Lending Money In The Philippines

[Mike S]

Yup ...... ol' Willie Shakespeare said it best ........ "neither a borrower nor a lender be" ........ here is the total quote .......

Neither a borrower nor a lender be;

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.

This above all: to thine own self be true,

And it must follow, as the night the day,

Thou canst not then be false to any man.

[i am bob]

I once talked to a Filipino friend living in Niagara about Money Lending in the Philippines and if it was worth looking at. He simply said to stay away from it and then he showed me a great example...

He said "Let's suppose my wife is the Lender and I am the Borrower." He walked over to his wife, whispered a few words in her ear and asked to borrow some money which she gave him readily. Then he turned to me and said "Let's go have a beer at the bar". But to further reinforce the point, he went into the closet and got his suitcase to take with him. I asked what was up with the suitcase and he replied that, now that he had the money, he ain't coming back! His wife then stopped him with a great big (toy) knife in her hands... Of course they only did this to reinforce his point and then we all sat back down and finished the beers we had originally been drinking!

Yeah, I learned... Money Lending in the Philippines is not something to get involved with!

:tiphat:

[Thomas]

I once talked to a Filipino friend living in Niagara about Money Lending in the Philippines and if it was worth looking at. He simply said to stay away from it and then he showed me a great example...

There are other reasons too:

/Some have been killed. (I don't know if by competitors, robbers or borrowers who don't want to pay.)

/I find it unmoral to take around 140 % interest (as 5-6 are recounted to year) from poor people.

But I think of perhaps doing some "harvest sharing loans" * if I will have extra non working capital sometimes e g if I save to buy an additional mashine to my main business.

Some kanos have done it with neighbours, and only one didn't give the pay, although they hadn't taken any security as e g the land.

* =Finanse farming (seed, fertilizer, pesticides. Around 20 000 pesos needed per hectar when it's rice. Then get (worth of) the money back, as well as pay extra farm workers, before counting the sharing. 1/3 - 1/4 to the financiere is common. I know a Filipina, who is careful and made agreement of a STATIC amount, so no point for them to hide some of the harvest :)

[cebu rocks]

Start a sari sari store or sell phone load bpth are money losers but at least they spread out the money you send over a longer period

[Dave Hounddriver]

I find it unmoral to take around 140 % interest (as 5-6 are recounted to year) from poor people.

I find that an interesting comment. This is not to criticize but to question; When the locals are used to getting 'ripped off' with the 5/6 schemes and an expat comes along and offers only 10% per month interest is that also immoral? What if you think that it is and decide to only charge 5% per month, is that immoral? That 5% compounds to well over 60% per year and it is usury by western standards but here (when done legally) the government gets 1/3 of the interest as their share so the government, the church, the people and the lenders have no problem with that . . but some would say its immoral.

I think its immoral that my Bankard Visa charges me 3.5% per month. But the point is, using morality to justify interest rates, or not, is a purely subjective and personal definition that has no basis (I know this is my opinion only but still valid I think) in real life in the Philippines.

[Thomas]

I find it unmoral to take around 140 % interest (as 5-6 are recounted to year) from poor people.

I find that an interesting comment. This is not to criticize but to question; When the locals are used to getting 'ripped off' with the 5/6 schemes and an expat comes along and offers only 10% per month interest is that also immoral? What if you think that it is and decide to only charge 5% per month, is that immoral? That 5% compounds to well over 60% per year and it is usury by western standards but here (when done legally) the government gets 1/3 of the interest as their share so the government, the church, the people and the lenders have no problem with that . . but some would say its immoral.

I think its immoral that my Bankard Visa charges me 3.5% per month. But the point is, using morality to justify interest rates, or not, is a purely subjective and personal definition that has no basis (I know this is my opinion only but still valid I think) in real life in the Philippines.

Sure. Although it's a big difference between

charching around 40 % per year to kano people, who has borrowed for e g "luxury" things as travel abroad on vacation before they have saved money to do it

and charching 140 % per year to Filipin people, who need them to survive...

Concerning which interest level is immoral, it can be discussed. Usury laws in different countries can be a hint. Some depending of inflation and risk levels too. (When they leave security I find 120% much much to high.) 120 % is more than 60 % anyway :)

Edited October 9, 2012 by Thomas

[Thomas]

Oh some error not showing the edit button, so first I wrote the change here :)

Edited October 9, 2012 by Thomas

[nor cal mike]

I did some checking around about money lending as additional income

once I am in the Philippines full time. My conclusion is that it is probably

the least profitable and most dangerous thing a foriegner can do. Yes,

the return is high IF you get paid and that is a huge IF. More important

is the fact that you and your family are at great risk of being harmed,

kidnapped or even murdered. IMO you are much better off to be very low

keyed and try to blend with locals which means not displaying any signs

of extra money, because if you do you will certainly become a target.

[Thomas]

I did some checking around about money lending as additional income

once I am in the Philippines full time. My conclusion is that it is probably

the least profitable and most dangerous thing a foriegner can do. Yes,

the return is high IF you get paid and that is a huge IF. More important

is the fact that you and your family are at great risk of being harmed,

kidnapped or even murdered. IMO you are much better off to be very low

keyed and try to blend with locals which means not displaying any signs

of extra money, because if you do you will certainly become a target.

Yes, surely dangerous. At least 2 foreigners in that business has been killed this year.

But concerning risk to not get paid, it DON'T need to be a big problem. Loans can be given against security. Much depending of judging characters too.

/A Filipina I know a bit has such business in small scale, but her daughter has biger. I believe they take security allways, except when they do a few harvest sharings. (Almost) allways got paid.

/A kano in harvest sharing, allways got paid, but perhaps they fooled him some saying they harvested less to give him a smaller share :)

/Other kano in harvest sharing. Fooled once totaly geting nothing THAT time. (This guy I know very well.).

No one of the kanos take security but do it only with people they know and find trustworthy enough.

The kanos got paid in rice, which I suppose make less robbery risk :)

5-6 I will surely stay out of both moral and security reasons.

I don't know, but it seem poor farmers "like" harvest sharing when they get fair deals, specialy when it's deals when they get some money to living costs too BEFORE the harvests. Him I know best, seem to be liked both by the rich and poor there.

[nor cal mike]

Thomas, It seems as if you have done your homework and well know what you are doing. Best of luck to

you and be sure to let us know how it works as many here would like some additional income.