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TUGUEGARAO
A Thesis
Presented to the
The Faculty of the Graduate School
Sanit Paul University Manila
In Partial Fulfillment
of the requirements for the Degree
Master in Business Administration
by
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ABSTRACT
Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards
economic development of the country. Entrepreneurs are said to be the pillar of economic
progress of the country. They contribute to the pecuniary growth of the nation in terms of
economic and stability of business in a global competitive world. It is however through the
support given by thegovernment where these entrepreneurs hold strength in pursuit to their
advocacy of building wealth to their family and for the nation. Helping the low-income
individual to build a booming and profitable business so they could become economically self-
sufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013)
The researcher utilized the descriptive method of research that describes the nature of the
situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al.,
2010). The descriptive method was used in this study. According to Calderon and Gonzales
(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process
of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices,
beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate
interpretation about such data with or without the aid of statistical methods. As they stated,
correlational research investigates a range of factors, including the nature of the relationship
between two or more variables.
This study aimed at determining the performance of micro-enterprises that availed micro-
financing in Tuguegarao City, Cagayan. Specifically, this study sought answers to the five (5)
sub-problems.First, what is the profile of the micro-enterprises in terms of form of business, type
of business and years in operation? Second, what is the performance of the micro-enterprises that
availed of micro-financing in Tuguegarao City, Cagayan in terms of Sales, Cash flow, Liquidity
and Return of Investment (ROI)? Third, is there a significant difference in the level of
performance of micro-enterprises for the availment of micro-financing when grouped according
to profile variables? Forth, what are the problems encountered by micro-enterprises in
Tuguegarao City? And lastly, what action plan can be proposed to address the problems
encountered by micro-enterprises in Tuguegarao City?
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The findings of the study were arranged according to the statement of the problem. First
was on the profile of the Micro-enterprises, the findings show the majority of the respondents
were Single or Sole Proprietorship, Retail and 6-10 years of Operations. Second, was on the
performance of Micro-enterprises, the findings show the majority of the respondents had Sales of
100,001 – 500,000 and Return of Investment (ROI) of 21-40, and nearly half of the respondents
had Cash flow of 50,001 – 100,000 and Liquidity of 1.51:1 – 3.00:1. Third was on the difference
in the performance of the Micro-enterprises when they are grouped according to profile variable,
the findings show p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which
were higher than the 0.05 level of significance. This shows that there is no significant difference
in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of
investment when the respondents are grouped according to form of business. Forth was on the
difference in the performance of Micro-enterprises when they are grouped according to type of
business, the findings show p values of 0.427, 0.206 and 0.359 respectively were obtained which
were higher than the 0.05 level of significance. This shows that there is no significant difference
in the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment
when the respondents are grouped according to type of business. Meanwhile, p value of 0.017
was obtained which was lower than the 0.05 level of significance. This shows that there is
significant difference in the micro-enterprises’ performance in terms of sales when the
respondents are grouped according to type of business. Fifth was on the difference in the
performance of Micro-enterprises when they are grouped according to years of operations, the
findings show p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained which were
higher than the 0.05 level of significance. This shows that there is no significant difference in
the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of
investment when the respondents are grouped according to years of operation. Sixth was on the
problems encountered by Micro-enterprises, the findings show the most common problems
encounterd were, not enough cash to purchase raw materials, merchandise and supplies, lots of
competitors, lack of training in handling business, high cost of sales that resulted to the increase
in selling price and natural calamities. And lastly, there is a need to proposed an action plan to
enhance the Micro-enterprises in the Minicipality of Balatan, Camarines Sur.
In the light of the above findingsof the study, the following conclusions were derived. (1)
The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years in
Operations. (2) The majority of the respondents had sales of 100,001 – 500,000 and Return of
Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 –
100,000 and Liquidity of 1.51:1 – 3.00:1. (3) The micro-enterprises performance in terms of
sales, cash flow, liquidity and return of investment is the same regardless of form of business. (4)
The micro-enterprises performance in terms of cash flow, liquidity and return of investment is
the same regardless of type of business. Meanwhile, the micro-enterprises in the services
business has sales than those in the retail business. (5) The micro-enterprises performance in
terms of sales, cash flow, liquidity and return of investment is the same regardless of their years
of operation. (6) The most common problems encountered were, not enough cash to purchase
raw materials, merchandise and supplies, lots of competitors, lack of training in handling
business, high cost of sales that resulted to the increase in selling price and natural calamities. (7)
There is a need to comprehensively implement the proposed action plan to enhance the micro-
enterprise in Tuguegarao City.
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TABLE OF CONTENTS
Page
Title Page i
Abstract iv
Table of Contents v
Chapter Page
Introduction 1
Theoretical/Conceptual Framework 4
Operational Framework 6
Operating Model 7
Statement of Hypothesis 9
Definition of Terms 12
3 RESEARCH METHODOLOGY 14
Research Design 23
4
Sources of Data
Summary of Findings
Conclusions
Recommendations
5
Chapter 1
Introduction
Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards
economic development of the country. Entrepreneurs are said to be the pillar of economic
progress of the country. They contribute to the pecuniary growth of the nation in terms of
economic and stability of business in a global competitive world. It is however through the
support given by the government where these entrepreneurs hold strength in pursuit to their
advocacy of building wealth to their family and for the nation. Helping the low-income
individualto build a booming and profitable business so they could become economically self-
sufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013).
to capitulate high income as they deserve to prosper even in the small entrepreneurial economy.
Most microfinance institutions (MFIs) operated on the assumption that providing micro
entrepreneurs loans without articulating how, where and when microfinance would work and for
whom it could work, would help the underprivileged, however, over the years, these MFIs have
realized that access to credit alone will not move the poor out of poverty. Thus, from being a
single-service provider of credit and nothing more, the institutions have shifted to providing what
According to the most recent data, "the microfinance industry is estimated at $60 to 100
billion, with 200 million clients." However, there is much criticism on the concept. Microloans
are smaller than traditional bank loans, but they have much higher interest rates. Many believe
the loans are not enough to start a successful business and only provide basic needs, like food
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and shelter, which eventually lead to more debt. However, there are many ways to ensure timely
repayment on the loans. According to Investopedia, many microlenders allow borrowers to work
together to repay their loans, helping each other when needed. This holds borrowers more
accountable for their repayments, which in turn leads to better credit and sets them off on the
In some poor countries the people desperately need loans for them to operate or expands
their farms or small businesses. Micro finance is commercial bank have histories been reluctant
to make small loans to people little or no collateral. This occurs when financial organizations
provide loads to low-income clients or solidarity lending groups who traditionally lack access to
Micro finance can help those included in the micro-enterprises. It is generally defined as
a small business employing nine (9) people or fewer, and having a Balance Sheet or turnover less
than a certain amount. The terms microenterprise and microbusiness have the same meaning,
though traditionally when referring to a small business financed by microcredit the term
microenterprise is often used. Similarly, when referring to a small, usually legal business that is
not financed by microcredit, the term microbusiness (or micro-business) is often used.
