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House bill seeks regulation of ‘paluwagan’ system

Vilma Ocsales makes a living as a chicken retailer in a wet market in Quezon City.

In 2020, she and other market retailers formed a paluwagan—a system in which members contribute a fixed amount to a fund manager, who pools the funds and gives the total the member scheduled to receive it, then the process begins again.

Ocsales was appointed in charge of the money. “Ako lang ang gusto nilang humawak ng paluwagan dahil ang nangyari raw dati, may humawak, wala. Tumakbo na yung humawak,” she told GMA Integrated News.

The group’s 21 members contribute P3,000 every week and every week, one of the 21 members receives a payout of P63,000.

The order by which the members receive the payout was determined by drawing lots.

“Nakakatulong din naman sa amin yon kasi pagka kailangan mo ng pera, nakakatapal din sa pambili namin ng paninda,” Ocsales said.

Partylist Representatives Virgilio Lacson of Manila Teachers and Rodante Marcoleta of SAGIP are proposing to regulate the paluwagan system. “Since the system only relies on trust, it also becomes prone to fraud,” they said.

“The last persons to receive the pooled funds have the highest risk in case other participants fail to pay and the system collapses. Since the system only relies on trust, it also becomes prone to fraud. Since most paluwagan systems [are] unregistered and undocumented, it is hard to prove claims of losses and damages in court,” they added.

House Bill 7757 calls for the creation of a Paluwagan Microfinance Administration in the executive branch of government.

In the bill, a group of seven or more individuals shall apply before the Administration to become a community paluwagan. Before approving the application, the Administration shall first investigate if the paluwagan conforms to the provisions of the proposed law, “the general character and fitness of members, and the economic viability of establishing the proposed paluwagan.”

The Chamber of Commerce of the Philippine Islands supports the bill.

“‘Paluwagan’ as exercised by anyone, by a co-op, or by an association or by a union must protect the borrower from abusive or unfair practices that victimizes poor borrowers,” Chamber president Jose Luis Yulo, Jr. told GMA Integrated News.

Economist Michael Ricafort also supports the proposal.

“Malayang makapamili ang mga investor, savers kung pipiliin nila doon sa paluwagan na yon, na hindi sila maloloko, protektado yung interes nila, tsaka yung batas ay nasa side nila. Yung regulators ay nakabantay. Yun lang naman ang layunin. Kasi, otherwise, problema yan, di ba? Kita naman natin ang mga scam. Napakarami nang mga scam,” Ricafort told GMA Integrated News.

The bill is pending before the House Committee on Micro, Small and Medium Enterprise Development. — BM, GMA Integrated News