Convenient

We now know that Pope Francis, shortly after assuming the papacy, signed a letter of resignation from the post. It was simply a practical thing to do.

Should anything happen that might disable him from discharging his duties, that signed letter will be simply pulled out of the files. That makes things simpler.

“Courtesy resignation” is a phrase that is probably unique to our bureaucratic and political practice. They are filed in different ways across different agencies, including the Cabinet, to give the appointing authority a free hand in summarily dismissing and replacing underlings. The Civil Service Commission frowns on the practice.

When Interior Secretary Benhur Abalos asked (but not “oblige,” says the DILG) senior police officers to turn in courtesy resignation letters, the move was met with wide-ranging criticism.

Submitting such resignation letters, critics say, undermines the security of tenure of public officials. It degrades the roles played by the Internal Affairs Service of the PNP as well as the various investigative bureaus built into the organization. It exposes the senior officers to public humiliation and taxes the morale of the uniformed services.

Most seriously, it invests excessive power on whatever committee is formed to evaluate information about the senior officers. The composition of this committee has not been announced when the police officers were asked to submit their resignation letters. The nature of the proceedings and the timetable remains a mystery. When the Ramos administration conducted a large scale “cleansing” of the police force, the process lasted all of four years.

Critics also pointed out that demanding the resignation of hundreds of senior officers to get to “less than 10” suspected scalawags was not an economical way of doing things. It put the whole organization in limbo while the weeding out occurs.

Nevertheless, according to the PNP, nearly all the senior officers turned in their resignation letters. Most officers conceded that the mass courtesy resignation is a convenient way to immediately recover public respect for the police. Recent sting operations against drug syndicates did suggest some amount of involvement of police officers in the illicit trade.

The Marcos administration has been criticized for being soft on illegal drugs, leading to an apparent uptick in criminal activities. Abalos’ effort to rid the police of scalawags is an attempt to show some political will in the war against drugs.

We can only hope this rather unusual process of cleansing will make whatever institutional erosion worth it.

Credit cards

While the BSP has raised interest rates substantially over the past few months, it has maintained a cap on the rate credit card companies may charge their clients. That cap of 2 percent a month is due to expire soon.

As expected, politicians out to score populist points clamor for the extension of the cap. They say removing the cap will only add to the other economic woes being borne by our consumers. This is exactly the same argument they make against raising water and power rates even as the costs of providing them have spiked.

The Credit Card Association of the Philippines, for its part, is concerned that the cap imposed at the height of the pandemic has inadvertently led to limiting financing available to Filipino consumers. One might have noticed that promotional campaigns to encourage consumers to acquire credit cards evaporated since the cap was imposed.

Making payments out of credit cards is a convenience for consumers. It is also a form of borrowing for which the lenders assume risks. The interest charged on credit card borrowing mitigates the risks as well as the investments in finance technologies the lenders make.

The cap on credit card interest rates forces lenders to assume larger risk that could put their businesses in jeopardy. It reduces their willingness to invest in new technology to enhance consumer convenience. Some lenders today chose to expand their lending in other finance products than expand their credit card business. This could, in turn, force small borrowers to rely on usurious informal channels for borrowing, such as the notorious “5-6” syndicates.

As in other forms of financing, credit card rates are adjusted according to the client’s history of credit discipline. Prime borrowers can get interest rates below the cap set by the BSP. Subprime borrowers, normally first-time credit card users and younger consumers, will get higher charges or be denied the service. The availability of credit card services will shrink.

Only the usurious informal lending syndicates will be happy with this prospect.

Credit card issuers are mostly banks. They will tend to allocate their capital to activities with lesser risks and better returns. They owe their shareholders financial viability.

Should the banks choose to put their money in corporate bonds and other securities, in the process limiting their consumer lending through credit cards, this will not only result in denying many credit card applications. It will also undermine all our efforts at financial inclusion.

Financial inclusion involves bringing more of the poor and the young into our financial system. That makes available to them financing and investment opportunities.

The growing importance of online retail and other e-businesses is underpinned by the wider use of credit cards. Younger Filipinos purchase information, apps, goods and services through their phones. Without credit cards, the market will be stunted.

To develop our economy, our policies ought to enable the free market to get the price (and the rates) right.