[Podcast] Avoiding financial predators and learning from Mongolia’s experience: Tips for small and medium enterprises in the Philippines

 

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Loan sharks, or informal lenders, exploit small businesses with exorbitant interest rates.

During this B-Side segment, Baasandorj Davaasuren, the chief business development officer at fintech company AND Global, talks to BusinessWorld reporter Aaron Michael C. Sy about lessons learned from Mongolia’s encounter with predatory lenders, with the goal of assisting micro, small, and medium enterprises (MSMEs) in the Philippines. The research and development arm of AND Global, known as AND Systems, is located in Ulaanbaatar, Mongolia.

According to Mr. Davaasuren, the Philippines’ archipelagic geography poses challenges in monitoring and controlling loan sharks, particularly in remote and less developed regions.

He stated that the issue of loan sharks in the Philippines is presently more dire than in Mongolia, but there is potential to address it.

Having limited knowledge about finances can leave both individuals and businesses at a higher risk of being taken advantage of by predatory lenders.

According to Mr. Davaasuren, a lot of people have trouble comprehending the available financial options and may perceive high interest rates as reasonable.

“They believe that a 5% interest rate per week or per month is acceptable.”

According to him, possible options could involve customized interest rates that allow private organizations to provide loans specifically for MSMEs at lower rates compared to regular retail loans. This could also include encouraging larger financial institutions to get involved in MSME lending to broaden the range of financing choices available for small businesses. Additionally, providing easier access to credit data could help banks make better decisions when approving loans. Another potential solution is offering loans without requiring collateral.

According to him, in order to effectively provide loans to small businesses, it is crucial to have a thorough understanding of the MSME market in the Philippines. This sector plays a vital role in the country’s economic growth.

“Small and medium enterprises are crucial driving factors for sustainable economic growth and financial impact on the country.”