socio-economic significance of micro financing, credit card, loans and installment buying

La Salle College Antipolo

Antipolo City

A Term Paper

On

Socio Economic Significance of

Micro financing, Credit Card, Loan,

And Installment Buying

In Partial Fulfillment

Of the Requirements for Basic Finance

Submitted by:

Rosemarie M. Trabuco

I-BSA

January 16, 2016

Submitted to:

Mr. Anthony Calderon

1

TABLE OF CONTENTS

TITLE

PAGE ........................................................................................................... 1

TABLE OF

CONTENTS .......................................................................................... 2

OUTLINE..........................................................................................................

........ 5

CHAPTER I INTRODUCTION AND BACKGROUND OF THE STUDY

1.1.

Introduction. ....................................................................................................

. 7

1.2. Statement of the

problem................................................................................... 8

1.3. Objectives of the

study........................................................................................ 9

1.3.1. General

objective................................................................................... 9

1.3.2. Specific

objectives................................................................................. 9

2

1.4. Significance of the

Study. .................................................................................. 9

1.5. Limitations of the

study. .................................................................................... 10

1.6. Organization of the research

report. ................................................................. 10

CHAPTER 2 THE LITERATURE REVIEW

2.1. Definition of key

terms. .................................................................................... 12

2.1.1

Microfinance......................................................................................... 12

2.1.2 Credit

Card........................................................................................... 12

2.1.3

Loans.................................................................................................... 13

2.1.4 Installment

Buying.............................................................................. 13

2.2. How microfinance, credit card, loans and installment buying

started............ 13

3

2.3. Significance of microfinance, credit card, loans and installment

buying........ 15

CHAPTER 3 SUMMARY OF THE RESULTS OF THE STUDY

3.1

METHODOLOGY………………………………………………………………………………

…… 21

3.1.1

Participants……………………………………………………………………………….. 21

3.1.2

Instrument……………………………………………………………………………….. 21

3.1.3 Data

Gathering………………………………………………………………………….. 22

3.2 Summary of

Results……………………………………………………………………………….. 23

3.2.1 Section 1: Miro

financing………………………………………………….. 23

3.2.2 Section 2: Credit

Card……………………………………………………… 24

3.2.3 Section 3:

Loans……………………………………………………………… 26

4

3.2.4 Section 4: Installment Buying……………………………………..

…… 27

CHAPTER 4 CONCLUSIONS AND RECOMMENDATIONS

4.1.

Introduction. ....................................................................................................

. 29

4.2. Conclusions from the

research. ....................................................................... 29

4.3. Recommendations from the

research. ............................................................ 33

V. BIBLIOGRAPHY

References

Books ........................................................................................................ 34

Newspapers ...............................................................................................

34

Journals....................................................................................................... 35

5

Internet ......................................................................................................

37

Appendices

Appendix

A................................................................................................... 39

Appendix

B..................................................................................................... 40

Appendix

C..................................................................................................... 41

Appendix

D..................................................................................................... 42

Survey Instrument

Questionnaire.................................................................................................

43

6

Outline

Topic: Socio Economic Significance of Micro financing, Credit Card, Loan,

and Installment Buying

Thesis Statement: Micro financing, credit card, loans, and installment

buying are all significant in today’s society because they function as a

medium of exchange and many people are capable of consuming more in

spite of the fact that they lack the money with which to buy their goods

(needs or wants) because they can avail of credit.

I. Introduction and background of the study

A. Introduction

B. Statement of the problem

C. Objectives of the study

D. Significance of the study

E. Organization of research report

II. Review of related literature

A. Introduction

B. Definition of key terms

7

1. Microfinance

2. Credit card

3. Loans

4. Installment buying

C. How microfinance, credit card, loans and installment buying

started

D. Benefits of microfinance, credit card, loans and installment

buying

III. Summary of the results of the study

A. Methodology

1. Participants

2. I nstrument

3. Data Gathering

B. Summary of Results

1. Section 1: Miro financing

2. Section 2: Credit Card

3. Section 3: Loans

4. Section 4: Installment Buying

IV. Conclusions and Recommendations

A. Conclusions

B. Limitations

8

C. Recommendations

V. References

A. Books

B. Journals

C. Internet Sources

9

INTRODUCTION

The pursuit of development has taken the direction of socioeconomic

development. Various institutions especially, the governments in each

country of the world, have been scrutinizing programs that would promote

development in the current economy. One of the proposed idea was the use

of credit and building a credit economy. Some of the different forms of

credit are through the use of micro financing, credit card, loans and

installment buying.

In a broad-spectrum, “credit is based on confidence in the debtor's ability to

make payment at some future time. Basically, the reason for credit is the

need or desire to obtain economic goods ahead of the capacity to pay.

