Informal Lending Practices and Profitability of Rice Retailers in Borongan City


  • Timothy Freth Lagria



Lending practices, profitability, rice retailing


This correlational study explored the relationship between informal lender’s practices and profitability of fifty-three (53) rice retailers in city of Borongan using a researcher-made-three part questionnaire on the business profile, level of practices among informal lenders and weekly income of the respondents. Data were sourced out from rice retailers who lent sum of money from “5-6” informal lenders, and were utilized using descriptive and inferential analysis test at .05 level of significance. Findings revealed that Majority of the respondents had been in the middle years of retailing business, used an average initial capital sourced out from their personal savings and are earning an average weekly income. The respondents’ perceived that informal lenders assess clients’ financial needs and willingness to pay without requiring collateral from them and that rice-retailers reloan due to fast processing of funds and the great customer service. Using regression analysis, year in business was found to be a significant predictor of increase in the profitability of rice retailing services. While, no significant relationship was seen between the rice retailers’ weekly net income and the level of practice among informal lenders. The researcher recommends that government and non-government agencies to provide intervention that will improve the microbusiness enterprise in the market using the help of informal and formal lending institutions and that wider scope of the study should be made to include other small business sectors that are affected by informal lenders.


Ageba, G., and Ahma, W. 2006. Micro and Small Enterprises (MSEs) Finance in Ethiopia: Empirical Evidence. Eastern Africa Social Science Review, Vol. 22. No. 1: 63 - 86.

Agabin, M. H. 1988. A Review of Policies Impinging on the Informal Credit Markets in the Philippines. Makati City: Philippine Institute for Development Studies.

Aldaba, R. 2008. “SMEs in the Philippine manufacturing industry and globalization: meeting the development challenges”. Chapter 8 in in ERIA Research Project Report 2007 No. 5. In Asian SMEs and Globalization, ed. Lim, H

Alera, D.P.C. (2016) Informal money lending business. lending-business

Aleem, I. (1990). Imperfect information, screening, and the costs of informal lending. 12/Readings/07Credit&Savings/02Aleem-WBEcoRev1990.pdf

Aviles, M, R. Ventura, G., Yago and Zeidman B. (2004). The Isabela Project: closing the latino capital parity and procurement gap. Latino Community Foundation, Milken Institute and San Francisco Hispanic Chamber of Commerce

Banerjee A.V. & Duflo, E. (2007). The economic lives of poor. Journal of Economic perspective 21[1].

Banerjee, A.V. (2004). Inequality and investment. 41TU

Biggs, T. (2003). Is Small Beautiful and Worthy of Subsidy? Literature Review. Paper commissioned as part of an evaluation of IFC Project Development Facilities, World Bank, Electronic article available on-line

Berger, A.N and Udell, G.F. (2002.) Small business credit availability and relationship lending: The importance of bank organizational structure. The Economic Journal, 112, 32- 53.

Bureau of Labor Statistics, Business Employment Dynamics (2012) Do economic or industry factors affect business survival? Small Business Facts.

Business Tips (2013). Small businesses in the Philippines.

Carlson, R. (2018) Capitalization of a start-up. Business Finance.

Colombo, A. and Grilli, S. (2006), Access to capital and terms of credit: a comparison of men- and women-owned smallbusinesses, Journal of Small Business Management, 38(3), pp. 37 – 52.

Consumer Council and the FIJI institute of Applied Studies (FIAS, 2009). barangay-batasan-hills-qc

Cuevas, A.C. & Sumalde, Z.M. (2015) Costs of agricultural credit and interest rate sensitivity of small farmers: an empirical study

Department of Trade and Industry (2003), National SME Development Agenda, Philippines.

Drack, M., & Schwarz, G. (2010). Recent developments in general system theory. Systems Research & Behavioral Science, 27, 601-610. doi:10.1002/sres.1013

Ekpo, I.A. & Omin, O.J. (2014) The informal sector.

