The Government Service insurance System (GSIS) has so far released some P76.5 billion to assist a total of 189,860 government employees in settling their outstanding loan balances from private money lenders engaged in the “five-six” or usury scheme, in compliance with President Duterte’s directive to put an end to this predatory lending practice that has plunged state workers deeper in debt.
To wean away government workers from the “five-six” scheme, the GSIS launched in May 2018 a flexible credit facility — the GSIS Financial Assistance Loan (GFAL) Program — that has benefited mostly public school teachers in settling their outstanding obligations with private lending businesses, said GSIS chairman Rolando Macasaet in his report to Finance Secretary Carlos Dominguez III.
Many government workers often rely on loan sharks who lend money with minimal requirements from the borrowers, but at a prohibitive 20-percent interest rate per month, dubbed “five-six” scheme because this means a payment equivalent of P6 for every P5 loan.
Under the GFAL Top-up option, GSIS member-borrowers can maximize their loanable amounts of P500,000.
Member-borrowers can apply for their remaining available credit as an added loan under this option, after settling their outstanding obligations with private money lenders at an interest rate of 6 percent per annum payable over a six-year period with insurance benefits.
Macasaet, who is also acting president and general manager of GSIS, said that since the GFAL was launched in May 2018, a total of 145,380 employees of the Department of Education (DepEd), mostly teachers, have been able to benefit from the program.
Another 44,480 non-DepEd employees also took advantage of GFAL’s easy-to-pay credit facility, he said.
“By offering this very flexible credit facility to cash-strapped government employees, we have eliminated their need to go back to private lending institutions. This is our way of providing better financing options to our members, as well as compete with private lending institutions in the loaning business,” Macasaet said in his report.
The Department of Finance (DOF) is the Cabinet department tasked to exercise administrative supervision over the GSIS and other government financial institutions (GFIs).
President Duterte directed concerned government agencies as early as 2016 to crack down on “five-six” lenders. He reiterated his order and warned loan sharks to stop illegal activities during the groundbreaking ceremony for a school in Bulacan in January this year.
Macasaet said in his report to Dominguez that as of January 3, 2020 the average loan amount per borrower under GFAL was P402,737 with 1,315 private lending businesses already covered by the program.
The program’s collection efficiency as of October 2019 stood at 99.25 percent involving 1,275 government agencies and regional offices covered by the Memorandum of Agreement (MOA) with GSIS on GFAL.
After the President ordered a crackdown on loan sharks in 2016, the Securities and Exchange Commission (SEC), which is also under the supervision of the DOF, launched an investigation into the activities of informal lenders, which eventually led to over 200 of them registering with the SEC.
The SEC had charged those caught employing “five-six” scheme with violation of Republic Act (RA) No. 9474 or the Lending Company Regulation Act and the Truth in Lending Act. Foreign informal lenders were referred to the Bureau of Immigration (BI).