Credit is simply defined as the power or ability to obtain money, goods, and

services at the present time in exchange for the promise to pay with money

upon demand or at a future determinable time.” (Laman, 2010)

Credit is very important part of our everyday life. It functions as a medium

of exchange. Many people are capable of consuming more in spite of the

fact that they lack the money with which to buy the goods because they can

avail of credit. As a medium of exchange, credit is faster, safer, and more

convenient form of obtaining goods and services than money. Credit has the

tendency to elevate the moral standards of the people since everyone

intending to have credit has to prove himself worthy of trust. It also

encourages people to save since they know they have to pay a liability in the

near future.

10

Credit enables businessmen and corporations to gather large amounts of

capital to undertake large-scale production and promote employment.

Suppose a businessman were offered loans to start a business. In the

construction of his business, many are benefited like the engineer,

architect, carpenters, masons, and unskilled laborers. Credit allows wealth

to be fully utilized. With the use of fixed assets as collaterals, people can

obtain loans from financing institutions. In this way, they can still use their

properties at the same time that they can convert them into cash for other

purposes. Credit in the hands of consumers has a great impact on the

quantity of goods and services consumed. Today, many families depend on

credit to be able to buy high-priced goods. Many new homes and

automobiles are being financed by installment credit. (Laman, 2010)

Lastly, credit helps in the expansion and contraction of money supply.

Through credit, the Central Bank can expand and contract the volume of

money in circulation.

1.2 Statement of the Problem

Varied plans have been proposed to solve the international debt problem.

Much of these plans range from encouraging more lending to reducing or

forgiving the debt. (Weygandt, et. al, 1996). Examples of these are micro

financing, use of credit cards, loans, and installment buying.

However, much as microfinance, credit card, loans, and installment buying

services have existed in today’s society for a period of time, there is still

11

lack of information on the good effects of the subject matter and the exact

magnitude of impact of these services on the nation’s economy and how the

loans are accessed and utilized in order to attain socio-economic

significance. The fact that poverty still exists amidst the attempts of

provision of these microfinance, credit card, loans, and installment buying

services creates room for exploring how far of these services have benefited

the nation and how these services are considered significant in today’s

rising economy.

The researcher therefore became curious and attempted to find out the

importance of microfinance, credit card, loans, and installment buying

institutions, the services they provided and in the process, find out how the

loans were accessed and utilized and what benefits it accrues in the society.

In so doing, the study would provide information about the socio-economic

significance or the role played by microfinance, credit card, loans, and

installment buying in today’s economy.

1.3 Objectives of the Study

The study had the general and specific objectives as follows;

1.3.1. General objective

The objective of the research was to determine the socio-economic

significance of microfinance, credit card, loans, and installment buying.

1.3.2. Specific objectives

12

Find out how the nation have benefited from microfinance, credit

card, loans, and installment buying socially and economically.

1.5 Significance of the Study

The study about the socio-economic significance of microfinance, credit

card, loans, and installment buying will be important to both the

academicians and researchers who can use it as a springboard for other

researches or studies. The information will also be used in the information

and resource centers of higher institutions of learning like universities that

have finance as a course for their students as well as the resource centers

in finance institutions and their umbrella organizations. It will therefore be

an additional reference for the data banks in the finance industry.

Furthermore, the information will be useful to policy makers especially the

district councils, town councils and the Ministry of Finance, who could

utilize it to promote policies and by laws that will enable more people to

access such finance programs and benefit from it as much as possible.

The study envisages that the findings of this research will highlight the

socio-economic significance of microfinance, credit card, loans, and

installment buying be appreciated by consumers especially those called

credit consumers and analyzed by policy makers.

1.5 Limitations of the Study

13

This study focused only on the socio-economic significance of microfinance,

credit card, loans, and installment buying, and it did not investigate the

correlation between the perceptions of creditors and debtors. Since the

given time-frame for making this study was limited, the respondents were

also limited to 30 randomly selected people age ranging from 18 to 60 years

old. Therefore the results of this study cannot be generalized to other

colleges or universities whether in the Philippines or abroad.

1.6 Organization of the research report

The following section is a discussion of the specific content of each chapter.

Chapter one introduces the research topic and explains the research

problem as well as the objectives, significance and the limitations of the

study.

Chapter two contains a discussion of the literature specific to the research

topic and research objectives and questions. The chapter discusses the

statements made about micro financing, credit card, loans and installment

buying. The divergent views by some researchers questioning whether

there are benefits and what type of benefits accrued from micro financing,

credit card, loans and installment buying have also been discussed.

Chapter three is a detailed discussion of the methodology of the research. It

discusses how the research was carried out and the methods used to

collect, analyze and record the data. It also discusses the major challenges

14

faced during the data collection as well as the ways in which the challenges

were handled. The chapter also looks at how the respondents were selected

and the specific type of research instrument used on a particular

respondent. The justification for the methodology used is also presented in

the chapter. It also discusses the findings from the study as guided by the

research questions and objectives. The findings are discussed under four

major sections:

Socio economic significance of:

Section 1: Miro financing

Section 2: Credit Card

Section 3: Loans

Section 4: Installment Buying

Chapter four presents the conclusions and recommendations from the study

for consideration of future studies. The conclusions feature the major

summaries that were established during the research and is supported by

statements from the review of pertinent literature in relation to the

objectives and guiding questions of the research.

