Analysis of the Rice Farmer-Borrowers' Transaction Cost in the Municipality of Bay and City of San Pablo, Laguna, 2018-2019

Date

6-2020

Degree

Bachelor of Science in Agricultural Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Arvin B. Vista

Committee Member

Arvin B. Vista, Antonio Jesus A. Quilloy, Agham C. Cuevas

Abstract

The study was conducted primarily to analyze the transaction cost of borrowing of rice farmers in the Municipality of Bay and San Pablo City, Laguna. Specifically, the study aimed to 1) provide the profile of rice farmer-borrowers; 2) determine the rice farmer borrowers' sources of agricultural credit; 3) evaluate transaction costs incurred by rice farmer-borrowers; 4) analyze the factors that affect the decision of rice farmer-borrowers to avail agricultural credit; and 5) recommend measures to improve agricultural credit access of farmers in Laguna and nearby areas.

A total of 82 rice farmer-borrowers were selected in the Municipality of Bay and San Pablo City using simple random sampling. The data covered rice cropping year 2018- 2019. Socio-economic characteristics, farm characteristics and their loan/financing profile were utilized using analytical tools such as descriptive analysis, cross tabulation, t-test, two­ way analysis of variance (ANO VA), least significant difference (LSD), and multiple linear regression. Among rice farmer-respondents, 57% borrowed from informal sources while 43% borrowed from formal sources. The study revealed that the location of formal credit institutions from the respondent's house were relatively farther in distance (7 .85 km), borrowers had to travel longer (0.58 hrs.) and had longer time spent (0.81 hrs.) . than its informal counterpart which were 2.18 km, 0.21 hrs. and 0.08 hrs., respectively.

The first two-way ANOVA conducted showed that the mean difference of the source of loan was highly significant. On the average, formal borrowers incurred higher transaction cost (PhP 115.4) that was almost five times of the average transaction cost incurred by informal borrowers (PhP 22.6). Regardless of source, transportation cost formed the bulk of the expenses incurred by farmer-borrowers. But formal borrowers also incurred paperwork cost, office/legal costs, and food expenses. Meanwhile, the result of the second two-way ANOV A conducted showed that the mean borrowers transaction cost among loan size groups were highly significant. The LSD test confirmed that all pairs of loan size groups were statistically different. Given this, a direct relationship between loan amount and transaction cost exists. Lastly, regression results revealed that the factors influencing borrower's transaction costs were: 1) collateral requirement; 2) dummy 2 for perception ratio; 3) tenure status; 4) distance relative to the credit provider; 5) time lag of loan; 6) loan term; and 7) loan amount.

The finding suggests that farmer-borrowers are still better off borrowing from the formal financial institutions even though results may suggest otherwise due to lower transaction cost to informal borrowers. To encourage more farmers to borrow from formal sources, it is recommended that cooperatives and associations could be used as credit conduits to address proximity concerns and adopting some of Land Bank and CARD Bank Inc. 's credit schemes that were specifically designed for farmer's convenience to help minimize farmer-borrower's transaction costs.

Language

English

LC Subject

Agriculture

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993.5 2020 A14 R49

Document Type

Thesis

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