WALA LANG
With a bit of prodding, barbers can be loquacious. Ranny Perlas was late, he apologized, because he had to walk all the way from his apartment in Santa Ana to the Makati CBD barber shop. The previous week, he continued, he was waiting for the red light to change when a speeding car turned the corner and hit him. Happily, Ranny suffered only a few scratches but his motorcycle was wrecked.
He didn’t get much by way of damages and for the crushed motor’s scrap value. Since then he had been walking the daily 30 minutes or so it took to get to work and another 30 minutes to get home. It would have taken ₱36, three vehicle changes, and 15 minutes anyway from home to work and vice versa. Life was tough, he added. Men seem to be happy with longer hair and since he works on commission, there are days he makes nothing.
THE RIGORS OF DAY TO DAY Ranny on his new wheels on his way to work at a barbershop in Makati CBD from his home in Sta. Ana
He decided to buy a brand-new motorcycle. It cost ₱50,000, with no down payment and monthly installments of ₱2,638.89 for three years. This means that the motorcycle seller-financier is charging Ranny interest of 48 percent per annum. He would not have to walk to and from work, however, and would be saving ₱72 per day for not taking public transport. At the same time he has to buy gasoline, costing him ₱300 every six days. That works out to net cash savings of ₱22 a day. He needs to buy third party liability and accident insurance but even without these and without considering the time and sweat saved, our barber is effectively paying about 30 percent per annum on his new transport.
Anyway, the financing deal is much better than the smiling bicycle-riding Shylock who lends on 5/6 terms, i.e., he collects ₱6 on a ₱5 loan after one week, earning an astounding 1,043 percent p.a. It seems that there are even friendlier Shylocks who readily lend ₱5 in the morning for ₱6 payable the same evening. It’s not a loan, they explain, it’s a partnership deal. Besides they have lots of bad debts and it’s not easy chasing after and collaring non-payers.
Relatives, friends, government agencies, and politicians, in that order, are the financiers of the first choice (“Wala na po kaming malapitan .”). Government agencies never have enough funds and donor fatigue sets in after a while so our needy are back to commercial sources.
Most have credit and/or debit cards. It’s easy to buy stuff with them and it’s a great convenience if you pay your monthly bill in full each time. Interest charge is high on unpaid balances, however, and the penalties are really super high if you miss a minimum monthly payment. It’s cheaper to borrow from banks but many are intimidated by know-your-client requirements, credit investigations, paperwork, interrogations.
When a windfall arrives and our man finally has extra cash, he gets centavos as interest on the pesos he deposits. Borrowers complain that banks pay so little when they accept deposits but charge so high when they lend the money.
Both bank borrowing and lending rates are now on the way up as the Bangko Sentral ng Pilipinas tightens up on credit in order to control inflation and to protect the peso, but the situation was little different in the recent past when the authorities were trying to stimulate spending and investment.
Banks have been paying something like one fourth of one percent (0.25 percent) on regular savings accounts and depending on the size of deposits, from three to four percent on deposits of one to two months. Deposits for longer periods earned more, again depending on the size of deposit – the larger the amount, the higher the rate.
The difference between deposit and lending rates does not end up as bank profits. To begin with, the full amount of deposits is not available for lending. Banks have to freeze part of their deposits as non-interest-earning reserves with the BSP and have to keep part of it as cash on hand in order to cover withdrawals (ideally, the day’s withdrawals matches deposits received on the same day). Interest income on the amount lent is subject to a five percent Gross Receipts Tax. Staff compensation, utilities, and other operating expenses add up. Then there are capital expenditures, most significantly for IT hardware and software.
The common man is always between a rock and a hard place.
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