Thursday, April 27, 2017

In fast-moving world of money and payments, anthropology finds a niche

by Jonathan Miller, Mario Einaudi Center for International Studies at Cornell University

Bill Maurer with cash, cards, and a new payment app.
Apple Pay, Venmo, Square – few aspects of modern life are changing more quickly than systems for moving money.

Ethnography, participant observation, domain analysis – few academic fields require as much time and patience as anthropology.

Yet the anthropology of finance is more urgent and relevant than ever, says Bill Maurer, professor of anthropology and dean of social sciences at the University of California Irvine.

“It’s been amazing to me how much people in IT, folks in the payment industry, really want to hear from us,” he said during a recent visit to Cornell. “Whether they call it anthropology, or the end-user perspective, or computer-human interaction, they want to know what people are really doing on the ground.”

Maurer, a leading figure in the social sciences of finance, was at Cornell to help kick off the Institute for African Development’s symposium “Mobile Money, Financial Inclusion, and Development in Africa.” His talk, “The Problems of Cash and the Perils of Cashlessness: Researching Mobile Money and Payment Infrastructure after M-Pesa,” looked at the “Cambrian explosion” in payment systems after the African telecommunications giant Safaricom launched M-Pesa, its cell-phone-based service, in Kenya in 2007.
That explosion has brought millions of people into the financial system, making everyday payments easier while providing access to credit and other services. That can make a huge difference for people who need money for seeds, farming equipment, or other modest but crucial investments.

“That said, there are some pretty big risks in the extension of credit to people who haven’t had it before,” Maurer said in an interview.

“Often such people do have their own systems of credit, through patrons and family and kin, or through livestock or access to land,” he said. “When they are given a credit card or access to a formal line of credit it can be difficult at first to figure out how that is meant to interoperate with those other, older forms.”

He cites the case of South Africa, where workers began receiving their paychecks by direct deposit at the same time that banks got the power to reclaim debts directly from their clients’ accounts.

Mobile money grew out of the trade in phone card airtime as a substitute for cash in Africa. This retail stand is in Uganda.

Mobile money grew out of the trade in phone card airtime
as a substitute for cash in Africa. This retail stand is in Uganda
“Anthropologist Deborah James showed how folks went into a financial tailspin because they found they couldn’t negotiate with the bank the way they could negotiate with their relatives. With the bank, if you didn’t pay when it was due, they just took it,” he said.

In societies where loans, gifts, and other forms of exchange are central to social cohesion, the “financialization” of transactions can damage more than just the solvency of an individual borrower.

“So there is this big downside, but there’s tremendous upside” in developing new forms of payment, Maurer said. “It’s just that getting to that upside is going to involve doing some work that some of these service providers have not really been willing to do in the past – to really get to know their customers, to really understand what their needs are, what kinds of informal credit arrangements they’re already using, and really actively trying to educate their potential users on how this new service can work together with those things.”

That is where anthropologists come in.

“If you were trained in a business school, you’re going to miss things like familial relations as involving exchanges that are themselves forms of credit,” Maurer said. “You’re going to miss things that happen on timescales that you’re unfamiliar with.”

With his colleagues at UC Irvine, Maurer founded the Institute for Money Technology and Financial Inclusion to bring together social scientists, technology developers, and financial system practitioners from around the world, particularly from developing countries. The institute has set up a regional center in Pakistan and is planning to establish others in Mexico and Senegal. That is because the technology and culture of finance can vary dramatically from place to place.

“We have a researcher who worked on the Russian side of the Mongolian border with former nomadic herders who had only been settled into villages in the past generation,” he said. “They sit at the crossroads of all kinds of physical cash, some of which they don’t know what to do with. So they throw it into the river as an offering to the river god.”

Cultural issues can arise much closer to home. Maurer recently gave a talk to bankruptcy judges in Orange County, California, near where he teaches. They told him about recent Southeast Asian immigrants whose ideas of communal or familial property can put them at odds with a legal system that sees ownership as an individual responsibility.

“I had one judge tell me that she had a back-and-forth with a guy facing bankruptcy where she was saying, ‘You don’t understand, this is how American law works’ and he was saying, ‘No, no, you don’t understand, this is how gifts work,’” he said.

