‘Loan rate cap risks hurting borrowers’

As regulators revisit rules for unsecured digital lending, financial technology firm JuanHand is making an unusual plea: be careful what you fix.

- By KEISHA TA-ASAN

Mauricio

While proposals to reduce interest rate caps aim to protect borrowers, JuanHand president and CEO Francisco Mauricio warns that well-intentioned reforms could end up choking financial access for the very people they seek to help.

In an exclusive interview with The STAR, Mauricio said that the company supports the Securities and Exchange Commission (SEC)’s renewed effort to curb predatory lending.

However, lowering the lending rate cap to 10 percent from 15 percent could unintentionally “lock out” the unbanked and high-risk borrowers whom fintech lenders serve.

“We're happy with the current 15 percent cap. No one is really complaining about that,” he said. “What borrowers are complaining about are predatory lenders and non-compliant lenders who violate the 15-percent cap and go way beyond that.”

He said these predatory lenders include a combination of fintech lenders and loan sharks, who charge rates of 50 to 80 percent per month.

Mauricio emphasized that lowering the rate cap may sound consumer-friendly, but the downstream effect would be stricter approval processes. Compliant lending apps like JuanHand, he said, would be forced to limit credit to only the safest customer profiles.

“If you lower the interest rate, we will lower approval rates. We will only take the non-risky borrowers,” he said. “We estimate we'll end up disapproving more than 300,000 Filipinos every month — many of them underserved, grassroots borrowers who need access the most.”