For GCash IPO Investors, the Financial-Inclusion Story Deserves Closer Scrutiny

Giving marginalized Filipinos access to loans at a 3.98% effective monthly rate may broaden access to credit. It does not necessarily make the credit inclusive.

As Mynt Inc., the parent of GCash, approaches what could be the largest initial public offering in Philippine history, one phrase has emerged as the offering’s moral centerpiece: financial inclusion.

The proposed listing has been promoted as a means of expanding digital financial services to underserved and unbanked Filipinos. The Philippine Stock Exchange approved the listing of as many as 8.03 billion common shares, plus an overallotment option of up to 1.20 billion secondary shares. At the maximum indicative price of ₱10, the transaction could reach approximately ₱92.32 billion if the option is fully exercised.

That is an impressive capital-markets story. It is also an invitation to ask a less comfortable question: What exactly is being included, and at what price?

A borrower offered credit at an effective monthly interest rate of 3.98% faces an effective annual rate of approximately:

(1.0398)12−1=59.73%

That calculation assumes monthly compounding and does not itself incorporate any additional penalties or late-payment charges. If such charges are imposed separately, the borrower’s total cost may be higher still.

An effective annual rate of 59.73% should not automatically be presented as financial inclusion. It may expand access to formal credit, but access is not the same thing as inclusion.

Financial inclusion should mean that people can obtain financial products that are useful, affordable, transparent, and responsibly delivered. If a product places vulnerable borrowers under a repayment burden they cannot reasonably sustain, it may bring them into the financial system only to keep them perpetually indebted to it.

That is not inclusion. It is monetized vulnerability.

The difference between a wallet and a lender

There is no serious dispute that GCash has transformed everyday finance in the Philippines. It has made payments, remittances, savings, and other services available through a mobile phone, including to people who previously had limited access to bank branches. The platform has become part of the country’s financial infrastructure, serving needs that traditional institutions often failed to address efficiently.

Supporters of the IPO argue that additional capital could extend those services to more underserved communities. Some have gone further, portraying the offering as a new form of inclusion in which ordinary users may become shareholders in the platform they use.

But the convenience of the wallet should not shield the economics of the loan from scrutiny.

Payments and remittances can lower transaction costs. Credit can impose them. A digital platform does not become inclusive merely because it places a “Borrow” button beside a “Send Money” button.

The relevant test is not whether a marginalized consumer can obtain a loan in minutes. It is whether the product improves that consumer’s financial position after interest, fees, and penalties have been paid.

At 3.98% effective interest a month, ₱10,000 left outstanding under a monthly-compounding illustration would grow to approximately ₱15,973 after one year. The additional ₱5,973 is not a minor convenience fee. For a low-income household, it can represent food, electricity, school expenses, or medicine.

The calculation is illustrative because an actual amortizing loan may have declining balances and scheduled repayments. But that is precisely why every lender should disclose the peso cost, payment schedule, and effective interest rate prominently and intelligibly, rather than relying on a seemingly manageable monthly percentage.

When penalties pile on

The concern becomes more serious when ordinary interest is combined with penalties and separate late-payment charges.

A lender is entitled to collect a lawful debt. It is also reasonable for a lender to price credit risk and impose proportionate consequences for default. But fees bearing different names can obscure their combined effect. Whether described as a penalty, late charge, collection cost, or service fee, each peso ultimately comes from the same borrower.

The economic question is straightforward: What is the total cost of the loan under realistic repayment conditions, particularly when the customer experiences the very financial distress that caused the customer to borrow?

For vulnerable borrowers, a missed installment rarely occurs in isolation. A hospital bill, delayed salary, or failed microbusiness can cause one missed payment. That missed payment can trigger additional charges, making the following installment more difficult to meet. The borrower may then take another loan to service the first.

The platform has technically widened access to credit. Economically, however, it may have created a digital debt trap.

Philippine law does not treat every high interest rate as automatically illegal. The old statutory usury ceilings were suspended, and courts assess unconscionability in light of the complete transaction. But the Supreme Court of the Philippines has also made clear that contractual freedom is not unlimited: an interest arrangement may be invalidated when it becomes exorbitant, oppressive, or unconscionable. In one case, the Court sustained the nullification of loan terms involving a 36% effective annual interest rate and additional charges after the arrangement was found grossly excessive under its circumstances.