Maurer sees meeting with practitioners as an important part of his work. “I think that we have a fundamental duty to be willing to speak to people about what we’re doing and the insights that we have to offer,” he said. “Too often I think, especially in anthropology, we adopt this role of cultural critic, which means we come with a holier-than-thou perspective on everything. When we deal with people outside academia, doing work that touches on our own, we either get judgmental toward them or we think of them as data.

“But there’s a hunger out there for the kind of insights we have to offer, especially for people in the trenches who are really seeing what’s going on.”

Read the original interview here:

Tuesday, April 25, 2017

Micro Insurance Claim Payments through Pre-paid Cards: Technology and Regulation Driven Financial Inclusion in India

By Debashis Acharya (University of Hyderabad) and Tapas K. Parida (State Bank of India)

It was the sweltering summer of April 2016 and we were with a few microfinance clients of Utkarsh Micro Finance (one of India’s leading MFIs granted a Small Finance Bank license) near an ATM machine located in Harhua, a small town close to the city of Varanasi. The executives of Utkarsh led by Mr. Atul Tripathy were distributing the first set of pre-paid cards to some clients. The cards were loaded with their insurance claims. These five to six clients came from nearby villages located about 4 km away from the Harhua branch of Utkarsh. Except for one person all the others saw this M2P-DCB providing pre-paid card for the first time. In fact, none had never used an ATM card before. The executives explained to them how to use the card, how to withdraw their claim amount and helped them with inserting their PIN number to withdraw the money. We could see the anxiety on their faces. In fact, we were anxious too. The ATM machine dispensed part of the cash for the first client when the card was inserted. But since the claim amount was not a rounded number and the machine was not dispensing Rs100/- currency notes, the client was advised to visit another ATM machine to withdraw the full balance. The second case also had difficulty because the machine didn’t read the card in the first instance and only upon repeating the operation did the client succeed in getting his cash.

We had already interviewed several senior executives about this pre-paid innovation and were well aware of its background. Regulations by the Reserve Bank of India (RBI) mandated not to pay by cash to micro finance clients while settling death claims. Adding to this the Insurance Regulatory and Development Authority of India (IRDAI) mandated direct payment of the claim dues to the client and outstanding to the MFI, the master policy holder. Because many clients did not have bank accounts, payment by cheque or electronic funds transfer was out of the question. Many claim payments were stalled for a long time and many cheques turned stale since they could not be cleared by banks due to KYC mismatches. The option of mobile-based payments was also ruled out since it hasn’t taken off in general among the rural population. During our visits to Varanasi and nearby villages we saw sign boards of Airtel Money and Vodafone M-pesa but our interactions with the locals revealed very limited use of mobile money. Mr. Satyen Dash of Bajaj Allianz Insurance, Mumbai says, “There were difficulties in going for mobile phone-based solution due to issues of connectivity, non-possession of smart phones by poor people, KYC issues and the individual perceptions.” Hence came the idea of pre-paid cards as they comply well with the regulatory requirements of the RBI and IRDAI and pay the claim amount directly to the client. The process is illustrated in the figure below.

Our project moved further with a survey of 200+ MFI clients to elicit their salient beliefs and we also conducted a few in-depth interviews. Societal image and perceptions of enhanced financial security and hassle free claims settlements were the most important determinants for acceptance of the technology. Many of these clients benefitted from the use of cards since their claims were pending due to regulatory changes restricting the insurance company from settling claims in cash. A good number of cheques had also not been realized since these clients didn’t have bank accounts. Vodafone M-pesa has not really taken off in this region and mobile-based payments were almost non-existent. The primary use of mobile has been to be in touch with families and recreation/entertainment. Overall, absence of formal banking coverage, distance to ATMS being 3-7 miles, and difficulty in using mobile based payments have made the pre-paid card experiment successful in this case.  

An interesting finding was that people often preferred soiled banknotes to new banknotes for fear of counterfeit currency. This emphasis on tangibility and trust based on physical signs of repeated use explains in part why mobile money has not taken off as a mode of payment and why some did not take as well to the pre-paid cards. A female respondent from a village near Varanasi said, “I don’t believe in new notes. The MFI agent once refused to accept them because the metallic part [the machine readable security thread and electrotype water mark] were damaged in the new currency note I had as part of  my fortnightly deposit. The new notes have not been used before and I don’t know if they are genuine. I think many of my friends share this feeling too.” Other beneficiaries felt that cards were better substitutes of cash. They felt that they could store their cash in this mode and use it as needed, which made them save a bit more in the process. The spouse of a female client said, “I think I overspend if I have cash. If I have money in my card I will spend when I need and save the rest.” This implies that employing card-based services for even collection and disbursement of loans by MFIs could be useful and could also serve other existing needs of potential clients.

