I tried writing several final reflections but they all degenerated into schmaltz very quickly (‘sometimes bad events can be blessings in disguise’, ‘sometimes it’s more important to make friends than get data’), so instead I’m posting the introduction of my final report. All sensitive data have been removed. This is the first draft, so get out your red cyber-pens and mark away.
Cagayan de Oro is a town of 550,000 people on the northern tip of Mindanao, the second largest island in the Philippines. A large, slow river meanders through the center of they city, dividing the central Divisoria district from bustling beehive of Carmen market, and its muddy waters wash up along banks dotted with Christian churches, empty billboards, and women doing laundry. It’s a safe place for tourists. Don’t go any further south, though; the central highlands of the island are home to Islamic separatists, a group that occasionally highjacks busses and, after serious thought, christened itself the Moro Islamic Liberation Front (MILF).
One of the most well-known moneylenders in Cagayan de Oro works from a small office at the top of a dark wooden stairway. He sits behind a wide, wooden desk and cools himself with a small fan that is fastened to one of the salmon-colored walls. He wore a loose black shirt and tinted glasses when we visited. Sixteen years ago he had started selling appliances on installments plans in Zamboanga, another city in Mindanao where the locals speak a dialect of Spanish with unconjugated verbs, and over time he had developed his business to its current position: a fulltime XXXX, ## collectors, and over #### clients.
Expansion wasn’t easy. In 1996, when the lender was still in Zamboanga, he was stabbed by a client in a public marketplace. The reason he survived, according to doctors, was because the six-inch blade was left in his back; if it had been removed he would have bled to death. He spent several months in the hospital convalescing and then moved to Cagayan de Oro with his wife. Permanently marked with a scar on his left shoulder, he decided to open a new lending business.
Why?, I ask.
“Lending is a risky business,” he smiles. “But a good one.”
Although lending may be a good business, almost all Filipinos agree that it makes for a very poor research topic.
Informal lending takes place in a hazy legal environment in the Philippines. Almost completely unregulated by the government, lenders are free to establish their own rates and terms but almost totally unable to enforce them through third-party means. Intimidation and social pressure become the preferred methods of persuasion. A clerk in a copy shop, learning the focus of my research, told me that lenders were “bad people.” A woman in the local government told me I “wasn’t old enough” to interact with them. Among the general population the consensus was that loan sharks worked in one world, American researchers worked in another, and that it was for the best that things remain that way.
The situation came to a head on June 10th, 2011, when I interviewed a moneylender at a gas station on the outskirts of Cagayan de Oro. We sat on small plastic stools facing the highway, and even though it was dusk I fanned myself with the survey papers as she answered. After several minutes an old woman approached us.
“Go away,” she told me in English. She had orange hair done up in a perm and wore a bright purple shirt. “You don’t belong here.”
My translator explained that I was an American doing research. Hearing that, the woman turned to the small crowd that had gathered around us. “Always the Americans!” she cried out. “They need to stop coming here.” Looking back to me, she continued. “Go talk to the bank. Go talk to the co-ops. This place right here is for Filipinos. Leave us alone.”
After a few days in the Philippines it became clear that lending was a sensitive subject. Equally clear, though, was that it was an enormously important one. Informal lenders operate in abundance here. In Dumaguete, a college town on the island of Negros, my translator and I could take jeeps to nearby villages, start talking to vendors in the market around 8:30 am, and have identified four lenders by lunchtime. Considering the huge number of easily accessible banks, the demand for informal credit is staggering. Surprising, too, is the number of lenders willing to accept the risk of lending to their friends and neighbors. Every community I encountered supported at least one lender. About 75% of the people that my translators and I approached over the course of the project immediately admitted to knowing a loan shark, and most of them could share with us a phone number or address. It may be true that lenders are bad people, but even so, they certainly are popular ones.
The purpose of this paper is to answer several questions about informal lenders. First, why does the local population need so many of them? Second, how do the lenders build viable business models in such risky environments? Third, and most mystifying, what about lending is so appealing that even a knife in the back can’t keep a man away?
Family members, you're going to be seeing a lot of this report, so if you want to save your edits for after I'm finished that's okay.
