Role and Impact of Credit on Public Market Retailers in Biñan City, Laguna

Date

4-2011

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Jimmy B. Williams

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Abstract

This study aimed to present the role and impact of credit on public market retailers in Biñan City, Laguna. Specifically, it aimed to: (a) describe the characteristics and basic operations of public market retailers in Biñan City, Laguna; (b) describe the credit situation among the market retailers in the locality; (c) determine the cost of credit to the market retailers; (d) present the factors that affect the retailers' choice of a particular credit and its source and; (e) recommend ways to improve the business operation and credit facilitation of the retailers in the locality.

This is one of the two studies conducted in two municipalities of Laguna – Biñan City and Calauan. The studies utilized a common methodology and analysis. In addition, this study is an extension of the previous studies in informal lending and microfinancing for farmers, thus, the findings here will be a part of much broader information based on finance and credit.

Biñan Public Market was the public market covered by the study. Primary data were gathered by conducting survey interview on public market retailers. A non- probability purposive sampling was conducted by dividing the population into strata according to the commodities handles such as meat, vegetable, seafood, fruit, sari-sari, dry goods, and rice. Secondary data were obtained from the public market administrator’s office, municipal government office, and libraries. The data were analysed using descriptive analysis. The effective interest rates on loans were computed to further analyze the study.

The study revealed that the market retailers had the following characteristics; female, middle-aged, married, with household size of 4-6, and attained secondary level of education. Majority of the retailers had no other sources of income. For those who had other sources of income, tricycle/jeepney operation was the most common source.

The general problems encountered by the respondents in their business operations were low sales, high competition, shoplifters, perishability of products, and bad debts from customers. On the other hand, the common problems in availing credit were the high interest rates charged on the borrowers, collaterals and requirements, limited amount of funds to be borrowed, and delay in payments.

Moneylenders were the most common (69.49%) and most preferred (52.45%) source of loan. It was followed by relatives and then bank.

Credit plays a significant role in the business operation of public market retailers. It increases working capital and it helps the retailers to cope with the business losses especially during lean season. In addition, credits were also used by market retailers in non-business purposes such as personal expenses, education of children, and other household needs. Credit sources have both positive and negative impacts on the market retailers. Credit has a positive impact on the retailers in the way that it helps retailers to increase the volume of commodities to meet the demands of customers. Furthermore, credits were also used by the retailers to pay their accounts from their suppliers and dealers. Credit has a negative impact in the way that loans provided by credit sources particularly moneylenders have high effective interest rates. The borrowed loans are used to pay for previous loans. It threatens the business operation of highly credit dependent retailers. This set-up becomes a continuous cycle. Retailers find it difficult to pay their loans because of the high interest rates so they become tied up with their loans. As a result, their business profits are used to pay for these loans.

Recommendations that would address the problems of market retailers in business operation and sourcing of credit were given. As solutions for the problems in business operations, limiting credit extensions to customers, keeping an organized business record, proving education to retailers, formation of cooperative intended for market retailers, and formation of community bank were recommended. For the problems in the credit facilitation, provision of microfinancing program, formation of credit cooperative, and group lending were recommended.

Language

English

LC Subject

Markets--Management, Credit--Management

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2011 M17 S44

Notes

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Document Type

Thesis

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