Introduction cooperative is to help improve the quality of life of its

members (Cooperative Development Authority). This

All human beings have a fundamental need and desire is accomplished according to the type of each
to belong. As the saying goes, No man is an island. cooperative. The most common type cooperative is the
Human beings do not thrive when isolated from others credit cooperatives. Generally, credit cooperatives
(Donne, 1624) . This need for mutuality and promote and undertake savings and lending services
fellowship is the very foundation of cooperative among its members.
efforts. Cooperativism, then, is a spontaneous
behavior of humans in response to their individual and Cambridge dictionary defined Credit Cooperative as a
collective needs. financial organization owned and controlled by its
members, who can borrow at low interest rates from
Group of individuals around the world and throughout an amount of money they have saved as a group.
time have worked together in pursuit of common Finance practitioners view Credit Cooperative as an
goals. Examples of cooperation, or collective action, organization of people who join together to gain
can be traced back to our prehistoric predecessors who advantage in borrowing.
recognized the advantages of hunting, gathering, and
living in groups rather than on their own (Zeuli & In todays world, money is hard to come by. People
Cropp, 2004). Although the word cooperative can be whether rich or poor, always meet financial problems.
applied to many different types of activities, in this But opportunities to secure additional financing such
paper, the term is used to reference a formal business as loans are not available to everyone. That is why
model. credit cooperatives exist to open doors or opportunity
to those who have greater difficulty in saving and
A cooperative is an association of, by, and for people obtaining loans.
with common problems and community of interests
whose main objective is to improve the standard of In the Philippines, most of the credit cooperatives
living and quality of life of members by working started with a handful of members who pooled their
together in the form of a voluntary and autonomous meager resources to address their financial problems.
business organization within the framework of the Some of them even started as informal associations
universally accepted cooperative principles. (i.e., damayan, paluwagan, etc.) with a simple
(Mendoza & Castillo, 2006) objective of collectively looking for means to ease the
financial difficulties of individual members. But years
According to the International Co-operative Alliance of nurturing collective efforts and of demonstrating
(ICA), a cooperative is an autonomous association of capability to serve the common interests of their
persons united voluntarily to meet their economic, members enabled these credit cooperatives to expand
social, and cultural needs and aspirations through a their sphere of influence in communities and
jointly owned and democratically controlled enterprise institutions and, consequently to inspire membership
from different income groups.
Historical accounts of the beginnings of cooperatives
in the Philippines tell of the national hero, Dr. Jose P. The first credit cooperative in the Philippines was
Rizal, who organized a consumers cooperative and a founded in San Dionisio, Paraaque. It was a small
supply and marketing cooperative while in exile by the barrio populated mostly by fishermen and farmers,
Spanish colonial authorities in Dapitan (Southern with some small merchants and laborers who worked
Philippines) from 1892 to 1896. The agricultural in the salt-making industry. They were taken
cooperative ran an irrigation system, procured farming advantage of unlicensed money lenders since they
implements, and marketed the produce of farmer were not qualified to avail of loans from banks or other
members. Dr. Rizal got first-hand knowledge of lending institutions. But then in 1961, a small group
cooperatives in Germany where he studied and lived, called Rover Scouts, decided to organize a credit
and where he learned about rural cooperatives cooperative; an idea learned from a Jesuit priest,
organized by Friedrich Wilhelm Raiffeisen. (Sibal, Father Walter Hogan. San Dionisio Cooperative
n.d.). Credit Union, Inc. (SDCCUI) was organized on July
28, 1961 by the twenty eight (28) founding members
Membership in cooperatives is voluntary, it cant be with three hundred eighty (P 380.00) pesos as starting
dictated. It is open to all persons able to use their capital. It was subsequently registered with the
services and willing to accept the responsibilities of Cooperative Administration Office (CAO) on
membership. The primary objective of every September 8, 1961. At present, San Dionisio Credit
Cooperative is one of the oldest and most successful
cooperatives in the Philippines, and is an outstanding better control over accounts receivable management,
example of a true-blooded cooperative that practices and improved customer services.
