Online Lending

What is Online Lending and how does it work?

Online Lending is a method of debt financing through a web-based platform. It is an instant marketplace financing service that caters to the public most commonly the unbanked individuals in a convenient and fastest manner. Online Lending uses artificial intelligence and data-driven approach to process the personal loan application online.

Instead of waiting for the long queues in the bank to submit the loan application, online lending made a way to make things easier. For about fifteen minutes to one hour, a quick personal loan will be available to help any person in need of cash.

Who may apply for a personal loan online? Any person who is of legal age may apply for a personal loan online by simply creating an account on the company’s website or by downloading their mobile application. The person shall also be a Filipino citizen residing in the Philippines and who has a valid government-issued identification card.

Borrowers must complete the loan application by answering all the personal information required by the lender including the uploading of their current photograph and government-issued identification cards. To make sure that the online loan application will not be denied, borrowers have to make sure that the photograph they uploaded is clear and with the required photo resolution. Once completed, verification shall be conducted via phone call. A notification will be sent to the borrower once the application is completed and approved. Borrowers need not worry about their safety once the loan is approved since loan proceeds can be transferred and readily available to their personal bank accounts. The manner of payment is likewise made digital without having to leave the comfort of your own home. Borrowers may opt to pay through designated-partnered remittances centers or through any online bank gateway.

Everyone can avail of a quick personal loan without the need of any guarantor nor provide any form of collateral. You can even apply any time of the day since online lending operates 24 hours. What an easy way to resolve everyone’s financial difficulties, isn’t?

What is Online Lending and how does it work?

Online Lending is a method of debt financing through a web-based platform. It is an instant marketplace financing service that caters to the public most commonly the unbanked individuals in a convenient and fastest manner. Online Lending uses artificial intelligence and data-driven approach to process the personal loan application online.

Instead of waiting for the long queues in the bank to submit the loan application, online lending made a way to make things easier. For about fifteen minutes to one hour, a quick personal loan will be available to help any person in need of cash.

Who may apply for a personal loan online?

Any person who is of legal age may apply for a personal loan online by simply creating an account on the company’s website or by downloading their mobile application. The person shall also be a Filipino citizen residing in the Philippines and who has a valid government-issued identification card.

Borrowers must complete the loan application by answering all the personal information required by the lender including the uploading of their current photograph and government-issued identification cards. To make sure that the online loan application will not be denied, borrowers have to make sure that the photograph they uploaded is clear and with the required photo resolution. Once completed, verification shall be conducted via phone call. A notification will be sent to the borrower once the application is completed and approved. Borrowers need not worry about their safety once the loan is approved since loan proceeds can be transferred and readily available to their personal bank accounts. The manner of payment is likewise made digital without having to leave the comfort of your own home. Borrowers may opt to pay through designated-partnered remittances centers or through any online bank gateway.

Everyone can avail of a quick personal loan without the need of any guarantor nor provide any form of collateral. You can even apply any time of the day since online lending operates 24 hours. What an easy way to resolve everyone’s financial difficulties, isn’t?

Market Research for Statistics

An article published by the Business World on November 19, 2019, mentioned the recently conducted research made by the Banko Sentral ng Pilipinas. The research shows that the number of bank borrowers decreased from 2.1% to 0.6% in the period of 2015-2017. The key interest rate stated by the Central Bank was equal to 4% in 2015 and 3% in 2017 and this started to grow only in May 2018. Lower interests and low inflation rates together usually lead to an increase in lending. Unfortunately for the banks, while there was an expected increase in lending a sudden drop took place and continuously dropping to present. The decrease in the number of borrowers of the bank is mainly because of the exposure of the public to micro loans specifically the online lending. Access to lending is tedious and even difficult especially for people with low income. In fact, most of these individuals are intimidated in applying for any form of loan from a bank whether it is a commercial or rural bank because of the number of documents required to present as well as proof of capacity to pay to be presented upon application. That tendency coincided with the development of financial technologies which allowed a qualitative assessment of borrowers’ ability to pay and detection of probability of defaults with high accuracy. The aggregate of both factors helped to provide microfinance to people with diverse income levels and informal earnings.

Added to this is the idea that most of these borrowers have limited time in going back and forth to process their loan application in the banks but has more access to their mobile and internet. These reasons make online lending more popular than bank credits among Filipinos. The change of the financial environment in the Philippines in 2018 will be able to significantly expand alternative lending. 

Online Lending comes in different forms and target markets. Currently, Payday Loan, Crowdfunding and Peer-to-Peer Lending has hit the mass-market. But among these online platforms, the Payday Loan is leading its way because of its quick and convenient way of resolving once financial need.

  1. Payday Loan is are unsecured cash advances for small amounts of money which normally starts at One Thousand Pesos (P1, 000.00) to Fifty Thousand Pesos P50,000.00 coupled with relatively high interest and short-term repayment demands. While in some countries, payday loan is being banned due to the imposition of high interest, the payday loan in the Philippines is still making its way because of the absence of Usury Law. The Philippines used to have an anti-usury law that set a cap on the interest rate on loans. However, it was suspended in 1983, and efforts to revive the law have languished in Congress.