Chapter five contains all the references from books, journals, newspapers

and internet sources used in undertaking this study.

REVIEW OF RELATED LITERATURE

15

2.1 Definition of key terms

There are some terms or words that will be featured frequently in this

research. The meanings of these words and terms have been compiled in

order to easily understand the contents of the research. The definitions are

based on the researcher’s understanding of how these words and terms

have been used in the research. They include the following;

2.1.1 Microfinance

According to Encyclopedia Britannica, “microcredit, also called micro

banking or microfinance, is a means of extending credit, usually in the form

of small loans with no collateral, to nontraditional borrowers such as the

poor in rural or undeveloped areas.” Academicians and researchers in the

field of finance industry (“Microfinance vital to economic growth”, 2005;

Luyirika, 2010; Agrawala & Carraro, 2010) also define microfinance as a

facility that makes it possible for the focused poor people to get a small loan

to build up their assets, establish or further develop a business, increase

their wealth and protect risks.

2.1.2 Credit Card

Credit card is a small plastic card containing a means of identification, such

as a signature or picture that authorizes the person named on it to charge

goods or services to an account, for which the cardholder is billed

16

periodically. (“Credit card”, 2015) It is a personal card which authorizes

purchases on credit.

2.1.3 Loan

Loan is the act of giving money, property or other material goods to another

party in exchange for future repayment of the principal amount along with

interest or other finance charges. A loan may be for a specific, one-time

amount or can be available as open-ended credit up to a specified ceiling

amount. (“Loans”, 2015)

2.1.4 Installment Buying

Installment buying refers to a partial payment on a financial obligation

(Scott, 1997). It is the use of short-and intermediate-term credit to finance

the purchase of goods and services for personal consumption, scheduled to

be repaid in two or more installments. (“Installment Buying, Selling, and

Financing”, 2003). Furthermore, it resembles the revolving charge in that

the debt is paid off over a certain period of time and usually requires a

down payment.

2.2 How microfinance, credit card, loans and installment buying

started

Microfinance

17

Microfinance was pioneered by Muhammad Yunus in 1976 when he created

the Grameen Bank in Bangladesh. Under this approach, clients who are

among the poorest of the poor, many of whom had never possessed any

money and relied solely on barter economy to meet their daily needs were

offered small loans to start their own business. By 1996 Grameen had

extended credit to more than three million borrowers and was the largest

bank in Bangladesh, with more than 1,000 branches. The success of

microloans in Bangladesh led to similar programs in other less-developed

nations and is now being sponsored by foundations, religious organizations,

or nongovernmental organizations such as Opportunity International and

the Foundation for International Community Assistance. Additionally, an

alternative approach to Grameen-style lending is stepped lending, in which

a borrower begins with a very small loan, repays it, and qualifies for

successive loans at higher values. (“Micro finance”, 2015)

Credit Card

The use of credit cards originated in the United States during the 1920s.

Under this system, the credit card company charges its cardholders an

annual fee and bills them on a periodic basis—usually monthly. In the late

20th century, credit card use began to increase dramatically. The recession

and rising unemployment that accompanied the global financial crisis of

2008–09 led to a rise in defaults as consumers were increasingly forced to

rely on credit. (“Credit Card”, 2015)

18

Loans

Loans originally are formally presented usually in writing to each party in

the transaction before any money or property changes hands. If a lender

requires any collateral, this will be stipulated in the loan documents as well.

Most loans also have legal stipulations regarding the maximum amount of

interest that can be charged, as well as other covenants such as the length

of time before repayment is required.

Loans can come from individuals, corporations, financial institutions and

governments. They are a way to grow the overall money supply in an

economy as well as open up competition, introduce new products and

expand business operations. Loans are a primary source of revenue for

many financial institutions such as banks, as well as some retailers through

the use of credit facilities. (“Loans”, 2015)

Installment Buying

Installment buying was first initiated by the furniture firm of Cowperthwaite

and Sons in 1807. In about 1850, the Singer Sewing Machine Company

began to sell its products on the installment plan. The success of installment

plans led manufacturers of pianos, organs, encyclopedias, and stoves to

broaden their markets by providing installment payments after the Civil

War. (“Installment Buying, Selling, and Financing”, 2003)

19

Installment financing of consumers' automobile purchases began in 1910.

After 1930, commercial banks became active in financing automobiles and

gradually came to dominate the market. In the mid-1970s, commercial

banks held about 60 percent of outstanding automobile installment credit;

finance companies, 25 percent; and other financial lenders, principally

credit unions, 15 percent.

