In the Philippines, part of the culture is the borrowing of money from usurious lenders. This is not to smear Indians but most of those so called shylock lenders are Indian nationalities who are in our country and thriving with their micro lending business. The scheme is called 5-6 (five-six) to mean the interest rate which is 20%. So if you borrow 5,000 then you have to pay back 6,000 and that is clearly 20% in interest. However it is not just 20% because the payment is in daily installments of 100 pesos for 2 months. The effective interest rate may reach 32% as per rough computation. The president had recently issued a directive banning such usurious loans. Those lending money with the 5-6 scheme will be arrested. This will greatly affect the country’s economy because most small time businesses like street vendors depend on those Indians for their cash flow.
These Unsurious loans have never been legal in my country. However, most people know where to get them and the cops stopped following up those responsible. It's not a good idea for the government to ban such loans since not everyone has time to build credit. The loans are instant compared to the tiresome loan application processes in banks. However, the government has to ban them since most of the people who give this loans don't pay taxes. They also don't follow the regulations on minimum interest rates. As much as they're helpful, a country's regulations have to be followed. The loans offer fast solutions to the citizens and long term effects to a country's economy.
Since these 5-6 scheme is underground, there are no statistics to tell us whether these Indians are actually earning money from their financing ventures. While we know that they can make a killing, we also know that some of their customers renege on their obligation to repay their loan so it's a balancing act for these lenders. If these schemes are totally banned,it will be difficult for people with low or negative credit rating to take out a loan for emergencies or business purposes.