 

  1. Crowd funding is the practice of funding a project or venture by raising money contributions from a large number of individuals and/or organizations through an online platform. The monetary contributions may be in the form of either equity (where the user of the funds is called an issuer) or loans (where the user of the funds is called a borrower). In the draft Rules and Regulations Governing Crowdfunding of the Securities and Exchange Commission (“SEC”), crowd funding is defined as a “small or limited scale fundraising activity usually for start-ups, micro, small and medium enterprises (MSMEs) using online electronic platforms.”

 

III.          Peer-to-Peer Lending Peer-to-peer lending (“P2P”) or crowdlending is a method of debt financing4 where a P2P facility, through a web-based platform, matches individual borrowers directly with investors who are willing to lend money. As a mere intermediary, the P2P facility does not act as a borrower as against the investors, nor as a lender as against the borrowers. Subject to the contractual arrangement between the lender and the P2P facility, the latter is not legally obliged to assume the risk as a lender and guarantee payment of the loan to the lender.

Case Study

The rise of the online lending started when it saw the need to address issue of time and efficiency in case of financial difficulty. Let say a father who doesn’t have money to buy milk for his son. He still needs to find an open grocery store, endure Metro Manila traffic for hours until he can be with his family to provide their needs. A sister who needs to send money to her brother for his tuition fee has to go to the bank and submit her loan application just to make sure that his brother pays for his tuition fee on time and gets the examination permit. These are just few among the number of daily scenarios that online lending has resolved. The demand for a quick source of money continues to grow just as quick as the technologies evolved. Unlike banks which follow the 9 a.m. to 3 p.m. schedule, online lending are open and may be done 24/7.

Pros and Cons

With the emerging potential of e-commerce, the online lending company places a good position in the market industry. Everyone has mobile phone and almost everyone can access the internet. In just a snap, anyone can make an order online and pays for it at the same manner at the same time. Another positive impact of online lending is the opportunity given to people with low income. The lending experience from a bank may tend to be so crucial especially for those who have less financial capacity to pay. Not to mention the length of time they have to spend in preparing all the required documents and waiting for its approval. These difficulties were resolved by the rise of online lending.

But while this online lending offers convenience, it has in some way disadvantages. A stable and safe connection should always be the priority. The customers’ details must always be protected against fishing and scammers. Online Lending Company should double their effort in identifying fraudulent transaction to safeguard not just their business but most specially their customers.

Rules and Regulations

  1. Incorporation of an Online Lending Company

 

Like any other domestic corporation, a business that operates as an Online Lending Company requires a prior registration before the office of Securities and Exchange Commission. The Corporation has to be established and registered as an information technology (“IT”) or financial technology (“Fintech”) company with the purpose of providing financing services through online solutions or the internet. Registration of the Corporation is necessary in order to establish a lawful existence of the business and authority to operate its services. The registration of the Corporation requires a prior permit from the office of the Bureau of Internal Revenue, as well as permits from the office of the Baranggay and City or Municipal Mayor where the principal office is located. Once registered, the company has to submit reportorial requirements such as but not limited to General Information Sheet and Audited Financial Statement.

 

  1. Application of other Laws and Memorandum Circulars

 

  • The Anti-Money Laundering Act of 2001

Under the Implementing Rules of the Anti-Money Laundering Act of 2001 (“AMLA Rules”), entities, administering or otherwise dealing with invaluable objects, cash substitutes, and other similar monetary instruments or properties that are supervised or regulated by the SEC are considered as Covered Persons.

Under the AMLA Rules, Covered Persons are mandated to adopt measures to prevent money launderings such as customer identification or KYC; risk assessment; and monitoring of customers, accounts, and transactions. As a preventive measure, the AMLA Rules provide that Covered Persons shall establish and record the true identity of their clients based on official documents. In conducting customer due diligence, a risk-based approach shall be undertaken depending on the type of customer, business relationship, or nature of the product, transaction or activity. Companies that perform online lending services have for their customers required to perform customer due diligence. The AMLA requires covered persons to conduct face-to-face contact at the commencement of the relationship, or as reasonably practicable, taking into account the nature of the product, type of business and the risks involved. In addition, the law prescribes a minimum level of customer information and identification documents that the covered person must gather. Covered persons are allowed to rely on a third party to perform customer identification, including face-to-face contact, and may even outsource24 the conduct of customers these functions to a counter-party, intermediary or agent. Based on the Covered Person’s risk assessment, it can prescribe standards in applying enhanced, reduced or normal due diligence standards with respect to customer acceptance policies and procedures.  Covered Persons are required to maintain and safely store for five (5) years from the dates of transactions all records of customer identification and transaction documents of their customers.

