In times of need, many Filipinos are compelled to obtain quick loans and give their ATM cards to their creditors as security to secure debt repayment.

However, the Bangko Sentral ng Pilipinas (BSP) cautions ATM users from taking advantage of such “Sangla-ATM” (“pawn ATM”) loan schemes, stressing the potential financial hardships they could experience.

The agony that senior persons have had to experience as a result of the prevalence of this debit card pawning scheme was also highlighted by a lawmaker. The BSP said in a statement released on Saturday, May 20, 2023, that once the ATM cards are given up as security, it will be difficult for borrowers to track the movement of their hard-earned money in the bank accounts connected to the ATM cards.

The BSP stated that it might be challenging for them to keep track of withdrawals made by those to whom the ATM card and PIN (personal identifying number) were supplied. The central bank continued, “Creditors may also withdraw sums greater than the debt of the cardholders.”

Some “sangla-ATM” borrowers, however, told SunStar Cebu that they had to use it to fulfill their financial responsibilities. They are not alone either. According to the BSP’s 2018 Consumer Finance Survey, the “Sangla-ATM card” was the most widely used form of security for consumer loans.

Sen. Raffy Tulfo disclosed how heavily Filipinos rely on ATM cards to let them borrow money in a privileged speech on February 27. “A Bangko Sentral survey conducted in 2014 revealed that Sangla-ATMs made up 39.9% of the collateral used as loan security. This is more significant than using property, equipment, a car, or a harvest as collateral, Tulfo said.

Necessity

On May 23, 2023, Jonna* (not her real name) told SunStar Cebu that she had to use these lending programs due to emergencies.

In contrast to the drawn-out and painstaking process and document submission required by banks and other lending institutions, she claimed that those offering these loans offered simpler application processes and quick approval.

Jonna stated, “It is a bit difficult if I go to the bank because the procedure is drawn out and it is uncertain if your loan will be approved or not.”

In contrast to those offering these quick loans, which are simple to apply for and accepted without much difficulty, not everyone has savings in a bank account, which is another criterion to be eligible, Jonna noted.

In contrast to those offering these quick loans, which are simple to apply for and accepted without much difficulty, not everyone has savings in a bank account, which is another criterion to be eligible, Jonna noted.

Rica* stated that she has the choice to select the loan amount and the number of months to pay in “Sangla-ATM,” depending on her ability to repay the loan. You can inquire about the amount and the number of months you have to repay the borrowed funds, according to Rica.

The plan gives Alyssa* more options because the creditor is typically a friend or acquaintance.

“You are dealing with the creditor you know personally directly. Cash is disbursed right away by the agreed-upon terms, including how much and when the loan is to be repaid. Less work, in other words,” Alyssa replied.

They all acknowledge that using “Sangla-ATM” carries dangers, including the possibility of unlawful withdrawals from the accounts connected to their ATM cards or even the possibility of their ATM cards not being returned.

However, they claimed that this is a result of the trust they placed in their creditors. They may now readily access their money on a smartphone and make adjustments to their accounts thanks to the development of digital banking.

Informal Agreement

According to Dr. Kei Kajisa, a professor of development economics at the Japanese university Aoyama Gakuin, “Sangla-ATM” is a type of informal loan arrangement that broadens borrowers’ access to credit.

Sadly, while it offers quick cash, Kajisa said in the webinar “Does a new informal credit arrangement improve the poor’s welfare?” it could also encourage them to overborrow. The case of debit card pawning in the Philippines” will be presented on December 17, 2020, at the Yusof Ishak Institute.

According to Kajisa, only 3% of the participants in the BSP’s 2019 Financial Inclusion Survey who own formal bank accounts have obtained loans from banks. Seventy-one percent of poll respondents didn’t have a bank account.

These participants said it was difficult to obtain official financing channels, citing difficulties coming up with documentation requirements and collateral as their main excuses.

Poor saving practices and a predilection for unofficial loan choices were the results of this.

According to the survey, family and friends (44 percent) and unofficial lenders (10 percent) were the leading sources of borrowing, while banks continued to be the least popular lender among borrowers.

Protection

The BSP counseled borrowers to thoroughly understand the terms and conditions of loans to “protect themselves against unreasonable demands.”

The central bank advised the public to “directly inquire with banks and other BSP-supervised financial institutions, such as pawnshops, money service businesses, electronic money issuers, and non-stock savings and loan associations” and pointed them toward safer microfinance and other small loan facilities.

Pension in Danger

Last February 27, during the Senate’s plenary session, Senator Tulfo spoke out against “Sangla-ATM,” suggesting that the use of Social Security System (SSS) and Government Service Insurance System (GSIS) pension ATM cards as collateral be prohibited or regulated due to the abuse that the elderly have suffered as a result.

“Our senior citizens on pensions are being exploited. Their cunning children, carers, or other family members steal their pension ATMs and take out a loan on their behalf, occasionally faking their signatures. According to Tulfo, “These retirees are uninformed that debts have been taken out in their names, or occasionally, they are forced into signing by their able-bodied caretaker or family members.

The senator bemoaned the fact that seniors are left without funds when they require money for their own meals, utilities, medications, or doctor visits. (Using CTL).