Skip the 5-6: Iloilo City offers interest-free nano business loans

ILOILO CITY — Qualified nano enterprises in Iloilo City stand to access direct, interest-free capital of PHP 5,000 to PHP 100,000 under the UNA Credit Access for Resilient Enterprises (CAREs) Program Ordinance.

The Iloilo City Council approved the measure on Wednesday, Nov. 4.

The ordinance establishes a dedicated, locally administered microfinance facility meant to close financing gaps for grassroots entrepreneurs and shield them from usurious informal lenders.

Small businesses without collateral or credit history often turn to so-called “5-6” lenders, informal moneylenders who collect PHP 6 for every PHP 5 borrowed, typically within weeks.

The program complements the Iloilo City Nano Enterprise Ordinance and anchors its business development framework on the Negosyo Development Academy, formerly the Uswag Negosyo Academy (UNA).

“The program seeks to ease the financial burden faced by many nano entrepreneurs who often have no choice but to rely on informal lenders charging onerous rates,” said Councilor Rudolph Jeffrey Ganzon, author of the ordinance.

“By providing interest-free loans subject only to a minimal service fee, the City Government offers a more accessible and development-oriented alternative that enables entrepreneurs to invest in their businesses, increase income, and improve their quality of life,” he added.

The city government has set an initial seed allocation of PHP 3 million for the program.

The fund will be replenished through annual city budget appropriations, national government grants, donor contributions, and loan repayments.

Loan terms and conditions

The UNA CAREs Program sets financial parameters built around the cash flow and operational needs of small businesses.

Qualified nano enterprises may borrow PHP 5,000 to PHP 100,000 per borrower.

Loans carry zero interest. The only charge is a one-time service fee of 1.5% of the approved principal.

Repayment terms run from six to 18 months, in equal monthly installments tailored to the borrower’s business capacity.

Borrowers also get a grace period of up to 60 days from loan release. During that period, principal payments may be deferred if the borrower submits a valid cash flow justification and it is approved.

To prevent over-indebtedness, the program enforces a single-active-loan rule. Beneficiaries may not take another loan under the program until the existing one is fully settled.

All loan proceeds under the program are disbursed through the UNA CAREs Fund.

Ganzon said the fund operates as a revolving microfinance facility rather than a one-time capitalization grant.

He said the revolving mechanism ensures that all principal repayments, service charges, and program-generated revenues flow back into the core loan fund.

“Through loan repayments and fund replenishment, the program ensures that assistance may continue reaching future beneficiaries, thereby creating a lasting cycle of economic empowerment within our communities,” he said.

Borrowers who miss repayment schedules beyond the allowable grace period face a penalty of up to 2% per month on overdue amounts.

The ordinance also provides that unjustified default or misuse of loan funds will result in three sanctions: immediate suspension, possible legal recovery proceedings against co-makers, and permanent blacklisting from city government assistance programs.

Eligibility requirements

To qualify, applicants must operate a business in Iloilo City and employ no more than three workers, including the owner. Their total assets, excluding land, must not exceed PHP 250,000.

That ceiling sets nano enterprises well below micro enterprises. The Magna Carta for Micro, Small, and Medium Enterprises (Republic Act 9501) defines micro enterprises as businesses with assets of up to PHP 3 million.

Applicants must also hold a valid Iloilo City business permit or a simplified registration certificate issued by the city government, along with a current barangay clearance.

They must prove Iloilo City residency through a valid government-issued ID or a barangay certification.

Applicants must also complete financial literacy and entrepreneurship training conducted or accredited by the city government before loan proceeds are released.

Applicants must submit a written statement on the intended use of the loan. The loan must serve legitimate business purposes such as buying inventory, purchasing equipment, or expanding the business.

Before disbursement, applicants must also present at least one qualified co-maker or guarantor. That person must be an Iloilo City resident, be at least 18 years old, and have demonstrated financial capacity.

A co-maker guarantees repayment of the borrower’s loan and agrees to assume joint and several liability for it if the borrower defaults.

The measure gives priority to applicants from vulnerable and underserved sectors, including:

• women entrepreneurs
• persons with disabilities
• solo parents
• returning overseas Filipino workers starting businesses
• informal sector workers moving into formal commercial operations
• agripreneurs

The ordinance disqualifies plantilla employees of the city government.

It also disqualifies relatives, within the fourth civil degree of consanguinity or affinity, of any employee or staff member in an office represented on the Loan Evaluation Committee. The rule covers plantilla, contract-of-service, and job-order positions alike.

Borrowers with unsettled or delinquent obligations under previous city assistance programs are also barred.

Training and support

Beyond financial assistance, the UNA CAREs Program requires approved beneficiaries to undergo business development and capacity-building activities.

These include:

• entrepreneurship and business development training
• financial literacy and management seminars
• mentoring and coaching services
• market linkage and networking initiatives

“At its core, this measure is not merely a lending scheme. It is a carefully designed development program that seeks to assess the whole business and the entrepreneur behind it,” Ganzon said.

“Through [the trainings], the program ensures that beneficiaries are equipped not only with financial assistance but also with the knowledge, skills, and support necessary to sustain and grow their enterprises. It recognizes that access to capital alone is not enough; sustainable success requires continuous capacity-building and responsible business management,” he added.

A Loan Evaluation Committee chaired by the city mayor will evaluate loan applications.

Its members include the head of the Local Economic Development and Investment Promotion Office, the city planning and development officer, the city treasurer, and the head of the Iloilo City Cooperative Office.