2.3 Significance of microfinance, credit card, loans and installment

buying

Several researchers have explored the major concern of this study which

was to know the socio-economic significance of micro financing, credit card,

loans and installment buying. Of those, most (Mutua, et. al. 1996; Brau &

Woller, 2004; Kabber, 2005; UNESCO, 1997; United Nations, 2005;

Luyirika, 2010; Woller, 2003; Wydick, 1999a; Wydick, 2002; Dunn, 2001;

Anderson et. al, 2002; Khandker et. al, 1998; Woller and Parsons, 2002;

Wydick, 1999b; UNDP builds capacity to expand availability of micro-credit

services 2005:38, Ritzer, 1995; Coulton, 1996; Schembari, 2000; Fajardo &

Manansala, 1993; Discover Card, 2001; D’Astous, 1990; Mutya, 2002) have

undertaken studies in which they focused on each of the four sections

below:

Microfinance

In his research, Mutua et. al (1996) expressed that the rise of the

microfinance industry represents a remarkable accomplishment. It has

20

overturned established ideas of the poor as consumers of financial services,

shattered stereotypes of the poor as not bankable, spawned a variety of

lending methodologies demonstrating that it is possible to provide cost-

effective financial services to the poor, and mobilized millions of dollars of

social investment for the poor.

Brau and Woller (2004) research also emphasized that the animating

motivation behind the microfinance movement was poverty alleviation.

Microfinance offers the finance discipline a possible avenue to make a

significant difference in the lives of millions of poor people.

Moreover, a report of the UN Secretary General on Micro-credit and

Development (1998), “such an initiative is instrumental in changing the

poverty patterns in view of improved facilities to lessen the challenge posed

by startup capital. Microfinance has been changing people’s lives and

revitalizing communities since the beginning of trade.”

Kabeer (2005) reports that the studies of the Imp – Act (improving the

impact of microfinance on poverty) program in South Asia confirmed that

access to financial services improved the economic position of households.

The improvement involves; improving asset base and diversification into

higher return occupation, promoting the adoption of new agricultural

practices, increasing ownership of livestock and levels of savings and

reducing reliance on money lenders.

21

Microfinance also contributes greatly to the empowerment of the poor,

especially women and helps raise awareness and aspirations for education,

health care and other social services. In light of these achievements,

microfinance is increasingly being considered as an important tool for

poverty reduction (UNESCO 1997).

It has been observed that the G8 members declared their support by stating

that; “Entrepreneurs, no matter how small, need access to capital.

Microfinance programs have provided small amounts of capital to

entrepreneurs for many years benefiting women in particular. Sustainable

microfinance can be a key component in creating sound financial market

structures in the world’s poorest countries. It is often the first step in

launching SMEs, the beginning of what should be a continuum of credit

access necessary to support the maturation of companies in developing

countries” (United Nations 2005).

In a study by Luyirika (2010), she stated that “In the recent past,

microfinance has been strongly recommended as an intervention that could

assist poor people to improve their quality of life by providing small

amounts of money to initiate development enterprises. The microfinance

services are provided through microfinance institutions.

The study established that women who accessed the loans from MFIs were

able to improve their socio-economic status through starting up and or

expanding investments and enterprises, paying school fees for their

22

children, purchase of household items like furniture, land and solar

installation, building of houses, confidence building, participation in

leadership roles etc.”

Interest in the social impact of microfinance has led to a number of impact

studies published in scholarly journals too. Woller (2003) reviews 88

published impact studies, both peer-reviewed and non-peer-reviewed.

In a study by Wydick (1999a), he finds that upward class structure mobility

increases significantly with access to credit. Using the same Guatemala

data set in a subsequent study (2002), Wydick also finds that rapid gains in

job creation after initial credit access were followed by prolonged periods of

stagnant job creation. Dunn (2001) finds that program clients’ enterprises

performed better than non-client enterprises in terms of profits, fixed

assets, and employment. Finally, Anderson et al. (2002) analyze 147 MFIs

and finds that microfinance participation increased environmental

awareness and common pool resource stewardship.

Two published impact studies explicitly assessed community, or village-

level, impacts. In Bangladesh, Khandker et al. (1998) find that program

participation has positive impacts on household income, production, and

employment, particularly in the rural non-farm sector, and that the growth

in self-employment was achieved at the expense of wage employment,

which implies an increase in rural wages. Woller and Parsons (2002)

estimate that a microfinance program in Portoviejo, Ecuador contributes

23

$480,000 per year in direct and induced economic benefits to the local

economy.

Wydick (1999b) constructs a theoretical model to analyze the economic

tradeoff between future returns to schooling and the current return to child

labor in Guatemalan household enterprises. He finds that in some states,

microcredit increases the probability that children will attend school.

It has been observed that in Mpigi, like in other districts in Uganda,

microfinance has been applied as a poverty eradication strategy. It has been

used to provide low-income people with small grants, micro-credits and

other microfinance services as an impetus to exploit their productivity and

develop their business to help them improve their livelihoods (“UNDP builds

capacity to expand availability of micro-credit services”, 2005:38).