Fajardo, F. & Abella, F. (1981). Cooperatives. Rex Bookstore, Inc.

Fox, L., & Sohnesen, T. P. (2012). Household Enterprises in Sub-Saharan Africa-Why They Matter for Growth, Jobs, and Livelihoods. The World Bank. d%20Enterprise%20in%20Sub-Saharan%20Africa%20- %20Why%20they%20Matter%20for%20Growth%20Jobs%20and%20Liveliho ods.pdf

Gamad, L.C. (2017) Entrepreneurial orientation and business strategies of micro, small, and medium-sized enterprises (msme): basis for sustainable entrepreneurship in the Philippines. Proceedings of 76th IASTEM International Conference

Gandy, D. L. (2015). Small business strategies for company profitability and s ustainability. Walden Dissertations and Doctoral Studies. rtations

Global Entrepreneurship Monitor (2014). Entrepreneurship: An emerging career path for Filipinos,

Gómez, G. (2008). Do micro-enterprises promote equity or growth?. enterprises_promote_equity_or_growth

Hampel-Milagrosa, A. (2014). Micro and Small Enterprise Upgrading in the Philippines: The role of the entrepreneur, enterprise, networks and business environment (No. 86). Studies. https://www.die-

Hussain A.K. & Halim, B.N. (2017). Identifikasi Berbagai Permasalahan yang Dihadapi oleh UKM dan Peninjauan Kembali Regulasi UKM Sebagai Langkah Awal Revitalisasi UKM (Identifying various problems faced by SMEs and SME regulatory review as the first step of SME revitalization). PERMANA, V(2),

ITU (2016). A review of Micro, Small and Medium Enterprises in the ICT sector.

Janssen, F. (2009). Do manager’s characteristics influence the employment growth of SMEs? Journal of Small Business and Entrepreneurship, 19(3), 293-315. 6.10593372.

Jappie, F. (2018) What Is a Micro-Business? Think Big for Small Results. 4db76522d70e

Kebewer, L. M. (2012). The effect of debt financing on firm profitability of commercial banks in Kenya. Unpublished MBA project, University of Nairobi.

Kondo, M. (2003) Kyoto Review of Southeast Asia. Regional Economic Integration. financiers-for-philippine-micro-enterprises/

Kongolo, M. (2007). Women and informal credit: lessons from Moretele, South Africa. Journal of International Women's Studies, 8(4), 121-132.

LaMarco, N. (2019) Advantages and disadvantages of borrowing money from the banks. money-bank-61049.html

Lokhande, B.D. (2011). Role of SMES in Botswana. American International Journal of Contemporary Research, Vol. 2 No. 8; August 2012

Mecha, N. S. Effect of microfinance on poverty reduction: a critical scrutiny of theoretical literature. Global Journal of Commerce and Management Perspective 6[3] poverty-reduction-a-critical-scrutiny-of-theoretical-literature.pdf

Miranda, A. T., & Miranda, J. L. F. (2018). Status and conditions of small-and medium- sized enterprises as predictors in empowering rural communities in Samar Island, Philippines. Asia Pacific Journal of Innovation and Entrepreneurship. 0045/full/html#sec017

Monica, M. (2020). Micro0entrepreneurs and their role in the growth of developing countries. their-role-in-the-growth-of-developing-countries

Mutura, E. (2004). Limitations in applying Silica thermometry for geothermal prospects evaluation in Rwanda.

Mowl, A. (2016). The technology of lending. Informal credit contracts. IFMR Finance Foundation. http://foundation. ifmr. co. in/the-technology-of-lending-informal- credit- contracts.

Mwobobia, F.M (2009). Empowering of Small -Micro and Medium Enterprises (SMMEs): A Case of Botswana. Business and Management Research, Vol. 1, No. 4; 2012

Normito & Zapata (2006) Philippine Management Review 2006, Vol. 13, pp.117- 126

Olsen, F.N. (2005), Assessing factors that affect women and youth micro- entrepreneurs in Botswana.International Journal of Academic Research in Economics and Management Sciences, Vol. 2, No. 1 ISSN: 2226-3624.