Internationally, most microenterprises are family businesses employing one or two persons. Most
microenterprise owners are primarily interested in earning a living to support themselves and
their families. They only grow the business when something in their lives changes and they need
Tuguegarao City.
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Theoretical/ Conceptual Framework
The study considered the concept by Ogindo (2006) of micro-financing which arose out
of the need to provide to the low-income earners who were left out by formal financial
institutions. The practice of micro-credit dates bank to as early as 1700 and can be traced to the
Irish Loan Fund System, which provided small loans to the rural poor with no collateral. The rise
context. 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. It must be emphasized too, that
the animating motivation behind the microfinance movement was poverty alleviation. Not only
that, but microfinance offered the potential to alleviate poverty while paying for itself and
perhaps even turning a profit doing well by doing good. This potential, perhaps more than
anything, accounts for the emergence of microfinance onto the global stage.
interventions: economic and human resources. By enabling the establishment of new micro-
enterprises, microfinance supports the efficient use of labour and capital as factors of production
and therefore contributing to economic growth and ultimately to sustainable development. The
human resources theory is quite similar to the economic one. Since it is generally accepted that
acquisition of new skills and the upgrading of existing ones and thus improve on the capacity of
the poor to generate income and improve their livelihood. In addition to the discussed theories
underlying microfinance, another spinoff theory is that of empowerment: the poor become
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empowered when they participate in microfinance activities. By self-selecting themselves into
groups and self-managing their groups, and gaining control over the means of making a living,
poor people become empowered and independent. Empowerment has been particularly relevant
for women who are perceived as being marginalized in most developing countries(Chester and
Kuhn, 2002).
Operational Framework
The study was anchored on the concept of micro-financing as cited by Ogindo (2006),
which summarizes that microfinance is a development tool that grants or provides financial
services and products such as very small loans, savings, micro leasing, micro-insurance and
money transfer to assist the very or exceptionally poor in expanding or establishing their own
businesses. It is mostly used in developing economies where small businesses do not have access
to other sources of financial assistance. Financial services generally include savings and credit;
however some finance organizations also provide insurance and payment services. In addition to
group formation, development of self confidence and training in financial literacy and
The study had independent variables and dependent variables whereby the independent
variables are the profile of micro-enterprises; the dependent variables are the level of
Operational Model
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Independent Variable Dependent Variable
Profile of micro-
enterprise Performance of
micro-enterprise
Sales Proposed Action
Form of Business plan to address the
Type of Business Cash Flow
problems
Years in Liquidity encountered by
Operation Return of micro-enterprises
Investment
Figure 1. The operational model of the study showing the relationship among variables.
2.1. Sales
2.3. Liquidity
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3. Is there a significant difference in the level of performance of micro-enterprises for the
5. What action plan can be proposed to address the problems encounteredby micro-enterprises
Statement of Hypothesis
Ho: There is no significant difference in the level of performance of micro-enterprises for the
2. Micro-financing helps the poor, especially rural women, develop new and strengthen
3. Respondents were objective and capable in assessing the level of performance of micro-
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Business Permits and Licensing office as of September 30, 2017. It covered fifty-five (55) micro-
enterprises whose assets and capital were less than P3million and who had availed of micro-
financing from either formal or informal institutions. This study was conducted during the
The findings of the study in determining the performance of the micro-enterprises would
Micro-enterprises owners, this would help them toeasily manage their business
the problems and implement possible solutions foran effective deliverance of financing services
to micro-enterprises.
Prospect businessmen, this would help them about the knowledge of funding sources
and idea regarding loan and profit that will compose them to become better businessmen.
the design and implementation of the programs that could really help the micro-entrepreneurs
National Government Officials, this could improve public service through MFIs
programs on the creation of an enabling environment, supportive regulations and provisions for a
services.
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Future Researchers, this research would serveas a guide in doing their research related
Definition of Terms
To facilitate understanding of the study, important terms were defined contextually and
for operationally:
Tuguegarao City.
Micro-enterprises are small business with minimal employees and capital. Due to a lock
of quality education, jobs and training available to people in poverty in developing countries.
Micro-enterprises add value to economy and lives by creating small business opportunities,
improving income and promoting commerce (Funds2orgs, 2018). In the study, these are the
business with assets and capital of P3 million and below in the Municipality of
BalatanCamarines Sur.
terms of job generation, growth, profitability, sustainability, survival and stability (Storey, 1994).
In the study, this refers to the capability and ability of the micro-enterprises to compete with their
competitors.
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Cash Flow provides a summary of cash inflows and cash outflows during the
Liquidity refers to the ability of a business entity to settle its currently maturing
financial obligations. Obligations are currently maturing if they become due within one
year from the date of the statement of financial position notwithstandingthe normal
Return of Investmentrefers to the ratio of net income to the average total assets which is
calculated by dividing the net income by the average total assets (Spiceland, Thomas, Herrmann,
2009)
other access to financial services (Lawrence and Weber, 2017). In the study, this refers to a
system of providing credit, mobilizing deposits and generating investment at the micro-level.
Profile is a set of data often in graphic form portraying the features of something
(Merriam-Webster, 2018). In the study, this refers to the characteristic, type and form of the
Single or Sole Proprietorship had a single owner called the proprietor, who often
manages the business. Proprietors tend to be small retail stores or professional businesses
(Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the single owner of the micro-
as partners or co-owners (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the
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type of business organization with two (2) or more owners of micro-enterprise in Tuguegarao
City.
entity separate from its owners. Therefore the owners of a corporation are not personally liable
for the debts of the business. (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to
Disctionary, 2013). In the study, this refers to the micro-enterprises that sells goods or
2017). In the study, this refers to the micro-enterprises that uses components, parts or raw
possession or ownership takes place when services are sold (Business Dictionary, 2017).
In the study, this refers to the micro-enterprises who rendered services to their clients.
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Chapter 2
This chapter presents the literature and studies, which are significant to present the study.
A synthesis of review of literature and Gaps Bridge by the present study was also included in this
chapter.
The literature and studies that were reviewed were found to have bearing on the present
study. They served as bases for the conceptualization the study’s problem, research design and
methodology.
economic growth is broad based and reduces poverty has become a fundamental development
challenge. In many countries, poor people cannot fully participate in, or enjoy the benefits of,
economic growth. Poor people, women in particular, in the developing world often lack access to
safe places to keep their savings. They cannot obtain credit to start a business or to grow their
businesses or farms.