Credit card

According to Ritzer (1995), credit cards are a symbol of this age. Money is

important-especially to college students who are members of a generation

that has been raised in a credit card society. They have grown up with debt

and use it freely.

Buyers may have insufficient cash and so are willing to borrow to finance

consumption. Credit cards are easily accessible to college students and are

marketed aggressively to the college student population (Coulton 1996;

24

Mannix 1999; Schembari 2000). Twenty percent of college students are

estimated to have four or more credit cards (TERI 1998).

“When you really stop to think about it, you have to admit, credit cards are

still one of the world’s coolest inventions. To purchase something you want,

all you have to do is carry this small card around, hand it over to people,

sign your name on a little piece of paper, and then walk away with a couple

of new CDs, a leather jacket, or a stomach full of deep dish pizza, whatever.

It’s enormously convenient. It’s safer than cash. It helps you build a strong

credit history. And it’s very helpful—particularly when it comes to more

significant purchases that you need but can’t quite afford in one big

payment: a sofa, a bed, a new clutch. The freedom to buy these things now,

and then pay them off later, is, well, a pretty remarkable thing. The point is,

credit cards are so much a part of our lives, so convenient for small

purchases and so helpful when it comes to larger purchases, that we don’t

always appreciate their power. They are also one of the most potent tools

around for building a strong credit history.” (Discover Cards, 2001)

Credit cards eliminate the immediate need for money to buy something and

likely accelerate the development of compulsive buying (d’Astous 1990).

Loans

According to Mutya (2002), money from loan is important because it may be

used as permanent working capital, to put up a factory or improve it,

acquire equipment, buy land, and secure another loan, and secure another

25

loan from a non-government financial institution. In addition, government

projects can be financed through bonds and loans. It also accelerates

production, employment, income, consumption and etc.

Installment Buying or Credit

The installment plan enabled people to buy goods over an extended period

of time, without having to put down very much money at the time of

purchase. With this plan people could purchase automobile, household

appliances, homes, furniture, and other items. Essentially, installment plans

allowed people to buy things that they could not necessarily pay for. The

company would give the buyer the product first, and then every month they

would have to pay a certain amount of money until the item was paid off.

For example, if someone wanted to buy a car that cost $200, they would

receive the car first. Every month they would have to pay $20 or so until the

car was completely paid off.

(http://livingstandards1920s.weebly.com/installment-plans.html)

METHODOLOGY

Participants

The respondents were randomly selected, with a total number of 30 and age

ranging from 18 to 60 years old.

Thirty randomly selected people were chosen as the population of

interest for two bases. First, because the time is limited, choosing randomly

26

will make it easier for the researcher to finish the study on time. Second,

since these people were randomly selected, they do not know each other

neither are they connected to each other and therefore would likely to

produce answers that are more reliable and unbiased than those people in

the same location who probably have the same perception on the said topic

of this study.

Instrument

A survey instrument was developed in order to address the research

purpose cited above. In the development phase, the questionnaire only

consisted of one section because the questions for micro financing, credit

card, loans, and installment buying were generalized to the word “credit”.

After careful consideration for the results to be specific, the final instrument

consisted of four primary questions with eight sub questions that were

divided into four separate sections. All sections were composed of closed

form or restricted type of questionnaire and open-ended questions.

Data Gathering

The study was administered during the second week of January 2016. The

respondents randomly selected were asked to answer the questionnaires as

honest as they could. Respondents were then given approximately 30

minutes to answer the questionnaire. Data were gathered after all

respondents finished answering the survey instrument.

27

To describe the responses of the randomly selected respondents,

percentages were computed. Data were analyzed through totaling the

frequency of responses. Responses in all sections of the survey instrument

were converted to percentages. Furthermore, pertinent literature was

reviewed in order to scrutinize whether some of the tendency which appear

to be taking place in the subject matter are also revealed in journals, books,

newspapers and internet resources. This review targeted eight books, four

newspapers, fourteen journals, and eight internet sources, all of which were

addressed in examining the literature.

28

Summary of the Results

The results of this research were discussed in four separate sections

according to the arrangement it appeared on the questionnaire.

Section I: Socio-economic significance of Micro financing

The total number of responses per question of Section I can be seen in

Appendix A. The number of responses of the respondents were converted to

percentages scores and is presented in tables for each of the questions

where appropriate.

RESEARCH QUESTION

The primary question asked “Have you ever borrowed money from

microfinance institutions?” with sub questions “If yes, what is your reason?”

and “If no, cite probable advantages of micro financing in your opinion.”

Only twenty seven percent of the respondents (N = 8 out of 30) said that

they have already borrowed money from micro financial institutions. When

asked the reason why or the purpose of borrowing, much of the responses

are for capital investments garnering a total of 17 percent (N = 5 out of 30)

and the rest of the total response for those who answered yes are for

household allowance with 10 percent (N = 3 out of 30).

