Factors Affecting Credit Decisions of Public Market Retailers in Sta. Cruz, Laguna

Date

12-2018

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Arlene C. Gutierrez

Committee Member

Normito R. Zapata, Jr., Hanna D. Miranda, Agnes T. Banzon

Abstract

A study on the factors affecting credit decisions of public market retailers was conducted in Sta. Cruz, Laguna, the provincial capital of Laguna. This study aimed to examine the factors affecting the credit availment and source of credit of the public market retailers. Specifically, the study described the characteristics of the public market retailers and their retailing businesses in Sta. Cruz, Laguna, determined the current credit situation among the market retailers in the area, assessed how the socio-demographic and business characteristics affect the credit decisions of public market retailers, and analyzed how the credit option considerations affect the sources of credit of the public market retailers.

One-on-one interview using the questionnaire was done on registered public market retailers of meat, poultry, fish, vegetable, fruit, and rice. Stratified random sampling was utilized to obtain the sample size used in the study. An eight-percent margin of error was considered, which resulted to 111 fixed stall vendors from the 424 registered booths. Probability sampling was used to determine the respondents from the population of the public market retailers in Sta. Cruz, Laguna. To assess the credit decisions of the public market retailers, the factors affecting the credit availment were analyzed through Logistic Regression and the source of credit through multinomial logistic analysis.

Primary data gathered include the socio-demographic profile and business operation characteristics. The average age of the respondents is 50 years old and majority (77%) of them is female. Most of them are also found to be married (68.47%), have at least reached high school, have an average household size of five individuals, and were influenced by their parents to engage in the retailing business. Moreover, majority of them have no other source of income (70%) having an average business experience is 23 years, which showed that most retailers have experience in retailing already.

Seventy-six out of 111 public market retailers currently avail from at least one source of credit. Fifty-four of them avail credit from informal lenders, nine avail from formal markets, and 13 from both markets. The formal credit markets the respondents have been borrowing from are banks and microfinance institutions, while the informal credit markets are friends and moneylenders. Through the computation of effective interest rates of each source of credit, it was found that moneylenders charge the highest (197.86%).

On credit availment, the results of the analysis have shown that the socio-demographic factors, such as married as civil status, female as gender, no other source of income as business retail characteristics, meat and poultry as types of commodity, credit as source of starting capital, and other retailers as commodity source were found to be significantly associated to the credit availment of public market retailers. Using Wald’s test, results show that the over-all effect of civil status and source of capital are not statistically significant at 90% confidence level, while the gender, other source of income, commodity source, and the type of commodity are.

For the analysis of factors on source of credit, all of the socio-demographic factors, specifically the age, gender, educational attainment, other sources of income, household size, and civil status are significantly associated to the credit source of choice of the public market retailers. The business experience and operational hours are significantly associated to the availment of credit of the retailers from formal markets than informal markets, however, the odds decrease when the procurement frequency increases and the retailers source the commodities from retailers other than wholesalers. Moreover, when a retailer procures commodity from multiple sources, the retailers have a higher tendency to just borrow from informal markets instead. On the credit option considerations, results show that choosing a formal market over an informal one is significantly associated to interest rate and payment maturity, while in choosing an informal market, collateral requirement, application process, accessibility, and credit supply were to be considered. It was also found that the retailers avail from combined formal-informal markets rather than from informal markets due to the effect of the Tax Reform for Acceleration and Inclusion law. These factors were found to be significantly associated at 90% confidence level with the choice of credit option of public market retailers.

Proper planning, procurement of commodities from wholesalers, and membership in microfinance institutions are recommended for the retailers. The government should also provide awareness through seminars on strategic management, formal credit markets and interest rates, in order to educate the retailers on proper credit facilitation. Further studies on loan utilization, microfinance institutions, and strict policy implementations on informal credit markets were also recommended in the study.

Language

English

LC Subject

Retail trade-Finance, Credit--Management, Market surveys

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2018 M17 S25

Notes

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Document Type

Thesis

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