2 lawmakers seek to regulate 'paluwagan'

RG Cruz, ABS-CBN News

Posted at Apr 05 2023 05:08 PM

New 1000-peso bill. ABS-CBN News
New 1000-peso bill. ABS-CBN News

MANILA -- Two lawmakers have filed a bill seeking to regulate the so-called "paluwagan" system in the country.

Paluwagan is a system where people pool their money by depositing a certain amount every day or week, and then take turns withdrawing from this pool.

Currently pending before the House Committee on Micro, Small, and Medium Enterprise Development is House Bill 7757 filed by Representatives Virgilio Lacson and Rodante Marcoleta.

"This bill aims to regulate the paluwagan system by creating an independent agency called Paluwagan Microfinance Administration. The Administration shall prescribe rules and regulations for the creation and registration of paluwagan, and shall exercise the power of supervision over registered paluwagans. The bill also provides for the creation of the Paluwagan Insurance Fund, which aims to protect members of insured paluwagan in case of cessation of business," the 2 lawmakers explained in their explanatory note.

According to the proponents, the bill principally aims to provide an avenue for the Filipino people to achieve financial autonomy and self-sufficiency, by promoting entrepreneurship and providing them with affordable credit and financial assistance. 

"It is hoped that the formalization and strengthening of the paluwagan microfinance system, as well as the establishment of the Paluwagan Microfinance Administration, shall contribute to the realization of the people's aspirations towards financial stability and self-reliance," the 2 lawmakers also said.

The lawmakers recognized the value of the system, even as they justified the need to regulate it.

"Although paluwagan has been in existence since time immemorial, the practice remains informal and unregulated... 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," they said.

"Since most paluwagan system is unregistered and undocumented, it is hard to prove claims of losses and damages in court," the lawmakers added.


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