By Atty. Antonio P. Pekas
Without economic empowerment, people empowerment is a myth. They will sell their votes, their beliefs and principles if hunger is knocking on the door. More so when death is at the doorsteps and money for hospitalization is the only hope. Whoever will provide for that need will generally be looked up to, if not worshipped, by the person saved and his parents and brothers and sisters.
A very good way to empower us this time is to fully support cooperatives of all sorts and financially encourage a lot more of these business organizations. Another way, as I said the other week, is also to financially support micro, small and medium enterprises which, as of last reckoning, account for about 2/3 of the Philippine economy. Make these robust and increase their number and the national economy should grow by leaps and bounds. Moreover, such move should take care of the need for a more equitable distribution of opportunities and resources.
But my point this time around is on cooperatives.
There are now billionaire cooperatives in the Cordillera. But what do members get as their share from such progress? Well, they could borrow bigger amounts if they are not delinquent in the repayment process but they should be entitled to more.
They should be made to pay much lower interest for their loans. The going rate now is about 16% a year. There are usually deductions such as patronage refund so members in many coops end up paying only 11% per annum. But this is misleading because the interest is deducted up front so the borrower member is not getting the full amount borrowed. In effect, he ends up paying more than 11% per annum.
This might have been OK in years past when commercial banks were charging interest of about 24% or more per annum. But this time, there is so much money moving around that interests are very low. And since the main objective of coops is to help their members and not to make huge profits, then their interests should be lower than banks. In fact, from my viewpoint coop members should only be charged administrative costs for the processing of their loans. If any interest should be charged, it should be very minimal especially considering that solid collaterals are required before loans are approved. Which means repayment is assured.
As of now, there are banks charging as low as 6% to 7% per annum. This is, of course, for prime clients with a good credit history.
For cooperatives, what can be more favored or prime clients than their members? They have their deposits and any loan they take out have to be backed by a solid collateral.
I was walking along a commercial bank last month and then it struck me to go in and ask about their interests for loans. I told the loan officer that sometimes I needed amounts for emergency business purposes and if I could apply for a credit line of just a million pesos. While that might be a big amount, it is very small when it comes to loans. She smiled and asked for a collateral and I assured here it would be no problem.
She computed the periodic payments I should be making if I got the whole amount. It turned out I would be only paying about 8% per annum. Effectively, it will be about 9% considering that the interest will be deducted up front and there will be other charges.
The point is, what could be a better way for cooperatives to promote the welfare of their members than to lower their interests on loans? This should be the priority of any cooperative.
Another point is, what is the Cooperative Development Authority doing to encourage cooperatives to go towards this direction. It will not only make coop members happy and empowered, it will be a great help for the improvement of the economy.
Coop members should clamor for lower interests, otherwise, it will not be given on a silver platter. Many coop management like to have more profits so they will have more money to play around with or, in some rare cases, to corrupt. So as far as they are concerned, they would like higher interests and more expansion of businesses.
I think this is wrong. The priority is the welfare of the coop members. Profits should be very modest only to assure the survival of the organization or to take care of contingencies. Very modest growth rates should be more than enough achievement.
So a paradigm shift in evaluating management performance of coops is in order. It should not be in terms of huge capital build up at the expense of benefits (such as low interest rates) for the members.**
