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Lending money business or microfinancing

Greetings everyone!

I was invited by a close, OFW friend to put up a business of "lending money" (I don't know the term used). She said that it's mainly lending money to the families of OFWs here in the Philippiines, but the payor/guarantor would be the OFW in Italy. We would be lending the money here in the Philippines, and it would be payed to our friend in Italy. The amount, when paid, would have an interest or maturity value, and would be paid depending on the agreed terms.

When she proposed this, a lot of questions went in my mind:

Is this Illegal?
Would this be a good business?
What could be our basis for the interest rate?

Please help me on this matter.
Thank you very much!

"Live Jesus in our Hearts Forever! Grin"

Comments

  • bankerIIbankerII Member
    where are you based? I was able to organized several of these for my friends. e-mail me if you wish. :)
  • cretinous00cretinous00 The sea! The sea! PExer
    it is difficult to be lending money to beneficiaries when the source of payments is already based oversees.

    our bank lends to seamen and their dependents. our status is as a third party financing provider to seamen --by their recruitment agencies. you see how we take advantage of second- and third-party ties to keep the market captive. that's one way of reducing risk of default.

    our borrowing seamen apply for a loan while they are here in the philippines, prior to deployment. they issue post-dated checks bearing the full amount of the loan before we release the funds. and only second-time deployments are allowed. no first-time OFWs are lent to.

    another 'provider' is a non-bank (whom we lend to.) so you might consider its method:

    form a corporation, and then forge ties with licensed recruitment agencies. choose only the agencies that do mass recuitment (un-skilled to semi-skilled), AND only those who require placement fees. so you now lend to deployments to finance their placement fees. PFs are relatively steep, often equal to 1 month of your contract salary. a funder is a welcome help for both OFWs and recruitment agencies. suggested procedures:

    1. the deployee, with his family, will come to your office applying for a loan to finance his/her placement fee, and maybe money to tide his family over for the first two months after he flies out. amount usually should not exceed 80k. both the OFW and his dependent will sign as co-borrowers. the OFW and his co-borrower wil also issue PDCs covering the entire loan amount.

    2. for an OFW and his beneficiary to be qualified, the OFW must already have a COE (certificate of emplyment.) a COE is issued by the POEA only after a contract has been signed, after the recruiter has been paid by the hiring company, after the OFW has obtained a passport, VISA and a plane ticket. any delay in deployment after the COE has been issued will make the recruiter financially liable so you are reasonably assured the person you are lending to is about to fly out and earn dollars to pay you.

    3. mode of release. the money will be released to the OFW (he will sign) but instead will be coursed straight to his recruitment agency to pay for the placement fee. the only money he will receive is that part of the loan his beneficiaries will need to tide them over until the first remittance.

    4. the beneficiary will pay to the bank branch nearest to her (probably outside NCR,) which will then transmit the money to your account with another bank.

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