On the other hand, almost seventy percent of the total respondents (N = 22

out of 30) have not yet borrowed money from micro-finance institutions.

When asked about their possible perceptions about the significance of the

29

subject matter, much of the respondents attributed the most for capital

investments with thirty seven percent (N = 11 out of 30), followed by

educational assistance with seventeen percent (N = 5 out of 30), and lastly

by both household allowance and emergency cases each with ten percent (N

= 3 out of 30).

Table 1 Number and Percentage of Responses in Section 1 of Questionnaire: Socio-economic Significance of Micro financing

QUESTIONS RESPONSE N %

1. Have you ever borrowed money from microfinance institutions?

If yes, why? (Check at least two)

If no, cite probable advantages of micro financing in your opinion: (Check at least two)

YESNO

For educational assistanceFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers

Educational assistanceCapital investmentsHousehold allowancePersonal wants or needsEmergency casesOthers

822

-53---

5113-3-

2773

-1710---

173710-10-

Section II: Socio-economic significance of Credit Card

30

The total number of responses per question of Section II can be seen in

Appendix B. The number of responses of the respondents were converted to


where appropriate.

RESEARCH QUESTION

The primary question asked “Have you ever used credit cards? With sub

questions “If yes, what is your reason?” and “If no, cite probable advantages

of credit cards in your opinion.”

Table 2 Number and Percentage of Responses in Section 2 of Questionnaire: Socio-economic Significance of Credit Cards


2. Have you ever used credit cards?


If no, cite probable significance of credit cards in your opinion: (Check at least two)

YESNO

For educational purposesFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers

Educational assistanceCapital investmentsHousehold allowancePersonal wants or needsEmergency casesOthers, please specify:

1317

2--65-

52433-

4357

7--2017-

177131010-

31

Only forty three percent of the respondents (N = 13 out of 30) said that they

have already borrowed money or bought something they are not financially

able at that moment using credit card. When asked the reason why or the

purpose of borrowing through credit cards, much of the responses were

attributed for personal wants or needs with twenty percent (N = 6 out of

30), followed by for emergency cases with seventeen percent (N = 5 out of

30) and the rest of the total response for those who answered yes are for

educational purposes with seven percent (N = 2 out of 30).

On the other hand, almost fifty seven percent of the total respondents (N =

17 out of 30) have not yet used credit cards. When asked about their

possible perceptions about the significance of the subject matter, much of

the respondents attributed the most for educational assistance with

seventeen percent (N = 5 out of 30), followed by household allowance with

thirteen percent (N = 4 out of 30), personal wants or needs and emergency

cases both with ten percent (N = 3 out of 30) and lastly for capital

investments with seven percent (N = 2 out of 30).

Section III: Socio-economic significance of Loans

The total number of responses per question of Section III can be seen in

Appendix C. The number of responses of the respondents were converted to


where appropriate.

32

RESEARCH QUESTION

The primary question asked “Have you ever loaned money?” with sub

questions “If yes, what is your reason?” and “If no, cite probable advantages

of loans in your opinion.”

Almost eighty seven percent of the respondents (N = 26 out of 30) said that

they have already loaned money. When asked the reason why or the

purpose of loaning, much of the responses are for educational assistance

garnering a total of thirty three percent (N = 6 out of 30), capital

investments with twenty percent (N = 6 out of 30), personal wants or needs

with thirteen percent (N = 4 out of 30) and the rest of the total responses

for those who answered yes are for household allowance and emergency

cases each with 10 percent (N = 3 out of 30).

Table 3 Number and Percentage of Responses in Section 3 of Questionnaire: Socio-economic Significance of Loans


33

3. Have you ever loaned money?


If no, cite probable importance of loans in your opinion: (Check at least two)

YESNO

For educational assistanceFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers, please specify:


264

106343-

4-----

8713

3320101310-

13-----

On the other hand, only thirteen percent of the total respondents (N = 4 out

of 30) have not yet loaned money. When asked about their possible

perceptions about the significance of the subject matter, much of the

respondents attributed the most, actually, all of the respondents attributed

the reason to educational assistance.

Section IV: Socio-economic significance of Installment Buying or

Credit

The total number of responses per question of Section IV can be seen in

Appendix D. The number of responses of the respondents were converted to


where appropriate.

34

RESEARCH QUESTION

The primary question asked “Have you ever been engaged in installment

credit?” with sub questions “If yes, what is your reason?” and “If no, cite

probable advantages of installment buying or credit in your opinion.”