good governance thru its structure, systems, policies
and programs. It is a cooperative that is committed to
serve its members and community with integrity (San 1.1 Statement of the Problem
Dionisio Credit Cooperative, n.d.)
The study intends to provide an adequate
For the best interest of members, cooperatives could understanding about the effects of credit policies on
find way to make credit facilities available for the collection of receivables of credit cooperatives in
everybody on time (Agutaya, 2016). This could be Baguio City.
accounted for the highly manifested concern of the Specifically, it intends to answer the following
cooperatives to promote the economic welfare of their questions:
members. The effective management of credit 1. What is the profile of credit cooperatives in Baguio
availment program by cooperatives gives rise to their City in terms of:
successful provision of credit facilities to members a. Length of Business Operation
who are in dire need of such services. This may be b. Form of Business Organization
attributed to the full and sincere support shown by their c. Size of the Cooperatives in terms of number of
respective member borrowers to the lending program members
of the cooperatives.
Hypothesis: There is no significant difference in the
Granting credit concerns collection thus there is a need effects of credit policy of credit cooperatives in Baguio
for a system that should insure close collaboration City in terms length of Business Operation, Form of
between the grant of credit and collection. Business Organization and Size of the Cooperative in
terms of number of members.
Credit Policy is established to meet the objectives of
the company, which are determined before any other 2. What is the type of credit policy used by the
actions can be taken. It serves as a guide in cooperatives and how does this affect the collection of
determining how to handle given kinds of credit and receivables?
accounts receivable issues, but it does not offer
definitive solutions (NACM Northwest, n.d.). It also Hypothesis: There is no significant difference in type
presents a range of solutions within which the credit of credit policy used by the cooperatives and the effect
executive exercises judgment. In the process of of these policies on the collection of receivables.
decision making, credit policy is constantly interpreted
and applied to concrete situations with the help of 3. Is there a significant difference in the effects of
specific guides or procedures. credit policy of credit cooperatives in Baguio City in
terms the following:
Management of the receivables asset is a demanding a. Length of Business Operation
task (Salek, 2005). For a company that sells on credit, b. Form of Business Organization
the accounts receivable financing portfolio is one of c. Size of the Cooperatives in terms of number of
the largest assets. However, often accounts receivable members
management area of asset is not given due importance
or care. Receivables are one of the three primary 1.2 Significance of the Study
components of working capital, the other being
inventory and cash. The primary aim of receivables As what the title of the study suggests, the main
management is to vet in minimizing the value of the objective of the researchers is to determine the current
firm while maintaining a reasonable balance between credit policies used by credit cooperatives and how it
risk (in the form of liquidity) and profitability. The may affect the collection of their receivables.
main purpose of maintaining receivables is not sales
maximization but is for minimization of risk involved The study also aims to produce valuable information
by way of bad debts (Analysis of Receivable that will aid in the improvement of these collection
Management, 2011) policies implemented by credit cooperatives in Baguio
City.
In understanding management of receivables, the
cooperatives can increase recoveries, reduce bad Specifically, this study aims to equip relevant
debts, fewer delinquencies, reduced operating costs, information to the following
1. To the respondent cooperatives: might not want to disclose confidential information for
This study is an informative tool to the respondent their security.
cooperatives in minimizing their doubtful accounts. 2. The evaluation of the effects of credit policies and
Respondent cooperatives will know whether they are collection procedures will be based only from the
effective enough in implementing their credit policies information gathered through questionnaire and
or not so that they will be knowledgeable if they will interview.
maintain or enhance their current policies. 3. Besides the cooperatives credit policies, other
factors affecting the collection of receivables will not
2. To potential debtors: be taken into consideration.
The information regarding the credit collection
policies and procedures will serve as a basis for them
to decide in whether to procure credit/debt in a Review of Related Literature
