Street Vendors’ Stories: Informal Borrowing Practices and Implications on Business

Abstract

This study describes the informal borrowing practices of street vendors operating in a Philippine public market and their implications for business performance. Street vendors are an important part of urban communities, offering essential goods and services while navigating the challenges of operating outside formal regulations. Moreover, due to being part of the informal sector, vendors are deprived of access to formal financial institutions, which leads them to depend on informal credit services. This study found that street vendors often turn to “5-6” lenders, borrowing between PHP 5,000 ($87.06) and -10,000($174.13) at an interest rate of 20% in two months, with repeated borrowing cycles prevalent. Also, while these loans provided short-term benefits such as enhanced inventory, better pricing, and short-term financial survival, they imposed significant challenges, including high borrowing costs, strict repayment schedules, and debt dependency. Interviews with street vendors revealed that reasons for borrowing from ‘5-6’ include financial exclusion, regulatory constraints, and external forces like market conditions and health issues. These findings implored the urgency for policy interventions to reduce street vendors’ dependence on informal credit and facilitate access to affordable financial services to support their business sustainability.