Table 4 Number and Percentage of Responses in Section 4 of Questionnaire: Socio-economic Significance of Installment Buying/Credit


4. Have you ever been engaged in installment credit?


If no, cite probable importance of installment credit in your opinion: (Check at least two)

YESNO

For educational purposesHousehold furniture/needsFor personal wants or needsFor emergency casesOthers, please specify:

Educational purposesHousehold furniture/needsPersonal wants or needsEmergency casesOthers, please specify:

237

9563-

211--

7723

30172010-

733--

Seventy seven percent of the respondents (N = 23 out of 30) said that they

have already been engaged in installment buying or credit. When asked the

reason why or the purpose of buying or crediting in installment, much of the

responses were attributed for educational purposes with thirty percent (N =

9 out of 30), personal wants or needs with twenty percent (N = 6 out of 30),

household furniture or needs with seventeen percent (N = 5 out of 30), and

then followed by for emergency cases with ten percent (N = 3 out of 30).

35

CONCLUSIONS AND RECOMMENDATIONS

Based on the results of this research, it appears that the thirty randomly

selected people on the socio-economic significance of micro financing,

credit card, loans, and installment buying resulted to different perceptions

and this was consistent with the reviewed literature. Therefore, a number of

primary conclusions were drawn.

Micro financing

First, the socio economic significance of micro financing is primarily

attributed to providing capital investments for the poor. Data from this

research indicate that twenty seven percent of the total respondents (N = 8

out of 30) said that they have already borrowed money from micro financial

institutions. When asked the reason why or the purpose of borrowing, much

of the responses are for capital investments garnering a total of 17 percent

(N = 5 out of 30). The findings of this research matched those of Mutua et.

al (1996) when he expressed that the rise of the microfinance industry

represents a remarkable accomplishment. It has overturned established

ideas of the poor as consumers of financial services, shattered stereotypes

of the poor as not bankable, spawned a variety of lending methodologies

demonstrating that it is possible to provide cost-effective financial services

to the poor, and mobilized millions of dollars of social investment for the

poor. Moreover, a report of the UN Secretary General on Micro-credit and

Development (1998), such an initiative is instrumental in changing the

36

poverty patterns in view of improved facilities to lessen the challenge posed

by startup capital. Microfinance has been changing people’s lives and

revitalizing communities since the beginning of trade.

In a study by Luyirika (2010), she stated that “In the recent past,

microfinance has been strongly recommended as an intervention that could

assist poor people to improve their quality of life by providing small

amounts of money to initiate development enterprises. The microfinance

services are provided through microfinance institutions.

The study established that women who accessed the loans from MFIs were

able to improve their socio-economic status through starting up and or

expanding investments and enterprises, paying school fees for their

children, purchase of household items like furniture, land and solar

installation, building of houses, confidence building, participation in

leadership roles etc.”

Credit Card

Second, the socio economic significance of credit card is primarily

attributed to providing instant money for their personal needs or wants and

for educational purposes. Data from this research indicate forty three

percent of the respondents (N = 13 out of 30) said that they have already

borrowed money or bought something they are not financially able at that

moment using credit card. When asked the reason why or the purpose of

borrowing through credit cards, much of the responses were attributed for

37

personal wants or needs with twenty percent (N = 6 out of 30) and

educational assistance with seventeen percent (N = 5 out of 30). This

research supported the conclusion of Ritzer (1995) when he indicated that

credit cards are a symbol of this age. Money is important-especially to

college students who are members of a generation that has been raised in a

credit card society. They have grown up with debt and use it freely.

Credit cards are easily accessible to college students and are marketed

aggressively to the college student population (Coulton 1996; Mannix 1999;

Schembari 2000). Twenty percent of college students are estimated to have

four or more credit cards (TERI 1998).

Buyers may have insufficient cash and so are willing to borrow to finance

consumption. (money credit and banking 2004) Credit cards eliminate the

immediate need for money to buy something and likely accelerate the

development of compulsive buying (d’Astous 1990).

Loans

Third, the socio economic significance of micro financing is primarily

attributed to providing educational assistance. Data from this research

indicate that eighty seven percent of the respondents (N = 26 out of 30)

said that they have already loaned money. When asked the reason why or

the purpose of loaning, much of the responses are for educational

38

assistance garnering a total of forty six percent (N = 14 out of 30). This

supported Mutya’s (2002) research when she said money from loan is

important bevause it can be used for many government projects such as the

study now pay later example.

Installment Buying or Credit

Fourth, the socio economic significance of micro financing is primarily

attributed to providing educational purposes with thirty percent (N = 9 out

of 30) and personal wants or needs with twenty percent (N = 6 out of 30).

This study supported an article from weebly.com when they said that

“installment plan enabled people to buy goods over an extended period of

time, without having to put down very much money at the time of purchase.

With this plan people could purchase automobile, household appliances,

homes, furniture, and other items (services).” Essentially, installment plans

allowed people to buy or get things that they could not necessarily pay for.

For example, a company or school would give the buyer the product or

services first, and then every month they would have to pay a certain

amount of money until the item or services rendered were paid off.