Legality, moreover, is only the floor. A company asking public investors to value it as a champion of financial inclusion should be judged by a higher standard than whether its contracts can survive litigation.

Collection must preserve dignity

The same principle applies to debt collection.

Borrowers should repay legitimate obligations. But indebtedness does not strip a person of dignity, privacy or the right to be free from humiliation. Threatening language, relentless communications, deceptive representations, public shaming and contacting unrelated persons are not legitimate substitutes for professional collection.

Philippine regulators have expressly warned online lending platforms against harassment, intimidation, public shaming and excessive use of borrowers’ personal data. A joint advisory involving the Department of Information and Communications Technology, the National Privacy Commission and the Securities and Exchange Commission prohibits disproportionate data processing, contact-list abuse and collection practices involving threats or reputational harm.

Any claim that GCash, a lending affiliate, or a contracted collection agency engages in aggressive or degrading practices should be supported by documented messages, recordings, call logs, or regulatory findings. But the broader governance question remains valid even before individual complaints are adjudicated: What controls does the platform impose on the people collecting debts in its name?

Outsourcing collection does not outsource accountability. A consumer sees the platform’s brand, not the contractual arrangement between the lender and a third-party collector.

A publicly listed company should disclose the number and nature of collection complaints, the use of outside agencies, disciplinary actions against collectors, complaint-resolution times, and safeguards against harassment. Investors cannot properly assess regulatory and reputational risk without such information.

Inclusion cannot be measured by loan volume alone

The planned IPO has drawn interest from major institutional investors. Reports have identified global asset managers and the International Finance Corporation, the private-sector arm of the World Bank Group, among prospective cornerstone investors. The International Finance Corporation has described its contemplated participation as supporting inclusive digital finance and the expansion of consumer and small-business lending.

That endorsement should increase scrutiny, not diminish it.

Development institutions and investors should ask whether inclusion is being measured by the number of accounts opened, loans originated and transactions processed, or by outcomes for customers. Useful measures would include repeat borrowing caused by refinancing, delinquency rates by income segment, the average all-in cost of credit, the share of borrowers paying penalties, and the number of customers whose debt grows after missed payments.

A platform cannot convincingly claim to serve marginalized borrowers while treating their financial desperation primarily as a high-yield revenue opportunity.

Before investors embrace the inclusion narrative, Mynt Inc. should clearly disclose:

1. The weighted-average effective interest rate on its consumer credit products;

2. The complete schedule of penalties, late fees, and other charges;

3. Average borrowing and repeat-borrowing patterns;

4. Delinquency and restructuring rates;

5. The proportion of borrowers incurring late-payment charges;

6. Complaints involving collection practices and how they were resolved;

7. The compensation and oversight of collection agencies; and

8. Evidence that borrowers are better off after using the products.

This disclosure would not undermine the IPO. It would help investors distinguish a durable financial-services franchise from a business whose profitability may depend disproportionately on expensive credit extended to customers with few alternatives.

Access at any price is not inclusion

GCash deserves credit for helping digitize Philippine finance. But past contributions do not exempt present products from examination.

The central issue is not whether 59.73% effective annual interest is automatically “usury.” Under current Philippine law, that conclusion cannot be drawn from the percentage alone. The issue is whether credit at that cost, particularly when combined with penalties, late fees, and potentially harmful collection experiences, deserves to be wrapped in the language of social progress.

Financial inclusion is not achieved when a person who was formerly excluded from banking becomes included mainly as a source of high-interest income.

Nor is it achieved when technology makes borrowing instantaneous but repayment punishing.

The IPO may indeed broaden access to payments, savings, investments and credit. But if Mynt Inc. wants investors and the public to accept financial inclusion as part of its valuation story, it should demonstrate that its lending products are affordable, transparent and designed to improve customers’ financial health.

Otherwise, “financial inclusion” risks becoming a polished label for something much older: earning exceptional returns from people with the fewest choices.