The poor often do not have basic services like insurance to protect themselves against
drought and natural disasters. Small and very small firms owned by the poor often have little
help in getting access to new technologies or business networks that could improve opportunities
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USAID programs enhance poor people’s access to financial services such as savings
accounts and credits. These programs seek to improve the quality and affordability of financial
services. Extend access to excluded populations such as women, persons with disability and
those living in remote areas.Assist smallholder farmers and small business entrepreneurs in
selling their products by linking them with buyers and suppliers of good and services.
These programs also help small businesses access new inputs, new technology and services
that lead to improved products that bigger businesses are looking to purchase.
USAID microenterprise programs improve the lives of the very poor, helping them to:
recover from shocks such as a flood or death in the family; protect themselves against risks such
as illness or drought; and steady home food and family purchases so that they have the ‘breathing
space’ that allows them to work and toremove themselves out of poverty.
education, and energy, to meet the needs of the mass market. In USAID's experience,
Another major area of focus is expanding poor people’s access to financial services through
mobile phone technology. Mobile money services help the poor to reduce the cost of banking
transactions and have been shown to increase savings. Along with developing these services, the
Agency is working to support a robust regulatory environment to ensure users’ money is not put
at risk. Many small entrepreneur and micro enterprises are having a hard time in putting up or
expanding a business. This is mainly because of the working capital need to start up a business.
That is the main reason why micro financing being develop by several banks and institution.
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Opportunity on Availing Micro-finance
financial services. While institutions participating in the area of microfinance are most often
associated with lending (microloans can be anywhere from $100 to $25,000), many offer
additional services, including bank accounts and micro-insurance products, and provide financial
and business education. Ultimately, the goal of microfinance is to give impoverished people an
Fauster (2014) emphasized the impact of micro-finance institutions (MFIs) on small and
medium scale enterprises (SMEs) is still fraught with inconsistent results, with some concluding
on positive impacts while others reporting negative impacts. This paper therefore sets out to
assess the impact that the study-MFIs are making on their SMEs-client in the Wa Municipality.
The with and without approach, coupled with a quasi-longitudinal approach was employed for
the study.
Data were gathered from the study-MFIs’ documents and questionnaire administration.
Simple percentage change was used as a measure of growth of mean sales revenue. Analysis of
also used in the analyses, with various hypotheses tests. It is concluded that the study-MFIs make
positive impacts on the mean sales revenues of their client – SMEs, with great differences
between those of SAT and MTA clients on the one hand and those of the control group on the
other. A slight difference that exists between the two study-MFIs was accounted for by
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differences in their management approaches. A strong positive correlation exists between
average sales revenue on one hand and micro loans, level of education and training on the other.
MFIs generally set poverty reduction, based on microcredit, as their major goal. For example,
Micro Credit Summit Campaign, an umbrella organization of major MFIs in the world, has its
themes of operation and goals as: Reaching the Poorest, Empowering, Building Financially Self-
sufficient Institutions, and Ensuring a Positive, Measurable Impact on the Lives of Clients and
their Families(Ayesha, 2006). The success story of most of these MFIs, especially in poverty
reduction and financial self-sufficiency, with some transforming into regulated non-banking
financial institutions with profit motive, and others becoming banking financial institutions is
development practitioners. However, with the statement: “You’ll see that they are definitely
poor… They repay the loans through nothing but hard work, every day”, the question can be
raised as to whether the growth generated by the SSEs can be attributed to the support from the
MFIs.
Micro-finance Revolution
of MFIs, funders, networks, and service providers serving low-income clients. Incorporated in
2002, MIX collects and reviews financial, operational, product, client, and social performance
data, standardizing the information for comparability. Its published data track development of the
industry, both for its operators and for those supporting it through funding, policy, or analysis. Its
primary data platform, MIX Market, has delivered MFI profiles and annual standard
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performance reports since 2002. Between 2002 and 2012, its public database has grown from
covering just over 100 MFIs to more than2,000 providers around the world. Its platform data
include benchmarks and comparative analysis, along with quarterly results. In addition, MIX
publishes annual regional updates and topical analysis of the sector through the long-standing
Based on the book of Armendariz (2010) the microfinance revolution, begun with
independent initiatives in Latin America andSouth Asia starting in the 1970s, has so far allowed
65 million poor people aroundthe world to receive small loans without collateral, build up assets,
and buyinsurance. This comprehensive survey of microfinance seeks to bridge the gap inthe
According to Khan (2007), there are about three billion people, half of the world’s
population, living on the income of less than two dollars a day. Among these poor communities,
one child in five does not live to see his or her fifth birthday. One study in 2006 showed that the
ratio of the income between the 5% richest and 5% poorest of the population is 74 to 1 as
compared to the ratio in 1960, which was 30 to 1. To enhance international development, the
United Nations Organization (UNO) announced the millennium development goals, aimed to
eradicate poverty by 2015. In this regard, microfinance is the form of financial development that
has its primary aim to alleviate the poverty. Governments, donors and NGOs around the world
responded enthusiastically with plans and promised to work together towards the realization of
these goals. In the recognition of microfinance, the UNO celebrated the year 2005 as a year of
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Microfinance is a credit methodology, which employs effective collateral substitute for short-
term and working capital loans to micro-entrepreneurs. The level of a country’s poverty has long
been linked with measures of its economic development. Little consideration was given to the
social reorganization of the natural resources (e.g. empowerment vs. alienation of people,
The economies with positive growth rate of Gross National Product (GNP) were measured
by their poverty mitigation. This gratitude emphasized on the achievement of wealth and
technology as a path for development and assumed that improved lives for all would be the
natural consequence.
countries particularly in Asia have a long history of microfinance. During the eighteenth and
informal banking for the poor. Informal finance and self-help have been at the foundation of
microfinance in Europe. The early history of microfinance in Ireland can be traced back to 18th
century. It is a history of how self-help led to financial innovation, legal backing and conductive
regulation, and creating a mass microfinance movement. But the unpleasant regulations
prompted by commercial banking brought it down. The so-called Irish loan funds appeared in
early eighteenth as charities, initially financed from donated resources and offering interest free
loans. They were soon replaced by financial intermediation between savers and borrowers. Loans
were granted on short–term basis and installments were scheduled on weekly basis. To enforce
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In developing countries, micro and small enterprises (MSEs) comprise the largest part of
the industrial fabric and are among the most important development agents in society. MSEs
offer many millions of poor people around the world the possibility of earning money, training,
work experience and employment. However, empirical evidence shows that most small
enterprises never develop the business beyond a certain scale and only a small minority of them
manages to upgrade to the next level of productivity, income and employment (Berner / Gomez /
Knorringa 2008). The pioneering research of Mead suggests that across developed and
developing economies, most MSEs are stagnating with only a handful of them managing to grow
to more 20 employees. In Sierra Leone, Bangladesh, Jamaica, Honduras, Thailand and Egypt,
Liedholm and Mead (1987) found that only 1 per cent of enterprises with four workers or fewer
managed to upgrade into the next size category. In Kenya, Cotter (1996) found that enterprise
upgrading rates are either zero or so low that no policy intervention could remedy the situation.