Micro financing, credit cards, loans and installment buying as credit

Furthermore, to provide a more summarized conclusion for this research,

the researcher used the term “credit” for all of the four topics above and

supports Fajardo and Manansala’s (1993) conclusion:

39

“Through credit more goods and services are acquired such as more food,

clothing, houses, machines, medical care, education, etc. More credit, more

consumption, more favorable in the economy. It stimulates more

investments. It results to more production, employment and income. Thus,

the whole national economy is benefited – including the government and the

people. Study now pay later helps students to climb the social ladder and

reach their dreams of finishing their studies. Credit also serves as a form of

social equalizer. This implies to poor nation as well.”

40

Recommendations

Despite of the many limitations of this study, the results of this study proved

that credit (micro financing, credit card, loans and installment buying)

indeed is important in our society. Some of the reasons are: it lays the

foundation of economic and social development like education, health,

housing, transportation, communication, and technology. In line with this, it

is suggested that the study be replicated in other locations, provinces and

regions in the Philippines or abroad using the same instrument used in the

study with greater number of respondents to see if results will hold true.

The use of other instruments that measures the socio-economic significance

of micro financing, credit card, loans and installment buying, if ever there

are, is also recommended. Effects of credit on consumer attitude can also be

another meaningful undertaking.

41

BIBLIOGRAPHY

Books

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15.

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48

APPENDIX A

Table 1 Number and Percentage of Responses in Section 1 of Questionnaire: Socio-economic Significance of Micro financing


1. Have you ever borrowed money from microfinance institutions?


If no, cite probable advantages of micro financing in your opinion: (Check at least two)

YESNO

For educational assistanceFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers

Educational assistanceCapital investmentsHousehold allowancePersonal wants or needsEmergency casesOthers

822

-53---

5113-3-

2773

-1710---

173710-10-

49

APPENDIX B

Table 2 Number and Percentage of Responses in Section 2 of Questionnaire: Socio-economic Significance of Credit Cards


2. Have you ever used credit cards?


If no, cite probable significance of credit cards in your opinion: (Check at least two)

YESNO

For educational purposesFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers


1317

2--65-

52433-

4357

7--2017-

177131010-

50

APPENDIX C

Table 3 Number and Percentage of Responses in Section 3 of Questionnaire: Socio-economic Significance of Loans


3. Have you ever loaned money?


If no, cite probable importance of loans in your opinion: (Check at least two)

YESNO

For educational assistanceFor capital investmentsFor household allowanceFor personal wants or needsFor emergency casesOthers, please specify:


264

106343-

4-----

8713

3320101310-

13-----

51

APPENDIX D

Table 4 Number and Percentage of Responses in Section 4 of Questionnaire: Socio-economic Significance of Installment Buying/Credit


4. Have you ever been engaged in installment credit?


If no, cite probable importance of installment credit in your opinion: (Check at least two)

YESNO

For educational purposesHousehold furniture/needsFor personal wants or needsFor emergency casesOthers, please specify:

Educational assistanceHousehold furniture/needsPersonal wants or needsEmergency casesOthers, please specify:

237

9563-

211--

7723

30172010-

733--

52

Name: (optional) _______________________________________ Age: ____Topic: Socio-economic Significance of Micro financing, Credit Card, Loans, and Installment Buying

53

SECTION I: MICRO FINANCING1. Have you ever borrowed money from microfinance institutions?___ Yes ___ No

If yes, why? (Check at least two)___ For educational assistance___ For capital investments___ For household allowance___ For personal wants or needs___ For emergency casesOthers, please specify: __________________________________If no, cite probable advantages of micro financing in your opinion: (Check at least two)___ Educational assistance___ Capital investments___ Household allowance___ Personal wants or needs___ Emergency casesOthers, please specify: _________________________________

SECTION II: CREDIT CARD2. Have you ever used credit cards?___ Yes ___ No

If yes, why? (Check at least two)___ For educational assistance___ For capital investments___ For household allowance___ For personal wants or needs___ For emergency casesOthers, please specify: __________________________________

If no, cite probable advantages of credit card in your opinion: (Check at least two)___ Educational assistance___ Capital investments___ Household allowance___ Personal wants or needs___ Emergency casesOthers, please specify: __________________________________

SECTION III: LOANS3. Have you ever loaned money?

___ Yes ___ NoIf yes, why? (Check at least two)___ For educational assistance___ For capital investments___ For household allowance___ For personal wants or needs___ For emergency casesOthers, please specify:________________________________If no, cite probable advantages of loans in your opinion: (Check at least two)___ Educational assistance___ Capital investments___ Household allowance___ Personal wants or needs___ Emergency casesOthers, please specify: __________________________________

SECTION IV: INSTALLMENT4. Have you ever been engaged in installment credit?

___ Yes ___ NoIf yes, why? (Check at least two)___ For educational assistance___ For capital investments___ For household allowance___ For personal wants or needs___ For emergency casesOthers, please specify: __________________________________If no, cite probable advantages of installment buying in your opinion: (Check at least two)___ Educational assistance___ Capital investments___ Household allowance___ Personal wants or needs___ Emergency casesOthers, please specify: __________________________________

socio-economic significance of micro financing, credit card, loans and installment buying

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