How much has the banking sector suffered due to quarantine restrictions, and has the demand for their services decreased overall?

Expert answer – Marc Kenneth Marquez:

While most financial establishments, including banks, were still operational amidst the pandemic and the lockdowns, still banking itself was not spared from the negative impact given that physical movements of people were restricted. As Business Mirror Philippines wrote, the government’s move involving the financial sector has been a double-edged sword – providing relief for the borrowers while constricting the liquidity of banks and other financial institutions.
Such response was based on the ‘Bayanihan to Heal as One Act,’ an urgent law mandating banks and financial institutions to implement a 30-day grace period for all loans with principal and/or interest falling due during the enhanced community quarantine (ECQ) which began mid-March and was lifted just by the end of May.

With the delayed credit repayments, the collection has distorted the cash flows in duration unless these banks would be compensated for the time value of money during such extended payment periods. Given these arrangements, the ASEAN+3 Macroeconomic Research Office (AMRO) forecast that the Philippine financial system may face as much as $505.3 million (or around PHP25.2 billion) in incremental collateral damage, the fourth highest in the region. Majority of the banks are confronted with sharp drops in revenue and rising credit risks.
Bangko Sentral ng Pilipinas (BSP), the country’s central bank, however said its latest gathered data showed that the Philippine financial system maintains ‘sufficient cushion in times of crisis and ensure business continuity to serve financial consumers while keeping the economy going.’ This can be attributed to the industry’s prudential measures and conservative practices.

Expert answer – Sheila Mae Gasatan:

The Philippine banking industry is not exempted from the adverse effects of this pandemic. Aside from the low liquidity, the sector was also required to comply with the Bayanihan Act No. 11469 which calls for providing a 30-day period extension of credit payments, without any penalty nor applied charges on their borrowers during ECQ.
The Philippine banking sectors, however, did not give an exact amount of how much they have lost due to the quarantine restrictions. But recently, we have been seeing and experiencing an increase in online transactions, as Filipinos are switching to cashless and convenient financial transactions.
The drastic need for an electronic transaction paved the way for increased online banking users. In fact, we now see more fully-digital banks showing up to cater to the growing needs of the Filipinos for a more accessible banking experience.
Overall, I believe that the banking sector had instead experienced an increased demand of their services during the quarantine restrictions.


Are quasy quota payday lenders in a very good position? Or did a pandemic hit all areas of lending?

Expert answer – Marc Kenneth Marquez:

Apart from the banking sector, lending and other financing entities were also directed by the Securities and Exchange Commission to defer their collections of credit repayments and charging of penalties while the country was under the state of national emergency.
All covered institutions by the agency, accordingly, were mandated not to impose additional interest, charges during the 30-day period to the future payments of their borrowers.
Within such a period, most lending companies also suffered financial downturns and may still continue with further losses while most borrowers – both small business entrepreneurs and individuals – are now facing financial struggles to keep up with repayments. While novel loan products that are responsive to the recovering economy can be offered in the market, there must still be a high credit risk that lenders must be prepared for.

Expert answer – Sheila Mae Gasatan:

Most of the Filipinos right now are in a great shock of the sudden loss of income. And of unemployment and financial difficulties, some take out payday loans on unfavorable terms with high interest rates, because applying for payday credits is far easier and gives you a higher chance of approval than traditional lending companies like banks and cooperatives.
So yes, payday lenders are in a good position of attracting borrowers who are in a dire need of quick cash. Although personally, I don’t highly encourage taking a credit from payday lenders as their interest rates are very high considering the short period payment terms.

What effect did the COVID 19 virus have on the work of pawnshops, did the demand for their services decrease, or did they become a lifeguard for citizens of Philippines?

Expert answer – Marc Kenneth Marquez:

The ‘Bayanihan to Heal as One Act’ covered even pawnshops on the provision of a 30-day payment grace period amidst the impact of coronavirus pandemic. With this, all pawnshops had to defer the collections of interest, fees, and other changes within the lockdown period. In other words, these institutions suffered from financial losses too.
However, online pawnshops have started disrupting the traditional pawning industry in the country, with pawners availing their services at the comfort of their homes. Compared against availing a personal or a business credit that comes convenient given the mobile technology, pawning has still been lagging behind. After all, the younger generation has not been investing much in physical items and collectibles, rather gadgets and experiences.

Expert answer – Sheila Mae Gasatan:

One of the fastest ways of getting quick cash during hard times is to pawn your valuables. And of course, this became one of the top options of the Filipinos as a financial lifeguard amidst the pandemic. In fact, Philippine pawnshops experienced a surge of demand, especially during the enhanced community quarantine.
While the increased demand means a good opportunity for pawn shops, it has also led to cash running out too quickly. But overall, pawn shops are very helpful as they became one of the financial refuges of many Filipinos even before the pandemic. Glad to see that right now, there are already Philippine pawn shops that are integrating their services online for faster transactions.


What currently can you advise lending programs in view of the difficult situation in the country?

Expert answer – Marc Kenneth Marquez:

Loan providers should tailor their programs and products to the emerging needs and trends. While borrowers usually look for genuine financial partners, not just lenders, loan providers should establish trust and collaborate with their clients. It is with this notion that loan providers should take partnerships seriously and earning revenues from loan interest as merely secondary.
In reality, borrowers read through reviews and social network, and a bad reputation just ruins business. Normally, they stay away from loan providers who do not understand their financial needs and who are just after making money from their loans. They may have inked a contract after getting their first loan application approved, but if they get disappointed with all those hidden fees and extremely aggressive collection mechanisms, the chance of getting another may be small.

Expert answer – Sheila Mae Gasatan:

I highly encourage lending programs to ease up on giving lower rates to their clients or consider extending the payment period more than usual. Obviously, people are resorting to borrowing for their current financial incapacity, and being imposed with high-interest rates or excessive penalty will only make them unlikely to pay their debts off.
In this time of crisis, prevention measures against the spread of covid-19 and financial accessibility must go hand in hand, as citizens are currently in a difficult position between going out and staying at home, so that they are less at risk of Contracting the virus.

What area of lending is the most trusted among citizens in the current environment?

Expert answer – Marc Kenneth Marquez:

In the Philippines, people on the poverty line resort to informal lending from their relatives, friends, and others. Transactions do not usually come with formal records or documents.
Lower-middle-class people who have a seemingly stable source of income and still don’t earn enough to maintain a carefree lifestyle, usually try short-term personal credits via mobile applications and other more formal lending services. They are the ones who, although earn a regular income from employment, still struggle paying off these loans.
Higher-middle class members, being professionals and enjoying more comfortable lifestyles, make loans for business and other growth purposes. They are those who would usually seek bigger credits from banks and other stable financial institutions.
Irrespective of these social brackets, Filipinos trust the most those loan products offered by government institutions such as SSS, GSIS, PAG-IBIG Fund, and other private institutions, mostly banks.
With the rise of online loan providers, Filipinos are becoming more and more selective and consider beforehand aspects such as minimal application requirements, convenience, and less aggressive collection mechanisms.

Expert answer – Sheila Mae Gasatan:

Personally, I think traditional lending companies such as banks, cooperatives, and pawnshops never got out of the options as the most trusted lending entities for Filipino citizens especially during this time of the pandemic. In fact, Philippine banking groups aim to impose lower lending rates even after the pandemic to help keep the economy running.
Filipinos are also eyeing on government loans which are not only focusing on giving financial aid to those who have momentarily lost their income but most especially to fund small and micro enterprises who experienced a reduction in sales, to slowly get back on their feet.