Some design issues in this experiment also merit attention. The seven cases of settlement of claims by cards that we witnessed in our field visits were related to first time users of such cards. None of them previously had bank accounts or ATM cards. Though their perception of the utility of such cards was positive, one could see potential problems of using this new instrument. First, ATMSs dispensing cash belong to different banks and possess distinct display features. Second, the cards used in these machines are either credit or debit cards and the accounts too are of different types. Finally, the currency dispensed by the machine is sometimes limited to relatively high denominations. For instance, some machines do not dispense notes of Rs100/- denomination. In such cases some quick user guides for these pre-paid cards would help the users to effectively use the card. As mentioned earlier, claim amounts were not rounded off and the clients ended up losing a few Rupees in every transaction. If the claim amount was Rs. 5329 the machine would not dispense Rs. 29. But the MFI executives became aware of this lapse and there was an attempt to correct it in the next lot of cards by rounding off the amount to benefit the client.

The Prayer/Pledge - A Financial Literacy Move by Utkarsh
It is also important to note that the level of insurance and financial literacy among these rural poor was very high. Most clients knew how much they paid for the insurance premium, the purpose of insurance, and how much was expected in case a death occured. They were also aware that due to some technical difficulties, their payments could get delayed. This can be attributed to Utkarsh’s financial literacy drive by executives specifically appointed for training clients in literacy. One example is that of a pledge taken by members at end of each meeting to adhere to the financial discipline of spending loan amounts on the activity for which it’s taken, paying the fortnightly instalments on time, spending income earned on family’s wellbeing, not applying for loan beyond one’s repaying ability and helping each other at bad times. The MFI representative also reciprocates by pledging to advance loans on time.

Is the pre-paid card based settlement/payment method sustainable in the changing environment of MFIs in India? Are MFIs fading away or are their roles shifting since some of them have been granted Small Finance Bank (SFB) licenses? These are some of the questions that remain. So far only eight MFIs have been issued SFB licenses by the RBI and others may follow in future. A majority of them will however probably continue as MFIs of small & medium sizes with the use of not very high-end technology. Pre-paid cards seem to fit that bill and may be well-suited to providing services like disbursement of loans and collection of repayments in addition to insurance claim payments discussed in this study.

Read more in Acharya and Parida's Final Report.


Wednesday, April 12, 2017

Part Three: Informal Loan Trap - Bombay 5-6 lending's effect on Micro-entrepreneurs in Tacloban City, Philippines

By IMTFI Researchers Rosalita M. Dula and Marilou P. Grego

This is the third and final post in a three-part series about the informal loan negotiation practices between ambulant vendors and a group known as "Bombay 5-6 lenders" in Tacloban City, Philippines. Dula and Grego describe the effects of these lending practices on the household and business activities of vendors who live and work on the edge of a precarious existence.

Businesses are put up to generate income. For some micro-scale entrepreneurs like the ambulant vendors, there is a starker purpose in engaging in their trade. For those who live a hand-to-mouth existence, their business is their bread and butter - maybe more.

Maria, 51 years old - Ambulant Vendor (Photo Credit: Rosalita M. Dula)

The results of our study indicated that most respondents borrow money for either educational or medical expenditures for the family. Moreover, the frequency of their loans are significantly related to poor health conditions of family members and lack of savings. Since household subsistence has higher precedence over repayment of loans, vendors rely heavily on daily income to sustain daily household needs and are always a day away from potential default. Once an ambulant vendor experiences default, there is a high possibility that a series of such defaults will be experienced. Because lack of income is the primary cause of default, defaults have a domino effect as daily income goes toward loan repayments in a circular course.

To have a debt is hard. To be caught in a cycle of debt is even harder. To be bound in a cyclical debt for a long period of time is beyond comparison. A person would normally feel ashamed if anyone knows that they are mired in debt. At the onset of this research study, we struggled to find prospective respondents because no one would ever admit to having a loan with a Bombay 5-6 lender. Realizing this, we re-phrased our question asking instead; “Do you know anyone among your fellow ambulant vendors who have existing loans from a Bombay 5-6 lender?” Amused by our question, one vendor referred us to another, who then referred us to another, until we found ourselves back with the first three (3) ambulant vendors we spoke with (who initially denied having such a loan). If only we knew then what those colorful beach umbrellas stood for.