These findings indicate the need for targeted policy interventions supported by empirical
evidence – especially to stimulate MSEs and harness the private sector’s potential to be engines
of economic growth in developing countries. Using the Philippines as a country case, this study
explores why only a few MSEs manage to grow to medium-size or large and why enterprise
growth remains elusive for most micro and small firms (Milagrosa, 2014)
According to Aldaba (2012) the Philippines has two operational definitions of small and
medium enterprises. Based on employment which is the most commonly used definition in the
country, the different size categories are classified as follows: Micro enterprises: 1-9 employees
Small enterprises: 10-99 employees Medium: 100-199 employees Large: 200 or more employees
In terms of the assets, SMEs are defined as follows: Micro enterprises: P3 million or less Small
enterprises: P3-15 million Medium: P15-100 million Large: P100 or more In terms of number of
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establishments; micro, small, and medium enterprises (MSMEs) dominate the economy and
account for almost 99.6% of the total number of establishments in 2008. With a share of about
92%, micro enterprises are more predominant than small and medium enterprises which account
for only 8% of the total number of establishments. Geographically, both micro and SMEs are
highly concentrated in the National Capital Region (NCR) and Calabarzon area.
Micro businesses in the Philippines can be defined according to the size of assets, size of
equity capital, and number of employees. A typical micro business is a business that employs
nine people or fewer, with assets of ₱3 million and below. In the Philippines, about 90 percent of
all the businesses are categorized as micro businesses. These consist of enterprises engaged in
corporation. Their total assets, inclusive of those arising from loans but exclusive of the land on
which the particular business entity’s office, plant and equipment are situated, have value of not
more than ₱3 million. Of all micro businesses, about 46 percent are involved in the wholesale,
retail and repair business; 27.6 percent are in the accommodations and food service; 13.5 percent
are in manufacturing; while 12.5 percent are engaged in other service categories (Abrugar,
2013).
According to Asian Development Bank the impact of the availability of program loans on
per capita income is shown to be positive and mildly significant. This is also true for per capita
total expenditure and per capita food expenditure. But it was also found that this impact is
regressive, that is negative or insignificant for poorer households and becomes only positive and
increasing with richer households. This negative or insignificant impact for poorer households
and positive impact for richer households provides some explanation of the mild significance of
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the coefficient for the total sample. It is worth mentioning that this is not the only study that
found a regressive impact. Coleman using data from Thailand qualified the earlier no significant
impact on consumption result in Coleman with the finding of a positive impact for the center
leaders which are also the richer segment of the membership and that the insignificant impact is
confined to poorer members. Hulme and Mosley using data from Indonesia, India, Bangladesh
and Sri Lanka, on the other hand, found positive impact on income on average but in addition
like Coleman also found larger impact for better-off members. Thus, the regressive result of this
study may not be entirely surprising but is certainly disturbing. This indicates that among poorer
borrowers the cost of and availability of program loans appears to be not sufficient to prod them
into selecting more productive activities that will not only pay the cost of borrowing but also
earn them some profit. One can also view this as the result of MFIs not screening projects
enough to have the desired results. This implies that attention to project selection must also be an
According to Medina (2012), the Magna Carta for micro, small and medium enterprises
the development of MSMEs. The government units such as DTI, the BangkoSentral, and the
Office of the President issued separate directives and/or memoranda to facilitate the
implementation of the Magna Carta. Magna Carta for MSMEs consists of Republic Act (77,
amended by R.A. 8289, and further amended by R.A. 9501. These important Pieces of
Legislation are directed towards the full development of entrepreneurship in the Philippines.
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According to the study of Ababiya (2013) the researcher examined the benefit cost ratio
of micro enterprise as related to financial flow and its management to measure the performance
and identified the factors that influence the performance of micro enterprise in Hosanna town.
All 174 micro enterprises from three sub towns of Hosanna were included in the study and key
informants from relevant government office were interviewed to collect necessary data on
enterprises performance and determinant factors. Descriptive analyses of the data were computed
to assess various characteristics of micro enterprises in the study area. According to the result
obtained from benefit cost ratio analysis 71.8% of enterprises found in the study area survived
whereas 28.2% failed. In addition, a regression model was used to identify the determinant
factors that affected the performance of the enterprises. The results of the regression analysis
showed that age of enterprises, age of operators, education level, number of employees, amount
of initial capital, entrepreneurial skill, experience of manager, access to training and access to
market were statistically significant at less than 1% significance level and had positive
contemporary development discourses. Many developing countries have adopted this strategy to
fight against poverty. In Nepal also, a micro-enterprise development program with the objectives
of increasing income and employment, and thereby reducing poverty, has been implemented
since 1998. Micro-enterprise development is particularly targeted to the households living below
the poverty line. Among the people living below that line, the program is more focused on rural
women, unemployed youth, and people from socially-excluded communities, besides confirming
the hypothesized association of many factors, also nullified several other hypotheses and
findings of previous studies, and explored the interesting association of some of the factors with
25
the performance of the microenterprise. The study observed an increase in the level and growth
of the measures of the microenterprise’s performance, such as employment, profit, and sales and
assets between BS 2068 (April 2011 - March 2012) and 2069 (April 2012 - March 2013).
However, a noticeable variation in the level and growth of employment, profit, sales and asset
growth among microenterprises was also observed. The study further revealed that entrepreneur-
related factors, particularly gender, educational attainment, managerial skills, the need for
achievement, the need for autonomy, creative tendency, internal locus of control, and managerial
foresight; enterprise related factors, particularly enterprise age, enterprise size and initial
social network, were among the key factors determining microenterprise performance in Nepal.
On the other hand, the age of the micro-entrepreneur, previous experience, calculated risk taking
traits, the enterprise sector, family environment, environmental dynamism, and environmental
heterogeneity did not appear to have significant effects on microenterprise performance. The
study also revealed the significant mediating effect of managerial foresight on microenterprise
performance. Managerial foresight appears to mediate the effects of educational attainment, need
for achievement, need for autonomy, enterprise size, initial financial constraint, environmental
hostility and social network on the performance of the microenterprise (Thapa, 2013).