particular credit institution such as cooperatives. The
information generated will also provide the potential Local
debtors with protection as to their interest especially in
cases when the existing collection policies and The cooperative system in the Philippines has been
procedures of a particular cooperative are not characterized by stories of success and failure. While
favorable to them. the system has been a recipient of all-out government
support, it seems that it has remained meek and docile.
3. To other credit institutions: Victor A. Tan, on his journal An Evaluation of the
Similar lending agencies may use the information Cooperative System in the Philippines says that some
gathered as a benchmark in assessing the efficiency of of the reasons why cooperatives fail is the inadequate
their current collection policies and procedures. The loan capacity and funds mismanagement as well as the
researchers recommendations may be a significant lack cooperative training among their members to
help in the enhancement of the existing policies and assume responsibility. Thus, an honest-to-goodness
procedures. discipline-oriented program should be faithfully
undertaken before even forming a cooperative (Tan,
4. To the Government 1987)
The research carried out through this study serves to
provide information to the government and relevant On a journal The Financial Structure and
bodies such as CDA on the challenges faced by Performance of Philippine Credit Cooperatives
cooperatives in setting their credit policies. Thus the conducted by Gilberto M. Llanto, concluded that
government can strategize on actions to take to provide credit cooperatives were able to mobilize huge
necessary support to these financial institutions financial resources and to provide credit and savings
services to a large mass base at a standard comparable
5. To future researchers to that of formal financial institutions. Thus, they are
The study provides a knowledge base for future viable financial intermediaries in the countryside
researchers with regard to the effects of credit policies whose development must be strongly supported
on the collection of receivables of cooperatives. It also (Llanto, 1994). His study aims to formulate policy
opens the way for more extensive research with regard recommendations that will support the further
to credit cooperatives in Baguio City. strengthening of the credit cooperative sector and
encourage development assistance to credit
1.3 Scope and Limitation of the Study cooperatives as a viable mechanism for a sustainable
credit system in Philippine communities. Llanto, after
The study will focus on the effects of credit policies on a review and analysis of the respondents, suggested
the collection of receivables of credit cooperatives. that credit cooperatives must review their internal
The study will cover in detail the credit evaluation and financial, credit and management policies and
collection process as they are implemented in the practices with a view to more efficiency, financial
cooperatives main office. This is specifically
designed for the credit cooperatives located in Baguio
city. Limitations of this research emerged from
numerous probable sources as following articles
illustrate:
1. Unwillingness of cooperatives to be questioned and
interviewed. For the reason that some cooperatives
stability and soundness. The deterioration of asset
quality cannot be ignored without disastrous future INDEPENDENT VARIABLES
consequences. Thus, loan delinquency must be
addressed seriously. This will require the credit Profile of Credit Type of Credit Policy
cooperatives to develop efficient financial Cooperatives Used
management and investment policies and techniques
that will ensure self-sustaining financial services to Length of Restricted Policy
members. business Relaxed Policy
operation
Form of business
Conceptual Paradigm
organization and
The conceptual paradigm of the study showed the Size of the
interaction of the independent variables and dependent cooperatives
variable that provide results called the expected
output. The independent variables were chosen or
selected by the researchers as the stimulus variables to
determine the relationship to an observed
phenomenon. In this study, the independent variable is
the profile of credit cooperatives in terms of the length
of business operation, form of business organization DEPENDENT VARIABLES
and size of the cooperatives in terms of number of
members. Furthermore, the type of credit policy used
by the cooperatives were also used as an independent Effectiveness of the collection of
variable in this study. Accounts Receivable

The dependent variable is the response variable which

is observed and measured to determine the effect of the
independent variables. In this study, the researchers
will measure the effects of credit policies on the
collection of receivables of credit cooperatives

EXPECTED OUTPUT

Effects of credit policies

on the collection of
receivables of credit
cooperatives

Figure 1. Flow of the

Study