Most of the respondents have children who are still attending school. Most are in secondary school and at college level. Education for them is very important, as is their health. Most of our respondents have lost some perception of the magnitude of the economic situation in which they are entrenched. But one remarkable thing we discerned from our respondents is their sense of responsibility to provide their children with a chance for a brighter future - one quite different from parents’ own current situation. Earning at a subsistence level from their businesses is challenging for heads of family who work to maintain the robust health of family members or confront financial challenges when one person in the household requires medical attention.

Focus Group Discussion with ambulant vendors (Photo Credit: Ericson D. Acebedo)

During our focus group discussions and in-depth interviews, one of our central questions was “Why Bombay 5-6?” We received a plethora of answers, of course, and as extensive as those documented in previous studies. In substantiating how accessible the Bombay 5-6 lenders are, one of our participants explained rhetorically: “If you have a sick family member and you don’t have money for their medication, would you approach formal financiers for a loan whence you’ll have to wait a month for the proceeds?” The answer would be the same when we asked why they go for a loan. It’s a matter of urgency, even survival.

We have heard many justifications from ambulant vendors about why they have messed up with Bombay 5-6 lenders. With this study, we were able to gain insight - from a financial perspective - on how these marginalized traders are operating their businesses. Though not exhaustive or comprehensive, our study provides an important overview of the economic system encompassing vendors and lenders. Referring to the segmented cycle illustrated above, money borrowing can commence at any point (household, Bombay 5-6, or business). This is due to the absence of savings that could serve as a buffer between the three entities involved. Since the scale is at a daily subsistence level, an active and ongoing spin is understandable.

In the long run, what was once considered disruptive becomes normal. This is one reason why most of our respondents showed no remorse over having a loan. Domingo Omoy, Sr. who has been an ambulant vendor for more than three (3) decades, said he cannot recall anymore a night where he had trouble sleeping because of a loan with a Bombay 5-6 lender. He reaffirmed that so long as the intention of taking on debt is for the welfare of his family, he will always find peace within himself and the determination to settle it. He admitted, though, that he does get a bit anxious whenever he fails to keep up with the repayment.

Today, Domingo has two children who have finished college and who now work as elementary school teachers. And yet, he still borrows money from Bombay 5-6 lenders. Three more kids to support, he said, but soon the two of them will be done with their college studies. When asked if he would be over with his Bombay 5-6 affair by that time, he replies that he certainly does not know for sure. But one thing he is sure of, he said, is that he will make it through.

An artist's depiction of Bombay 5-6 lending (Artist: Jakes)

The level of courage and endurance that Domingo and the rest of our respondents show is amazing. They have withstood the battle, but seem to have forgotten the urge to retire from their cyclic money borrowing activities. Some may already have achieved fleeting financial freedom on their own terms, but remain unaware that they are kept in a trap by deeply ingrained habits of making do.

Maria, 51 years old and an ambulant vendor in Tacloban city imparted to us: “For thirty years of peddling and thirty years of borrowing from Bombay, life is still the same. Constrained, striving, and impoverished - yet we still endure. I hope that assistance from the government can reach to those who are marginalized - like us.”

For earlier posts in this series, see part 1 here and part 2 here

Read their final report, Informal Loan Trap: Bombay 5-6 And Its Effect On Micro-Entrepreneurs In Tacloban City, Philippines, here 

Tuesday, April 11, 2017

Part Two: Up close with informal money lending - Loan Negotiation Practices between Bombay 5-6 lenders and Micro-entrepreneurs in Tacloban City, Philippines

By IMTFI Researchers Rosalita M. Dula and Marilou P. Grego

This is the second of a three-part series about the informal loan negotiation practices between ambulant vendors and a group known as "Bombay 5-6 lenders" in Tacloban City, Philippines. Dula and Grego describe the effects of these lending practices on the household and business activities of vendors who live and work on the edge of a precarious existence.

Tacloban City is the center for trade, commerce and culture in the Eastern Visayas Region of the Philippines. It has attracted both local and multinational franchises to invest in the city. At present, Tacloban City has a total of 43 financial establishments comprised of 15 bank companies and other formal financial institutions from government and private sectors. On the other end of the spectrum are the informal money lenders who are thriving in the area. The most interesting of these are the Bombay 5-6 lenders who, based on word-of-mouth, have been continuously operating and dominating this business for the longest period. A majority of their client base are those engaged in micro-scale businesses like those of the ambulant vendors.

