The interest rate formation of Informal Credit Providers (ICPs) to the fruit and vegetable vendors in Nagcarlan and Calamba City, Laguna, 2011

Date

4-2012

Degree

Bachelor of Science in Agricultural Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Ma. Eden S. Piadozo

Abstract

The study determined the factors affecting the formation of informal interest rate in the Nagcarlan and Calmba City public markets. The specific objectives of the study were to; (1) identify and describe the informal lenders present in the Nagcarlan and Calamba City public markets; (2) describe the nature and mode of operations of the informal credit providers and (3) determine the factors affecting the interest rate formation of informal credit markets in the Nagcarlan and Calamba City public markets. In order to achieve the objectives, descriptive methods were employed utilizing primary data through the survey of 24 fruit and vegetable vendors from Nagcarlan and 18 fruit and vegetable vendors from Calamba. The survey also included the ten professional lenders and two supplier-lenders providing credit in Nagcarlan public market as well as the nine professional lenders and two supplier-lender providing credit to the Calamba public market. Simple linear regression analysis was also employed in order to determine what are the factors affecting interest rate formation. The study found out that majority of informal lenders in Nagcarlan, 55% and Calamba, 56% have at most five years of experience in the lending business. On the other hand, more than half of informal lenders both in Nagcarlan and Calamba had an initial capitalization of the range P30,000 to P50,000. In terms of the nature and mode of operations of informal lenders, the study found out that in both study areas, the lenders collect loans on a daily basis. In the survey, majority of lenders in Nagcarlan, 90% said that they charge 10% interest rate. On the other hand, 100% of lenders in Calamba said that they charge the 10% interest rate. In the regression analysis, it was found out that only monthly cost of lending significantly affects the informal interest rate formation. This means that both informal credit markets in Nagcarlan and Calamba City are leaning toward a competitive market. Based on the finding, if the government wants to lower the informal interest rate, then it should focus on minimizing not the informal sector itself, but instead it should focus on lowering the costs incurred by the sector. Also, the government should not try to minimize the informal credit market since this would penalize the farmers and entrepreneurs who are availing credits from informal sources.

Language

English

Call Number

Thesis

Document Type

Thesis

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