Microfinance Industry
Frohberg (2016) state that microfinance has become very important in global poverty
reduction debates. The popular assumption is that enabling poor households access to credit
helps households begin micro entrepreneurship which would enable them improve their incomes
and eventually escape poverty. Evidence from research so far has been scanty, and many results
26
have been highly contested. The main objective of the thesis was to analyze the impact of
access to microfinance. The study is an experimental case of Makueni district where participants
in microfinance programmes and non participant households were studied over time; thus
yielding a rich pooled data for analysis. On integrating time dynamics in the analysis, the results
indicate a positive and significant impact of microfinance on household income. To this end the
thesis argues that there is a role of microfinance on the improvement of household incomes. The
thesis also re-asserts that providing affordable financial services to the rural population still
In the study of (Chester, 2014) analyzed and examined in an attempt to determine if loan
borrowers believed these programs were beneficial and provided a valuable service. Results from
this analysis reveal several concerns facing microfinance institutions and borrowers stemming
from issues of high interest rates, loans used for consumption spending, and multiple borrowing.
Findings from this study can be used to guide further policy decisions and regulations regarding
In the study of Berberg (2011) strives to examine how microfinance activities can be
successfully applied in the developed world. This is done through a field study in New York
City. Throughout interviews and observations with three of the largest actors in New York:
Acción USA, Grameen America and Project Enterprise, as well as interviews with their clients,
the lending processes and key characteristics of the organizations have been mapped.
Furthermore, the Federal Reserve Bank of New York has been interviewed on the general
opinion of microfinance in the US. Previous theory elaborates on some of the major challenges
27
with implementing microfinance activities in the developed world, such as lack of funding and
cultural differences hindering the lending processes to be carried out as they are in the
developing world. Henceforth, problems regarding regulation, awareness and outreach are
discussed. Throughout the observation of the institutions we can confirm that some of the
challenges brought up in theory actually are apparent. We do, however, question the criticism
towards the use of group based lending programs in the developed world. Our study does, in
contrast to previous research, imply that the concept does work as well in the US as it does in
developing countries.
On the other hand the thesis emphasizes that there is need to come up with innovative
microfinance institutions that are supportive of their own role in assets accumulation and wealth
creation for their clients. This will involve innovative targeting of potential clients, as well as
streamlined microfinance regulations to protect their clients. In particular the study cautions that
the ability of households to begin informal sole micro entrepreneurships should not be assumed
to be adequate for the improvement of household income. There is need to create a policy
framework to spur growth not only in the micro enterprises but also in the overall rural economy
that would lead to the creation of employment opportunities and an increment in the agricultural
output. This is quite a big task to accomplish and may require more than one particular policy
intervention. In essence this calls for both private (microfinance) and public partnerships to
create the environment where such poverty reduction objectives could be realized.
According to the study of Martinez (2016), challenges are always present in the money
lending business, thus, a strategy been formulated to address those challenges. Many business
28
shut down because some could not overcome the challenges, but some succeeded because of
their key principles of success. It is in this light that the researcher desired to undertake this study
with a view of to lend or not to lend. The research questions occurred as to what is the lived
experience of money lenders and how did them apply the key principles of success to their
money lending business. The study employing psychological in seven themes (always work on
text, facing challenges head on, giving before receiving, ideas turned actions, value of collecting
knowledge, recognizes the instinct motivational factors, knowing the importance of extrinsic
motivational factor) categorized into textural (what) and structural (how) description of the
phenomenon.
In the study of Guliman (2015) showed that college education increases the likelihood of
having a higher level of financial literacy relative to high school education. Based on the mean
percentage ratings of financial knowledge, this study found out that most of the owners of these
enterprises have low levels of financial knowledge in taxation, time value of money, financial
institutions and investment securities. Also, the financial skills of the respondents displayed low
mean percentage ratings in savings and record keeping yet planning and budgeting skills posted a
fair mean percentage rating. Thus, results showed that in general, these entrepreneurs have low
levels of total financial literacy based on the measurements used. Furthermore, the correlation
between financial knowledge and skills is positive yet very low. The findings have practical
relevance to MSMEs and policy makers to be able to determine the interventions necessary to
help the MSME sector. It is recommended that future studies be made to substantiate the results
29
Microcredit is applicable only to the enterprising poor. The application of microcredit to
other poverty groups who actually need subsidies and social safety nets would be a mistake.
Thus, the EDC sub-component should be reformulated and revitalized following the program
design of the Bangladesh Rural Advancement Committee (BRAC). Its graduated strategy for
helping the poor should be applied to the poverty pyramid by categorizing the WMCIP
beneficiaries into four poverty groups: (1) micro-enterprise operators or the less poor, (2)
enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most
vulnerable or the ultra-poor. The results further reveal that based on the poverty pyramid, the
credit program designs of the Credit Assistance Program for Program Beneficiaries Development
(CAP-PBD) and Quedan Rural Credit and Finance Corporation (QUEDANCOR) are readily
applicable to the credit needs and financial capabilities of the enterprising poor. Beyond
QUEDANCOR’s microcredit facility, the no enterprising poor may actually opt for financial
production activities. On the other hand, the beneficiaries and their “not-so-strong” organizations
that could not readily comply with the minimum credit standards should be provided with farm
production subsidies, capability-building services and social safety nets under a special poverty
alleviation project. This will enable them to pass minimum credit standards within a transition
In the study of Gamlanga (2011), the respondents status before the availment of micro –
financing was moderate level along all three aspect; Financial, Socio- economic and marketing.
On the other hand the status of the respondents after availment of the micro financing along with
the three aspect such as financial, socio-economic and marketing is average or satisfactory. They
also tested that there is a significant difference on the respondents before and after the availment
30
of micro financing. The problem encountered by the CCT- Binan clientele were high cost
financing and short credit terms. While the less serious problems were bureaucratic
government financing program, and collateral requirements. On the whole the problems
According to Alzate (2013) the respondents of hybrid rice, hybrid corn, and eggplant
production. Were more knowledgeable in terms of the policies implemented in availing of micro-
financing than the respondents of ampalaya production. The micro financing program increased
the beneficiaries’ annual average income, income per cropping season, and amount spent for
Likewise, their crop productivity improved with improved with 29.4 % increase in their
yield per cropping cycle. Policies imposed in availing of micro-financing catalyzed the
respondents’ adoption of technologies in producing hybrid rice, hybrid corn and eggplant.
However, these policies did not influence the respondents’ adoption of ampalaya production
technologies.
in the Philippines: survey and empirical analysis, both of which are combined in an attempt to
understand what determines entrepreneurial motivations and success in the Philippines. The
survey was conducted in order to study entrepreneurship development and motivations in the
Philippines and also to understand the challenges and sacrifices faced by Filipino entrepreneurs.
