The administration has added another weapon to its arsenal of tools to combat loan sharks in the country. The state-owned Small Business Corp. is extending P5.1 billion worth of loans this year to micro entrepreneurs.
The Department of Trade and Industry’s Pondo sa Pagbabago at Pag-asenso program has offered microentrepreneurs loans worth P5,000 to P200,000 since its launch in 2017.
Small Business Corp., the micro financing arm of the DTI, has helped over 110,000 microentrepreneurs to date grow their businesses through safe loans.
The issued loan amount depends on the needs of each business and the repayment capacity of the borrower, with no collateral requirement.
Further, small business owners can enjoy low interest rates. DTI’s 3 Ps loans so not exceed 2.5 percent every month for interest rates and service fees.
Loan sharks, or “5-6” money lenders, typically charge a 20% nominal interest rate on loans to small businesses. These high interest rates often lead to lenders financing loans with other loans, creating a cycle of debt that can be difficult to escape.
The DTI’s loan offerings are much more suitable for growing small businesses. The no collateral requirement means that it is also a lower risk to potential borrowers.