A Comparative Study of Borrowing Effects on Professional and Non-Professional

Microfinance Members in Biliran Province

____________________________________________

A Research Proposal Presented to

The Faculty of School of Arts and Sciences
Biliran Province State University
Naval, Biliran

_____________________________

In Partial Fulfillment
Of the Requirements for the Degree
Business Administration Major in
Financial Management

_____________________________

Submitted to

MR. CRISMAR HOYLAR

_____________________________

Submitted by

Duma-o, Anna Marie

Samong, Mona Jean
Mahibales, Jelo P.
Palconit, Jennelyn

October 11, 2023

 Chapter I

INTRODUCTION

Background and Rationale of the Study

Microfinance has gained recognition as a powerful tool for poverty alleviation

and socio-economic development in many developing nations worldwide (Morduch,

1999). In the Philippines, a nation comprising over 7,000 islands, microfinance

institutions (MFIs) have played a pivotal role in extending financial services to

marginalized and underserved populations residing in geographically dispersed rural

areas. This development can be traced back to the early 1980s when institutions like

the Bangko Sentral ng Pilipinas (BSP) and the National Anti-Poverty Commission

(NAPC) recognized the potential of microfinance for financial inclusion (Alip, 2013).

Over the years, the microfinance sector has grown significantly, with various MFIs

operating across the country, including the picturesque Biliran Province. These

institutions offer an array of financial services, including microcredit, savings,

insurance, and financial literacy programs. Despite its undeniable positive impact,

the intricacies of microfinance’s effects, especially when considering professional

and non-professional members, remain a complex and unexplored subject.

Microfinance has been the subject of extensive research, with scholars

investigating various aspects of its operation and effects. Esther Duflo’s

groundbreaking work in 2003 highlighted the potential of microfinance to alleviate

poverty by providing access to capital for income-generating activities. Duflo’s

research across multiple countries demonstrated that microcredit programs had

tangible benefits, helping individuals escape extreme poverty and fostering

entrepreneurship within communities. Nobel laureates in economics, Abhijit Banerjee

and Esther Duflo, have emphasized the importance of understanding how

microfinance impacts the lives of borrowers. Their studies revealed that microfinance

is not a one-size-fits-all solution and that its effects vary among different groups of

borrowers (Banerjee & Duflo, 2019). This diversity in outcomes underscores the

need for a nuanced examination, particularly in regions like Biliran Province, where

both professional and non-professional members coexist within the microfinance

ecosystem.

This study’s primary rationale is to bridge the gap in existing literature by

conducting a rigorous comparative analysis of the borrowing effects on professional

and non-professional microfinance members in Biliran Province, Philippines. By

identifying and understanding the differences in their borrowing behavior, fund

utilization, and outcomes, we aim to provide a more comprehensive perspective on

the impact of microfinance. The findings from this research have the potential to

inform policy decisions and the design of microfinance programs in Biliran Province

and similar regions, tailoring services to meet the specific needs of these distinct

groups, thereby enhancing the effectiveness and inclusivity of these programs.

Additionally, by considering not only financial but also social and economic

outcomes, this study aims to provide a holistic understanding of the multifaceted

impact of microfinance, contributing to a more informed discourse on the role of

microfinance in poverty alleviation and sustainable development.

Objectives of the Study

The primary objective of this study is to compare the effects of microfinance

borrowing on professional and non-professional members in Naval, Biliran.

Specifically, it seeks to:

1. Determine the socio-demographic profile of the microfinance members,

including factors such as:

1.1. Age

1.2. Sex

1.3. Civil Statu

1.4. Educational Attainment

1.5. Employment Status

2. Analyze the borrowing behavior of professional and non-professional

members by examining aspects such as

2.1. Loan amounts borrowed

2.2. Loan repayment patterns

2.3. Frequency and purpose of loans

3. Assess the utilization of borrowed funds by both professional and non-

professional members to understand how the funds are invested or used for income-

generating activities, savings, or other financial purposes.