31
In particular, this survey is quite comprehensive in scope and comprised 202 questions. Aside
from data on the general characteristics of the business enterprise and the entrepreneur, the
survey also asks questions about important issues in the study of entrepreneurship such as
entrepreneurial intensity, sacrifice, motivation, business plans, the business' effect on the
entrepreneur's quality of life, the entrepreneur's personal beliefs and attitudes, and difficulties
and problems that the entrepreneur encountered at different stages of operating the business
enterprise. This study also presents an empirical analysis of the determinants of success by
Filipino small businesses. This analysis made use of the survey data and is based on the
estimation of a regression model using Ordinary Least Squares technique. Since the 1990s, there
has been a resurgence of interest on the role of small-scaled business enterprises or small and
medium enterprises (both will be referred to as "SMEs" hereafter) in national and international
economic and social development. This is consistent with the overall shift of development
strategies in many countries toward a more decentralized, even localized, approach. As such,
many scholars, practitioners, and institutions involved in economic development have begun to
recognize the important roles that smaller-scale business entities play in the economy and
society. More and more people are becoming convinced that these entities can be a very effective
means of achieving, not only economic progress, but social goals (e.g., a more equal income and
a greater appreciation for diversity in gender and race) as well. All of these suggest a greater
need to increase our understanding of the nature and capabilities of family businesses and SMEs
and the kinds of policies and incentive systems that would be appropriate, necessary, and
32
Small Medium Enterprises
Like those in other countries, SMEs in the Philippines make significant contributions to
the overall economy and the country's pursuit of economic development. Data show Filipino
SMEs to make up more than 99% of all businesses in the country, provide more than two-thirds
of the country's employment, and is responsible for almost one-third of the country's income
(Philippine Department of Trade and Industry, 2015). Given their economic importance (others
also highlight their social significance), Filipino SMEs are an interesting subject of study.
Consequently, one would expect to find numerous studies on them. This, however, is not the
case, most probably because of a number of issues that complicate their study. One of these
issues has to do with the different perspectives on different aspects related to SMEs. Depending
on which perspective the researcher uses as the primary source of insight and information, one
gets a very different picture. In the study of Filipino SMEs, at least 3 different perspectives could
In Philippines, government support to SME looks very good. The Barangay Micro
Business Enterprise (BMBE) under BMBE law of RA 9178 Act of 2002 was signed by President
Gloria Macapagal Arroyo on November 13, 2002, to encourage the formation and growth of
BMBE’s by granting them incentives and other benefits. The country recognizes that small
businesses are essential to the economic development of the country. Supporting the growth of
BMBEs will increase jobs, provide livelihood and a better quality of life for Filipinos. The Act
then aims to “integrate micro-enterprises in the informal sector into the mainstream of the
economy (Phil. Department of Trade & Industry, 2015). Registered BMBE’s may availed the
33
following incentives, Income tax exemption from income arising from the operations of the
enterprise; Exemption from the coverage of Minimum Wage Law (BMBE employees will still
receive the same social security and health care benefits as other employees); priority to special
credit window set up for the financing BMBEs and Technology transfer, production and
management training and marketingassistance programs for BMBE beneficiaries; reduce the
amount of local taxes, fees and charges imposed or exempt the BMBEs from local taxes, fees
and charges. Based on the BMBE law, business or activity is eligible to apply as BMBE if the
products, including agro-processing, as well as trading and services. It has a total assets of not
more than P3 million, including those arising from loans but not the land on which the plant and
equipment are located. The business or service provider, in connection with the exercise of his or
her profession, is not a professional duly licensed by the government after having passed a
government licensure examination, such as accountants, lawyers, doctors and the like. It is not a
branch, division or office of a large-scale enterprise and its policies and business modus operandi
are not determined by such enterprise or by persons who are not owners or employees of said
Cash Management
Ahmad (2015) emphasized in his paper that cash management including cash flow, sales,
and return of investment are important for all businesses to strengthen their financial
management and financial survival. Each business needs to have high level of cash management
practices to meet the business expectation. Therefore, this study explores the extent of cash
management practices applied in the micro and small businesses in four main states in Peninsular
34
Malaysia. Overall findings of this study showed that cash management practices in these states
are high. However, the results show that the internal control on cash management has very low
implementation level. Thus, the capital providers need to re-educate the entrepreneurs on the
importance of having good internal control on cash management in order to avoid any
manipulation, cash shortage and other financial issues. Besides that, the result of this study is
important to ensure the effectiveness of cash management in order to be able to support the
financial sustainability of the business. Small Medium Enterprises (SMEs) play an important role
in the economic growth, especially in the developed and developing countries (Ahmad, 2015).
However, despite the contributions of small businesses to the local economy, including fostering
the Gross Domestic Product (GDP), alleviating poverty, and creating jobs, SMEs worldwide are
highly prone to failure. This problem happened when the entrepreneurs have limitation in
handling the business from the financial aspect and the nonfinancial aspect. According to Abdul
and Ahmad (2013), the financial limitations in SMEs are that the business is unable to manage
the cash flow and unable to generate enough sales and revenue. In terms of the non-financial
aspect, the failed business has issue with service quality, owner experience, customer satisfaction
and competitors. Besides that, Aren and Sibindi (2013) revealed that the majority of SMEs failed
due to poor cash management. It is because there are inevitable links between small business
failures and poor or careless financial management (Drever & Hartcher, 2003). Moreover, only
certain SMEs prepare good cash flow, as others are unaware or unconvinced of the benefits of
accounting and financial reporting requirement for the purpose of control and also for decision-
making (UNCTD, 2000). The study is able to fill the gaps since there are limited literatures on
cash management in Malaysia. The issue of cash management practices only arises in other
countries for examples, a study by Alala, Deya and Busaka (2013) in Kenya and Uganda, a study
35
by Aren and Sibindi (2013) done in South African Retail Sector and a study by Gilbert, Nellson
and Nicholas (2013) in Northern Uganda. Therefore, the study aims to explore the current cash
management practices in micro and small businesses in Malaysia for the service sector. The
contribution of the study is at least twofold. First, the study provides some insights on cash
management practices in micro and small businesses. Second, the study could assist the
The paper proceeds as follows: section 2 reviews the literature review on cash management
practices. Section 3 describes the research method including the sample selection and instrument
used. Section 4 presents the results of the study, and the final section concludes the study and
Cash Flow
Cash management is the business strategy in managing cash for the purpose of
optimizing liquidity (Linert, 2009). Deb, Dey and Shil (2015) specifically defined cash
management as the managing of (i) cash flows into and out of the firm, (ii) cash flows within the
firm, and (iii) cash balances held by the firm at a point of time. Each business needs to have
proper cash management to achieve the targeted goals and objectives by enhancing their
allocation and planning in the cash. From that, a good cash management will ensure that the
business can achieve their main objectives in the long term period and plan for a good strategy.