Ambulant vendors' most popular food items (Photo Credit: Rosalita M. Dula)

Our study used purposive sampling to identify as respondents a total of 100 ambulant vendors who have existing loans from Bombay 5-6 lenders. The study looked into respondents’ socio-economic and business profile, the determining factors of preference that led ambulant vendors to strike a deal with Bombay 5-6 lenders in Tacloban city, and the loan negotiation practices of lenders and ambulant vendors.

Females comprised seventy-eight percent (78%) of all respondents. Lenders consider it to be easier to begin business relationships with female ambulant vendors than with male vendors (Sonny, Bombay 5-6 lender). Aside from the actual instances where it is mostly women who are left to oversee and operate the business, women are often highly approachable and can easily be pressured to re-pay debts. In contrast, their male counterparts are described by lenders as stubborn and not easily persuaded to repay. A Bombay 5-6 lender would typically lend money to a male ambulant vendor with quite a bit of hesitation. In addition, women - especially the wives of male vendors, are customarily the ones who manage financial matters in a Filipino household.

Forty-eight percent (48%) of the respondents depend solely on their entrepreneurial income, which averages to P10,001 – P15,000 per month, to cover all their business and household expenses – from food, to utilities and education, among others. Forty-one percent (41%) of the respondents are engaged in street food vending. Street foods are both budget-friendly and handy at the same time, making it very popular among Filipinos. On an ordinary day of hustle-bustle in the city streets, it is usual to see pedestrians stopping to grab some street food as they go about their day. Prices per serving seldom exceed twenty pesos (approximately USD 0.50). Banana cue, camote cue, fishballs, squid balls, hotdog on a stick, kwek-kwek and tokneneng, kikiam, sorbetes, peanuts, corn, batchoy, and barbeque are some of the street foods sold near schools, churches, plazas, and public transport terminals. Street food vending requires a small starting capital, and its appeal for ambulant vendors gets an added boost from its potential to realize a return on investment within a shorter period of time (Domingo Omoy, Sr.).

An aggregate of eighty percent (80%) of our respondents’ loans are taken out as capital for starting or maintaining their businesses. Forty-nine percent (49%) of respondents’ loan transactions were offered by a Bombay 5-6 lender. Instead of offering cash loans up front, Bombay 5-6 lenders will initially entice their client to purchase various goods to be paid for on an installment basis (Ligaya, ambulant vendor). Beach umbrellas, towels, and appliances are some of the first commonly recommended goods. It is even amusing to learn that beach umbrellas – aside from providing shade – also serve as an indicator among ambulant vendors of those who have messed up with Bombay 5-6 lenders.

On the very first transaction, Bombay 5-6 lenders do not directly mention the total cost of the merchandise they sell. They undermine clients’ prudence by blowing the small details out of proportion so that numerical figures appear to be clearly surmountable. A transaction amounting to PhP500.00 will be carried out as a good sold for only PhP25.00 per day in a 20-day period (Maricel, fruit vendor).

The virtually omnipresent beach umbrellas providing a silhouette
 for ambulant vendors (Photo Credit: Marilou P. Grego)

Trust and confidence built up through the debtor’s good payment standing becomes the basis for a Bombay 5-6 lender to eventually offer a cash loan. The sum offered depends on the value - inferred by the lender - of the merchandise on display. More volume and variety of merchandise suggests a larger amount is dispensable. A borrower’s background is not checked, hence also making the lender vulnerable to acts of deception. For instance, in an isolated incident, a person pretended to be one of the ambulant vendors by borrowing goods and merchandise from a friend, occupied a space in the open thoroughfares as if they were the owner, and was thus able to borrow money from a Bombay 5-6 lender. The following day, the perpetrator was nowhere to be found (Evelyn, ambulant vendor).

Loans are paid out daily for a nominal 45-60-day period. However, the loan duration may be shortened or extended depending on the capacity of the vendor to pay. Bombay 5-6 lenders conduct their daily collection routine during idle times in the afternoon when most, if not all of their clients have already accumulated money from sales. Bombay 5-6 lenders explained that they collect payment on a daily basis in order to check up on a client’s business status and to ensure that the latter will be repaying the loan in manageable amounts. For the ambulant vendors, this arrangement is preferable in order to circumvent the burden of paying the full amount all at once and reducing the likelihood of the amassed funds being misappropriated. Collection is sometimes undertaken by the lender alone or in groups. On rare occasions, a Bombay 5-6 lender is accompanied by a local in anticipation that this will guarantee them safety. In worst cases where a robbery can’t be averted, the local individual can help them identify the culprit. Sonny recalls incidents of robbery that have occurred over Bombay 5-6's twenty-five years of money lending operations in Tacloban city, but they reported none of these to authorities.