 4. Evaluate the financial outcomes of microfinance borrowing, including

changes in income, savings, and financial stability for professional and non-

professional members.

5. Investigate the social and economic impacts of microfinance borrowing,

examining changes in entrepreneurial activities, community development, and

overall well-being for both member categories.

Theoretical Framework

Importance of the Study

The importance of the study lies in its ability to provide tailored insights into

microfinance dynamics in Naval, Biliran. By comparing the borrowing effects on

professional and non-professional members, it offers targeted information crucial for

microfinance institutions and policymakers. These insights can enhance the

effectiveness of microfinance programs, ensuring they meet diverse borrower needs

and, ultimately, contribute significantly to poverty alleviation and sustainable

development in the region.

Scope and Delimitation of the Study

The scope of this study is to conduct a comparative analysis of the borrowing

effects on professional and non-professional microfinance members in Naval, Biliran,

focusing on microfinance institutions in this area. It will examine borrowing behavior,

fund utilization, and assess financial, social, and economic outcomes for these two

groups of members. The study is delimited to Naval, Biliran, and may not be

generalizable to other regions. It does not propose policy recommendations but aims

to provide insights for policy discussions related to microfinance in this specific

context.
Definition of Terms

Microfinance – refers to a range of financial services, such as microcredit,

savings, and insurance, designed to provide access to financial resources to

individuals or small businesses who lack access to traditional banking services.

Review of Related Literature

This chapter undertakes a comprehensive exploration of the borrowing

behavior among microfinance members in Biliran Province, with a particular focus on

differentiating between professional and non-professional members. Microfinance,

widely recognized as a potent instrument for fostering financial inclusion, has

garnered significant scholarly attention due to its role in poverty alleviation and

economic empowerment (Smith, 2018). Existing research underscores its capacity to

provide financial services to marginalized individuals, enabling them to participate in

entrepreneurial activities and income-generating ventures (Johnson & Patel, 2016).

This financial tool, often termed "microcredit," offers impoverished communities

access to capital, breaking down barriers that hinder economic progress.

However, within the microfinance landscape, a critical distinction emerges

between professional and non-professional microfinance members. Professional

members, frequently entrepreneurs or individuals with specialized skills, often utilize

microfinance services as a means to expand their existing businesses or acquire

expertise in their chosen fields (Wang et al., 2017). In contrast, non-professional

members, representing a more diverse demographic, may primarily rely on

microcredit for addressing fundamental needs such as education, healthcare, and

housing. This

differentiation underscores the significance of exploring borrowing patterns

and outcomes specific to these two distinct groups.

The impacts of microfinance borrowing extend far beyond financial

transactions, encompassing profound changes in borrowers' lives and communities.

Borrowers often report enhanced self-confidence and increased participation in

community activities, contributing to transformative impacts on social capital (Ghatak

& Guinnane, 2019). Furthermore, microfinance demonstrates the potential for

poverty reduction and the enhancement of overall social well-being by promoting

sustainable livelihoods (Duvendack et al., 2018).

To advance this study, a robust conceptual framework is developed that

transcends traditional variables. This framework includes key dimensions such as

loan repayment rates, entrepreneurial success, and overall financial stability,

meticulously tailored to the unique socio-economic context of Biliran Province.

Building upon previous research (Johnson & Patel, 2016; Wang et al., 2017), the

study endeavors to elucidate the intricate relationships between these variables and

their varying impacts on borrowing behavior among professional and non-

professional microfinance members. To measure these variables accurately, a

rigorously designed questionnaire inspired by validated instruments from prior

studies will be administered, ensuring data reliability and validity through thorough

pilot testing.

This comprehensive literature review offers a profound understanding of the

complex dynamics of microfinance and underscores the significance of

distinguishing between professional and non-professional members within Biliran

Province. By emphasizing the transformative potential of microfinance and providing

a robust foundation for the forthcoming study, this review aims to inform policy

development, program implementation, and strategies for promoting financial

inclusion that can benefit marginalized communities in the region.

