Personal and Business-Related Factors associated with Loan Shark Availment of Public Market Vendors of Passi City
Carimah Jane Ambata
Quenne Rose Buenavista
Shane Eunice Yap
Background of the Study
Loan Sharking is the practice of lending money to desperate people at extremely high and illegal rates of interest. An American author, Rolf Nugent says that the business appears to have begun in cities of the Middle West shortly after the end of the Civil War. The huge profits of the earliest offices were reinvested in additional offices in neighboring cities. Employees of these chain companies left to establish their own offices as soon as they had accumulated or could raise the small initial capital that was needed. The observable prosperity of the business attracted other lenders, and so, loan shark offices soon spread to all major cities throughout the United States and other countries.
A Loan Shark is an individual or organization that loans money at extraordinary high rates typically above the legal interest rate. In the Philippines, loan sharks are usually Indians from South Asia, popularly known as “Bombay 5-6”. They belong to the two Indian communities overseas, the Sindhi and Sikh. Majority of them were from the Sikh community, which is said to have copied the money lending business from the Sindhis. The business is termed as 5-6 or “six-for-five” because, for borrowing an amount of five, the return is six at the end of the week. Filipinos often believe that many Indians in the Philippines are in the 5-6 business, and the words 5-6 and “Bombay” are frequently used interchangeably to point out people of South Asian origin.
Bombays usually target public market vendors knowing that these vendors desperately need money for everyday needs. In Passi City Public Market, 5 to 10 Bombays are actively engaging in this lending business. Much higher than the legal interest rate of six per cent per annum, as declared by the Monetary Board of the Philippines, 20% to 40% is the interest being imposed by the Bombays. They go to the market everyday to collect daily dues. For convenience, some of them hire Filipino collectors to collect the daily payments. Attracted by the profits, there are residents of the place who started their own lending business too, similar to 5-6, to compete with the Indian financers.
Recent study shows that loan sharking greatly affect the people in low income communities in terms of health and well-being. Surveys say that in a particular place in United Kingdom, half (48%) of payday loan users have taken out credit that it turned out they couldn’t afford to repay. 13% of them have prioritized paying back these loans over traditional essentials such as buying food, clothes or paying for gas and electricity. A study by Mari Kondo, a Filipino researcher, showed that Filipinos suffer bankruptcy due to Bombay 5-6. News article by Miriam Grace Go stated that some politicians in Mindanao borrow from loan sharks, putting up their local government’s revenue shares as collateral, thus, putting vital services on hold.
The researchers choose this study because loan sharking is already rampant in the society. Since the researchers are commerce students, this topic is in line with their specialization and they are exposed in different kinds of business including lending. So, they want to find out why people choose to be involved in loan sharking instead of engaging in other lending institutions. The researchers want to know also if personal and business-related factors have significant relationship with the loan shark availment.
Statement of the Problem
The main purpose of this study is to determine the personal and business-related variables associated with loan shark availment of public market vendors of Passi City.
Specifically, this study seeks to answer the following...
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