Seventy-eight percent (78%) of the respondents in our study reported some experiences of default in repayment. A majority (67%) of all such cases were attributed to lack of sales. To mitigate the consequences, most (83%) of the respondents who were in default pleaded for an extension, while others (10%) doubled their payment the next day. On the worst end of the arrangement are those in the remaining seven percent (7%), who secured yet another loan from another source or multiple sources in order to repay their loan to the Bombay 5-6 lender. Sonny explained that lenders grant extensions in order to regain the capital they lent to vendors. But for vendors without a good repayment standing, further loans will not be granted. Bombay 5-6 lenders do not take goods as payment. They only accept cash. In extreme cases where the vendor is at a great disadvantage and can’t keep up with repayments, lenders arbitrarily lower the interest rate to help clients liquidate their debts.

The hallmark of informal lending is a lack of fuss over documentation. Thus, keeping a record of payments is not much of an issue for either the ambulant vendors or the Bombay 5-6 lenders. Payment records may be written on a notebook or a piece of paper and kept by either the vendor or the lender in some cases, while others don’t record payments at all.

Bombay 5-6 lenders are the most preferred lenders according to the majority of the respondents in our study, based on the following attributes arranged in descending order: 1) no collateral, 2) no imprisonment, 3) no formal requirement needed, 4) easy and fast loan transaction, 5) fast cash, 6) Bombay 5-6 lenders are approachable 7) accessibility, 8) flexible mode of payment, and 9) they have no other choice. Many respondents prefer informal lenders even if the interest rate is high because the borrower’s transaction cost is minimal (Limpao-Osop, 1998*). Other than the interest rate, the borrower does not incur additional costs such as commissions, application/processing fees, other indirect charges, or transaction costs such as feasibility studies and financial statements, among others.

*Limpao-Osop, Arah D. (1998) "Case Study Informal (5-6) Money Lenders." Final Draft. November 23, 1998. Unpublished Report for Chemonics International Inc. Davao City, Mindanao, Philippines. Under contract No. 492-C-00-98-00008-00 USAID Office of Economic Development, Manila, Philippines. Pp. 1-21.

Stay tuned for Part Three and Final Report
For Part One, see here

Monday, April 3, 2017

Part One: In every economic crisis comes business opportunity - Bombay 5-6 lenders and the micro-entrepreneurs in Tacloban City, Philippines

By IMTFI Researchers Rosalita M. Dula and Marilou P. Grego

This is the first of a three-part series about the informal loan negotiation practices between ambulant vendors and a group known as "Bombay 5-6 lenders" in Tacloban City, Philippines. Dula and Grego describe the effects of these lending practices on the household and business activities of vendors who live and work on the edge of a precarious existence.

October 15th: a sunny day in Tacloban City, Philippines, and yet another busy day for Domingo Omoy Sr., 63 years old, and his 59-year-old wife, Paula. They have 3 children to feed and send to school. They’re one of the families that have worked as ambulant vendors, rolling their business on the streets of the city, for more than three decades.

A female ambulant vendor in the busy streets of a public market area,
Tacloban City, Philippines (Photo credit: Rosalita M. Dula)

Early this morning, Domingo went to the public market to buy the necessary supplies for their food vending business; afterwards, he and his wife began preparing various food stuffs. At around 8am, Domingo pushed a cart containing their merchandise to a nearby school where they set up before the class break. Around 3pm, a guy on a motorbike wearing a checkered long-sleeved polo shirt approached the vending couple. The guy’s look and physique did not resemble that of locals, but the guy and Domingo exchanged pleasantries in the local dialect, to no one’s surprise. While engaged in their brief conversation, Domingo handed over a tiny notebook and some cash to him. After scribbling something, the guy on the motorbike handed back the notebook to the old man. Everything went smoothly, as if their moves were well-rehearsed and expected. In a jiffy the guy and his motorbike vanished. Classes ended around 5pm. Domingo then pushed the cart back home, concluding a routine day of business.