 Chapter II

METHODOLOGY

The methodology section outlines the approach and techniques employed in

this study to investigate the borrowing effects of professional and non-professional

microfinance members in Naval, Biliran. It encompasses the research design, the

research locale, the subjects involved, research instruments, data collection

procedures, data scoring, and the statistical treatment of data. This section provides

a structured framework for systematically exploring the differences and similarities

between these two distinct groups within the microfinance landscape.

Research Design

This study will employ a comparative research design. It is designed to

compare and analyze the borrowing effects on two distinct groups of microfinance

members: professional and non-professional members in Naval, Biliran. The

comparative design allows for an in-depth examination of the differences in

borrowing behavior and outcomes between these two groups.

Research Locale

The research will primarily take place in Naval, Biliran. This locale is

significant due to its diverse microfinance landscape and the coexistence of both

professional and non-professional microfinance members.

Research Subject

The research subject will include professional and non-professional

microfinance members in Naval, Biliran. A purposive sampling method will be

employed to select participants. Professional members will be defined as individuals

with stable income sources, while non-professional members rely on microfinance

for income generation. The selection criteria will ensure that a representative sample

from both groups is included in the study.

Research Instruments

Data will be collected using structured surveys specifically designed for this

research. The questionnaire will combine closed-ended and Likert scale questions to

gather quantitative data. The survey instrument will be pretested to ensure clarity

and validity.

Data Gathering Procedure

The data-gathering process will begin with the identification and selection of

subjects using the sampling methods. Informed consent will be sought from all

participants, and data collection will take place at the chosen research locale in

Naval. Surveys will be administered, and interviews will be conducted with research

personnel. The data collection process will be carried out in a manner that ensures

privacy, confidentiality, and ethical treatment of participants.

Data Scoring

Quantitative data from surveys will be scored according to a predetermined

system, involving the categorization and organization of responses for analysis.

Statical Treatment of Data

 Quantitative data will be analyzed using descriptive statistics, including

means, frequencies, and percentages, to provide an overview of borrowing behavior

and socio-economic outcomes for professionals and non-professional members.

REFERENCES

Morduch, J. (1999). The Microfinance Promise. Journal of Economic Literature,

37(4), 1569-1614.

Alip, R. M. (2013). Financial Inclusion: What’s It All About? Bangko Sentral ng

Pilipinas (BSP).

Duflo, E. (2003). Grandmothers and Granddaughters: Old-Age Pensions and

Intrahousehold Allocation in South Africa. The World Bank Economic Review, 17(1),
1-25.

Banerjee, A., & Duflo, E. (2019). Good Economics for Hard Times. PublicAffairs.

Alip, E. R. (2013). Microfinance and the role of state intervention in the Philippines.
In Handbook of Research on Microfinance (pp. 197-217). IGI Global.

Duflo, E. (2003). Grandmothers and granddaughters: Old-age pensions and

intrahousehold allocation in South Africa. The World Bank Economic Review, 17(1),
1-25.

Duvendack, M., et al. (2018). What is the evidence of the impact of microfinance on
the well-being of poor people? EPPI-Centre, Social Science Research Unit, Institute
of Education, University of London

Ghatak, M., & Guinnane, T. W. (2019). The economics of lending with joint liability:
Theory and practice. Journal of Development Economics, 138, 185-199.

Johnson, E., & Patel, R. (2016). Microfinance and income generation: Evidence from
a randomized evaluation in rural India. Journal of Development Economics, 121, 43-
58. - Wang, L., et al. (2017). Microfinance and poverty alleviation: A comparative
study of professional and non-professional microfinance members in Southeast Asia.
Journal of Economic Development, 42(3), 58-73.
Karlan, D., & Zinman, J. (2010). Expanding credit access: Using randomized supply
decisions to estimate the impacts. Review of Financial Studies, 23(1), 433-464.

Smith, A. (2018). Microfinance and poverty reduction: An overview of the current

state of knowledge. World Development, 112, 169-178.