Orlando, M.B. & Pollack, M. (2000). Microenterprises and Poverty. Evidence from Latin America. Washington, D.C: Inter-American Development Bank Sustainable Development Department Microenterprise Unit, February. Retrieved from Microenterpri ses% 20and%20 Poverty.pdf?sequence=1&isAllowed=y.

Parilla, E.S. (2013). Level of management practices of micro and small businesses in Ilocos. Journal of Academic Research in Business and Social Sciences, 3[7]. https://Level_of_Management_Practices_of_Micro_and_Small_Businesses_i n_Ilocos_Norte.pdf

Philippine Association of Service Exporters (2015). still-prefer-informal-lenders-over-banks/

Roperos, G.M. (2010) Taxing 5-6 lenders.

Sachs, J.D & Collins, S.M. (1989). Developing country debt. sequence=1

Sakinah, M. Z., Rosman, M., & Najihah, M. Y. (2014). Intellectual capital, innovation and start-up success in small business. In the Proceedings of the 2014 1st International Conference on Halal Global (pp. 1-9). TAL_INNOVATION_AND_START-UP_SUCCESS_IN_SMALL_BUSINESS

Satyanarayan, A. (2006) “Globalization: impact of sickness in Small Scale Industries” Narayana, N. (Ed) Issues of Globalization, Serials Publications, New Delhi, pp.564 -576

Scott S. (2010) business-10994.html

Senate Economic Planning Office (2012). MSME sector at the glance.

Servon, L. J., Visser, M. A., & Fairlie, R. W. (2010). The continuum of capital for small and micro enterprises. Journal of Developmental Entrepreneurship, 15(03), 301-323. ital_for_small_and_micro_enterprises

Shubita, M. F., & Alsawalhah, J. M. (2012). The relationship between capital structure and profitability. International Journal of Business and Social Science, 3(16), 104-112.

Stafford, K., Bhargava, V., Danes, S. M., Haynes, G., & Brewton, K. E. (2010). Factors associated with long-term survival of family businesses: Duration analysis. Journal of Family and Economic Issues, 31, 442-457. doi:10.1007/s10834-010- 9232-1

St-Pierre, J. (2004). La gestion du Risque comment améliorer le financement des PME et faciliter leur développement. Sainte-Foy: Presses de l’Universitú du Québec. Teruel-Carrizosa, M

Survey of Entrepreneurs and MSMEs in the Philippines (2018). Building the Capacity of MSMEs Through Market Access. https://apfcanada- 10/2018%20Survey%20of%20Entrepreneurs%20and%20MSMEs%20in%20t he%20Philippines_0.pdf

The Bombay 5-6” English KRSEA article from Issue 13 (2013) to issue 16 September 2016 retrieved from resource-informal-financiers-for-philippine-micro-enterprises/

Wright, M., & Stigliani, I. (2012). Entrepreneurship and growth. International Small Business Journal, 31(1), 3-22.

World Bank. (2011) Social research methods, London: Sage publications

Zainol, N. R., Al Mamun, A., Hassan, H., Rajennd, A., & Muniady, L. (2017). Examining the effectiveness of micro-enterprise development programs in Malaysia. Journal of International Studies, 10(2).` +effect iveness+of+microenterprise+development+programs+in+Malaysia&btnG=

Zhang, J. (2011). The advantage of experienced start-up founders in venture capital acquisition: Evidence from serial entrepreneurs. Small Business Economics, 36, 187-208. doi:10.1007/s11187-009-9216-4




How to Cite

Lagria, T. F. (2021). Informal Lending Practices and Profitability of Rice Retailers in Borongan City. American Journal of Agricultural Science, Engineering and Technology, 5(2), 229–244.