∙         Securities and Exchange Commission Memorandum Circular No. 7 Series of 2014

A corporation principally and regularly engaged in the business of performing credit evaluation of corporations or business projects with the intention of assessing the overall creditworthiness is considered a credit rating agency (“CRA”). If the P2P facility performs credit rating functions for the lender, it may be considered as a CRA. No secondary license is required to operate as a CRA, but Philippine regulations impose the following requirements: 

  1. The CRA and the entity it proposes to rate must sign a written contract, covering the CRA’s obligation to render credit rating services;
  2. The CRA shall not promise, assure, or guarantee a particular rating outcome – either explicitly or implicitly – while soliciting business;

iii.              Rating definitions, policy for use, and rating criteria shall be explained to the rated entity before rating services are engaged;

  1. The basic policies, practices, and methodologies used for assignment of ratings shall be published and freely available in print and on the website;
  2. The CRA must devote sufficient resources to ensure the high analytical quality of all its credit risk assessments; and
  3. The organizational structure and design of the rating process shall ensure that rating decisions are not influenced by rating fees, any other revenues or business potential from the rated entity, or the consequences of a rating action 

Issues and Problem Facing

While the purpose of establishing an Online Lending is noble, it is nonetheless being subject to much strict scrutiny nowadays. In fact, a recent circular issued by the SEC, the Commission required all financing companies to include in their respective websites, loan applications, and all other marketing collaterals, the precautionary statement to all borrowers to check the terms and conditions of the loan that they are availing.

Meanwhile, The National Privacy Commission (NPC) today issued summons by publication aimed at 67 unlisted operators of online lending applications, who were subject to data privacy complaints but whose identities and business addresses elude detection. The NPC is ordering the board of directors behind the lending apps to appear before the Commission to attend a summary hearing, submit their Responsive Comment, and present their defense. The Order was specifically addressed to operators of the following online apps:

  1. Akulaku
  2. Batis Loan
  3. Cash bus
  4. Cash flyer
  5. Cash loan
  6. Cash moto
  7. Cash to go
  8. Cash warm
  9. Cashafin
  10. Cashaku
  11. Cashalo
  12. Cashaso
  13. Cashmoney loan
  14. Cashope
  15. Cashwhale
  16. Crazy Loan
  17. Credit coin
  18. Credit peso
  19. Crutchpil
  20. First lending
  21. Flash cash
  22. Happy cash
  23. Hello papaya
  24. JK Quick Cash Lending
  25. Kwago
  26. Lalapeso (Mintwagon Lending Corp)
  27. Lending cash
  28. Light credit
  29. Loan champ
  30. Loan motto
  31. Loan wallet
  32. Mabilis cash
  33. Mango cash
  34. Mango loan
  35. Mcmpire
  36. Megaloan
  37. MF cash (Microdot Lending Corporation)
  38. Moola lending
  39. One cash
  40. Online loans Pilipinas
  41. Pautang peso
  42. Pera advance
  43. Pera express
  44. Pera lending
  45. Pera Pocket (Rainbow Cash)
  46. Pera4u
  47. Peso legend
  48. Peso lending
  49. Peso now
  50. Peso online
  51. Peso Q
  52. Peso to Go
  53. Peso tree
  54. Peso wallet
  55. Peso.ph
  56. Peso2go
  57. Pesomine
  58. Pesos ph
  59. Pesos.ph
  60. Pinoy cash
  61. Pinoy peso
  62. Pondo pocket
  63. QCash
  64. Sell loan
  65. Super cash
  66. Super peso
  67. Utang pesos

 

Despite the numerous issues that E-commerce is facing right now, a new company is set to change the market, Makati Loan is an emerging online lending company providing a quick and innovative solution to everyone’s financial needs through a mobile application. Makati Loan is established and named after the Philippine’s business center- City of Makati. Makati Loan offers a new way of getting your personal loan simply by downloading the mobile application and completing the online loan application. No need worry about getting in the bank on time. You can even apply your loan while heading your way to work or while having your lunch. Makati Loan provides a quick and paper-less application. What an eco-friendly idea, right?

Frequently Asked Questions

The Loan Terms varies depending on what type of the borrower you are.

The First time borrowers may be approved for a maximum of 15 days.

While repeated borrowers may choose from 3,4,5, or 6 months of the flexible loan terms.

You can borrow Php 1,000 to Php 55,000 depending on your needs.

You can apply any time of the day since online lending operates 24 hours.

No. Everything is easy and done in quick and convenient manner. Just simply complete the loan application by answering all the personal information required. Upload your current photograph and government-issued identification cards. Once done, just clicked the complete button and your application will now be processed. You will receive the loan approval confirmation to the email address and mobile number you have provided.

You will receive your loan proceeds either via bank or remittance center. You may choose among the partnered banks by providing your existing bank account details or click the remittance button to get the corresponding remittance code. Loan proceeds are sent immediately after approval of the loan application.