Ltd. in Binh Phuoc, said black-market lending was a critical issue facing many workers.

 

She said that in recent times, many workers have been mired in financial difficulties due to the pandemic, but, unable to get loans from banks, they’ve had no choice but to turn to loan sharks.

 

She said that in recent times, many workers have been mired in financial difficulties due to the pandemic, but, unable to get loans from banks, they’ve had no choice but to turn to loan sharks.

 

In the past three years, the Vietnamese ministry has overseen more than 2,700 cases with 5,000 people involved and prosecuted 2,000 cases with 4,000 defendants. Of those cases, workers are victims in more than 1,000 cases.

 

Some are calling for banks to take responsibility when workers must turn to loan sharks and cannot access the official sources.

 

There the central bank will collaborate with the Vietnam General Confederation of Labor to make sure that workers with legitimate needs can get access to the loan package.

 

The PM’s dialogue with workers attracted 4,500 workers in total, online or offline. Several social issues, the need for preferential loans and other policies to support and incentivize workers.

 

Questions and proposals brought up at the meeting included several social houses, preferential loans, and policies to support and offer incentives for workers.

 

Loan sharks in the Philippines

 

 

There are two main types of loan shark Philippines.

 

These are the “five-six” and the Sangla ATM.

 

Five to six kind of loans is where you borrow five pesos and pay six.

 

If you do the calculation, you are paying 20% on your loan.

 

Some banks do charge this level of interest but within many years. A loan shark, however, charges this interest per month.

 

Sangla ATM – the word “sangla” means pawn.

 

In a loan shark scheme like this, the borrower must surrender his ATM card to the lender, along with this password or PIN code.

 

The borrower will not be able to get his ATM card back unless the payment has been made.

 

As these examples show,  the borrower in both types of loan sharking is in a bad spot.

 

 If you do not have your ATM with you, you will not be able to withdraw, and you will have no money to spend for your day-to-day living.

 

The ATM card, by the way, is how the borrower gets his salary from his employer, so it has serios imlications.

 

With the pandemic and the Russian Ukraine war, food prices and fuel are rising weekly, so families are already struggling to make ends meet.

 

There is no easy solution unfortunately.

 

[bangon04]

Leading the trend.... the Republic of the Philippines will take out a huge loan from the PRC and as collateral they will offer Subic and Boracay.......

[teelac777]

And yesterday the government reported the Phils inflation rate at 6.1% thus far in 2022.  ????