Although cash management is a good and important practice, many of micro and small
businesses do not practice it (Jayabalan, Dorasamy, Roman & Ching; 2009; Sunday, 2011; Alala,
Deya & Busaha, 2013). According to Abanis, Sunday, Burani and Eliabu (2013), among the
serious issue in cash management practices is that some of the businesses do not have bank
account to track and control their business income and expenses. If they have the bank account,
36
the business would be able to reduce the tendency of cash shortage, set minimum cash balance
and have monthly reconciliation of cash book with the bank to monitor their cash. The business
also needs to have internal controls for cash management for example, sell their goods and
provide their services using cash. Good internal control also requires the separation of duties in
managing cash including the separation of the cashier personnel from the accounting duties.
Besides that, the business needs to appoint the person that has the skill and ability to do the
budgeting. Some businesses give the responsibility to do the budgeting to the owner or manager
who has self interest in the business. Nonetheless, the persons are that involved with the
budgeting need to avoid conflict of interest to ensure that they review the cash budget to identify
if the budget is prepared based on business needs. The cash management practices are essential
for every business to increase profitability, sustainability, and future planning. Cash management
practices also include cash budgets and cash flows. Cash management is important in describing
the inflow and the outflow of cash, which refers to the movement of cash in the receiving to
payment cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari,
2014) in order to maintain the profitability and sustainability of their businesses. Besides that,
poor cash management can also become challenging when it is employed to maintain the skill
and knowledge among employees. In addition, according to Evans (2012), cash flow
management helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor
in deficit. It can minimize the positive items and maximize the negative items that affect the cash
cycle. Besides that, cash management also helps in spotting potential cash flow gaps. In
particular, cash management serves as a reference tool for seeking funds from bankers, and in
for evaluating business because cash management focuses on the actual operation, eliminates
37
one-time expenses and non-cash charges, and indirectly, it will give a clear picture of what the
company is truly doing. Hence, efficient cash flow management system plays a vital role and
helps to demonstrate if an SME is profitable (Minnery, 2006). Moreover, proper cash flow
management can prevent a business from bankruptcy, and therefore, profitability and
sustainability of the business are ensured (Inc., 2013). In fact, proper and efficient management
of cash is imperative towards the growth of small businesses. Usually, the cash flow of a small
business could become a problem when the business deals with a number of customers who are
difficult to be tracked and when the business sells products due to higher demand compared to
the competitors (Inc., 2013). These problems can be avoided if cash flow is managed properly.
Internal Control
Muinde (2015) contended that the Small and Medium Enterprises (SMEs) play a vital
role in economic contribution, property alleviation and employment. However, SMEs faced a
Burani and Eliabu (2013), among the weaknesses that occur in micro enterprises in terms of cash
management is that, most owners do not have bank account to record their sales. This problem
occurred because they do not have experience in managing enterprise. This may cause the owner
unavailability of book account can minimize the ability of owner to monitor their cash flow and
manage the usage of their cash (“The importance of keeping on top of your business accounting
records”, 2015). Besides that, monthly reconciliation of cash book with the bank to monitor their
cash is important to each enterprise. From that, the owner may be aware if there is any cash
problem and would be able to improve their cash practices. In addition, internal control plays a
38
vital role in cash management practices. However, only some owners practice internal control
and are aware of its importance. Those enterprises that sell their goods or services by cash must
have proper internal control. In order to improve internal control, owner of enterprise may have
separation of duties in managing cash. Besides that, the other element of cash management
practices in the enterprise is the ability of the person that is responsible to prepare the budget.
Some enterprises give the responsibility to do the budgeting to the owner or the manager. Then,
the owner or manager needs to review the cash budget and identify if the budget is prepared
based on their needs. In addition, the internal control can help the owner to identify their
opportunities and strength of the enterprise (Jim, 2015). Moreover, Abanis et al. (2013)
concluded that the person that is responsible in preparing the budget is important because good
budget preparation may influence the practices of cash management in the enterprise. The
researches done in South Africa and Uganda proved that cash management practices in SMEs are
poor (Avika & Hari, 2014; Abanis et al., 2013). A number of small businesses are being
managed without appropriate strategy and with poor skills in cash management. The efficiency
of a business in managing cash may influence the growth of business operations. Failure to do so
can affect business operations, as sustenance of business operations can come to a halt. Marion
(2011) proved that out of five, three businesses failed within a short period of time - three years.
It shows that in order to be successful in business, entrepreneurs must possess good strategies
and ensure that they can achieve their targets. Besides that, according to Guptaa, Wilsonb,
Gregorioua and Healya (2014), evidences pertaining to SME financing strongly indicate that
firms which are unable to generate sufficient operating cash flow (OCF) are more susceptible to
bankruptcy. According to Gilbert, Nelson and Nicholas (2013), problems in cash management
practices occur when the management takes for granted the importance of managing cash. This
39
happens when the entrepreneur does not focus on cash management. This will directly affect
business operation. When businesses do not prepare cash management, they will be unaware if
there is any loss in the business. Then, when the businesses realize the loss and the need to
recover, loan is obtained from the bank. This will cause the winding up of the businesses as they
fail in improving their cash to cover the losses, and are unable to pay their loans.
well a firm can use assets from its primary mode of business to generate revenues. The term is
also used as a general measure of a firms overall financial health over a given period of time, and
can be used to compare similar firms across the same industry or compare industries or sectors in
aggregation. The most common measure of financial performance is ratios. A ratio is simply a
recommended measures for financial analysis that determine a firms financial performance are
grouped into five broad categories: liquidity, solvency, profitability, repayment capacity and
Liquidity refers to an enterprise ability to meet its short term ability to meet it’s short
term obligations as and when they fall due. They are used to assess the adequacy of a firm’s
working capital. The three basic measures are net working capital, current assets that are
financed from long term capital resources that do not require repayment in the short term,
implying that the portion is still available for repayment of short term debt. Current ratio
measures the dept paying ability of an enterprise. A high current ratio is assumed to indicate a
40
strong liquidity position while a low current ratio is assumed to indicate weak liquidity position.
Quick ratio on the other hand tests the dept paying ability of an enterprise without having to rely
on inventory and repayments (ormiston, 2007). The ratios is important to creditors, shareholders,
The review of related literature and studies has an implication on the present study. All
reviews cited were substantial because it were focused mainly on the impact and performance of
micro-finance in some selected local and international rural communities. In the literature, the
terms microcredit and microfinance are often used interchangeably, but it is important to
highlight the difference between them because both terms are often confused.
The aim of microfinance as cited byMilagrosa (2014) and Aldaba (2012) is not just about
providing capital to the poor to combat poverty on an individual level, it also has a role at an
institutional level. It seeks to create institutions that deliver financial services to the poor, who
are continuously ignored by the formal banking sector. Some literature states that the poor are
generally excluded from the financial services sector of the economy so MFIs have emerged to
address this market failure. By addressing this gap in the market in a financially sustainable
manner, an MFI can become part of the formal financial system of a country and so can access
capital markets to fund their lending portfolios, allowing them to dramatically increase the
Medina (2012) andBerberg (2011), cited that one of the most important aspects of microfinance
41
is savings mobilization, which is discussed in the theory part. Besides these, microfinance
methodology, solidarity, human development and liquidity are also discussed in the theoretical
framework.