Domingo is a native of Tacloban City, the regional center for education and trade of Eastern Visayas, Philippines. It is comprised of 138 barangays (villages) and a population of 242,000 based on a 2015 census by the Philippine Statistics Authority. It gained global publicity and attention after being massively hit by super typhoon Yolanda (internationally known as Haiyan) on November 8, 2013. Based on the severity of damage it was deduced that the city was the typhoon’s ground zero. Fortunately, not long after Haiyan’s devastation, prominent local and multi-national franchises have either opened or reopened their businesses in the city, allowing for a rapid bounce-back of the local economy.

Commensurate to the escalation of big corporations’ is the economic activities and contributions of micro entrepreneurs, specifically the ambulant vendors. Domingo and those belonging to this micro-enterprise sector who sell their merchandise in the open thoroughfares of the city, commonly live in a hand-to-mouth existence. Unable to buy or rent a stall, they market their goods along sidewalks, by transport terminals, in front of the market, or near public or private establishments. They are peddling goods such as street foods, fruits and vegetables, condiments, accessories, and they render services like shoe and cellphone repairs. Meanwhile, considering the nature of business and being known to have an income generally below subsistence level, ambulant vendors are not compelled by the Bureau of Internal Revenue to pay income tax returns. This somehow adds an appeal to ambulant trading as a viable prospect for those who want to start their foray into a micro-business venture with very minimal capitalization and low tax overhead. Ambulant vending is a boon to those on tight budget that demand easily accessible goods and/or services at a very affordable cost. A serving of banana cue, for instance, would only cost approximately $0.2 from an ambulant vendor compared to $0.3 at canteens or food stalls.

Most of the ambulant vendors rely on their daily business income to sustain their daily household needs. In lean seasons, when income hits rock bottom, a lack of savings spells doom for the family and business. It is during these vulnerable times when most of the micro-scale entrepreneurs like ambulant vendors would seek the help of institutions engaged in money lending to keep their business afloat. Unfortunately, with very little to no access to formal financing and the absence of property that could serve as loan collateral, these distressed traders eagerly grab hold of informal money lenders’ helping hands.

A Bombay 5-6 lender scurrying off after collection of payments from ambulant
vendors in the downtown area (Photo credit: Marilou P. Grego)

The prevalent practice of informal money lending in Tacloban City, and probably most other cities in the Philippines, is dominated by the “Bombay 5-6” money lenders. The term “5-6” is based on the two lowest numerical figures to clearly represent the nominal 20 percent interest rate. Hence, a person who borrows 5 pesos will have to repay 6 pesos over an agreed period of time (Kondo, 2003)*. Bombay 5-6 is a group of enterprising Indian nationals who have been covertly operating their informal money lending business in the Philippines for a long time. According to Sonny, a Bombay 5-6 lender, their family and relatives have been operating in Tacloban City for almost two and a half decades. Their business operation has been bequeathed from one generation to the next. The considerably high interest rate cleverly imposed on smaller amounts enables them to offer attractive loan deals to locals, and get the returns in two-month’s time or even less. Their clients are mostly micro-scale business entrepreneurs.

Bombay 5-6 lenders’ long-term presence in the area has paved the way for them to make friends with the locals, learn their language, adopt their culture, and engage in business with them. In turn, members of the group were able to create a persona, gain the trust of locals and attract them to borrowing money from them. As with many informal money lending practices, obtaining a loan from Bombay 5-6 is plain and straightforward with the absence of paperwork and required documents superficially sweetening the deal.

Domingo is amongst those who depend heavily on Bombay 5-6 lenders for business’ and even household’s financial needs. For him, even at its paramount, the interest rate fades into oblivion when he is glaring at the absence of means for survival. He is one of those who has stuck around and continued to push his business even beyond the silver-year milestone of peddling. He was able to go the distance because of his perseverance in bringing his trade close to those who needed it. Domingo and his family may be one of the few who deserve to be admired for exhibiting a vibrant picture of resiliency. Yet on the other side of this resiliency is his daily business visitor, the guy on the motorbike wearing his checkered polo shirt and rocking his motorbike across the distance, booting obstacles along the way to bring Domingo a link for the chain that holds their mutual existence on a continuum.

*Kondo, Marie. October 2003. “Bombay 5-6”: Last Resource Informal Financiers for Philippine Micro-Enterprises.”Issue 4. Kyoto Review of Southeast Asia. Retrieved from

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