Simon Wakaba (2013), Maria, florica and Catalina (2002), Ormiston, 2007 cited that in
financial performance, assets can be considered as primary source used to generater funds. Their
researches adhere to the concerns of the success criteria inlcuiding liquidity, solvency,
profitability, repayment capacity and financial efficiency as part of the successful business.
Moreover, inventory and repayments can or cannot be relied to the extent of a scuess business
micro-enterprises.
Ruane (2016), Dey and Shil (2015), Guliman (2015), (Moreno, 2011), Gamlanga (2011)
and Alzate (2013) cited that these are important to the present study because it talks about
microfinance and its contribution to the improvement and poverty alleviation for millions of the
poorest people of Bangladesh. Microfinance has a huge impact on the lives of millions of poor
people particularly women. Numerous scholars and NGOs have been working to take
microfinance within the reach of poor people, who are still not benefited by the conventional
financial system.
From the above review of related literature and studies, the following gaps were
determined:
42
2. There were no studies yet conducted on performance of micro-enterprises considering
In view of the gaps identified, the researcher focused on the performance of the micro-
43
Chapter 3
RESEARCH METHODOLOGY
This chapter presents the procedures adapted by the researchers to explain in details the
research design, sources of data, population of the study, instrumentation, and validation, data
gathering procedure and statistical treatment of data applied in order to come up with this study.
Research Design
The researcher utilized the descriptive method of research that describes the nature of the
situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al.,
2010). The descriptive method was used in this study. According to Calderon and Gonzales
(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process
of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices,
beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate
interpretation about such data with or without the aid of statistical methods. As they stated,
correlational research investigates a range of factors, including the nature of the relationship
Source of Data
The study had two sources of data; primary and secondary sources, the primary sources
of data were the owner of micro-enterprises availed micro-finance located in Balatan Camarines
Sur. Secondary sources of data were the books, thesis, journals, periodicals,magazines and
internet deemed necessary to gather the needed information for the study.
44
The targetpopulation of this study was the micro-enterprises in BalatanCamarines Sur.
There were fifty five (55) respondents were used by the researcher to provide accurate and valid
solutions to those mentioned problems. The targeted population relied on the owners of different
micro-enterprises. The researcher personally went to the locale of the study for the precise
conduct of the investigation. Total complete enumeration was used in the study.
The researcher utilized self-made questionnaire consisting of three parts. Part 1 focused
BalatanCamarines Sur.
Since the questionnaire was self-made, it was subjected to the face and content validity. It
was shown to the panel of experts in the field of specialization, in statistics and in research for
their comments and suggestions. After some modifications, it was showned to the adviser for
The researcher wrote a letter to the owners of micro enterprises. A letter to the
respondents was likewise composed. Both letters informed the addressees of the purpose of the
study and solicited their support to the undertaking while assuring them that all data generated
were kept in strict confidentiality. The researcher explained to the respondents the manner of
answering the survey questionnaire before the actual distribution was done.
45
Statistical Treatment of Data
2. Mean, used to determine the performance of the micro-enterprises that availed micro-
financing.
46
Chapter 4
This chapter deals with the gathered data that will analyzed and interpreted for the better
understanding of the study. The framework of the analysis and interpretation is guided by the
Table 1
Profile of the Micro-Enterprises
Profile Frequency Percentage
Form of Business
Single or Sole Proprietorship 37 67.3
Partnership 18 32.7
Corporation 0 0
Type of Business
Retail 43 78.2
Services 12 21.8
Manufacturing 0 0
Years of Operation
1-5 years 21 38.2
6-10 years 28 50.9
10 years above 6 10.9
Total Number of Respondents = 55
respondents, 37 or 67.3 percent had Single or Sole Proprietorship and 18 or 32.7 percent had
Partnership. As to the Type of Business out of 55 respondents, 43 or 78.2 percent had Retail and
12 or 21.8 percent had Services, and as to the Years of Operation out of 55 respondents, 28 or
50.9 percent had 6-10 years, 21 or 38.2 percent had 1-5 years and 6 or 10.9 percent had 10 years
abovein operations.The result shows that majority of the respondents were Single or Sole
47
The findings of the study support the claims and theory of Fauster (2014) which
emphasized that the impact of micro-finance institutions (MFIs) on small and medium scale
enterprises (SMEs) is still fraught with inconsistent results, with some concluding on positive
impacts while others reporting negative impacts. This paper therefore sets out to assess the
impact that the study-MFIs are making on their SMEs-client based on the forms of business,
types of business and the number of years in operations. The with and without approach, coupled
with a quasi-longitudinal approach was employed for the study.Data were gathered from the
study-MFIs’ documents and questionnaire administration. Simple percentage change was used as
correlation coefficient (r) and coefficient of determination were also used in the analyses, with
various hypotheses tests. It is concluded that the study-MFIs make positive impacts on the mean
sales revenues of their client – SMEs, with great differences between those of SAT and MTA
clients on the one hand and those of the control group on the other. A slight difference that exists
between the two study-MFIs was accounted for by differences in their management approaches.
A strong positive correlation exists between average sales revenue on one hand and micro loans,
level of education and training on the other affecting the types of business, forms of business and
48
2. Performance of the Micro-enterprise that Availed of Micro-financing
Table 2
had100,000 below and 3 or 5.5 percent had 500,001 – 1,000,000 and 1,000,000 above Annual
Sales respectively. As to Cash Flow out of 55 respondents,26 or 47.3 percent had 50,001-
100,000, 15 or 27.3 percent had 50,000 below, 9 or 16.4 percent had 100,001-150,000 and 5 or
9.1 percent had 150,001 above Annual Cash Flow. As to Liquidity out of 55 respondents, 24 or
43.6 percent had 1.51:1-3.0:1, 20 or 36.4 percent had 1.50:1 below and 11 or 20 percent had
49
3.01:1 above Annual Liquidity Ratio. As to the Return of Investment, 35 or 63.6 percent had 21
– 40, 11 or 20 percent had 41 above and 9 or 16.4 percent had 20 below Annual Return of
Investment (ROI). The results shows that majority of the respondents had Sales of 100,001 –
500,000 and Return of Investment of 21-40, and nearly half of the respondents had Cash Flow of
The findings support the theory of Cash Management by Ahmad (2015) which emphasized
that cash management including cash flow, sales, and return of investment are important for all
businesses to strengthen their financial management and financial survival. Each business needs
to have high level of cash management practices to meet the business expectation. Therefore, this
study explores the extent of cash management practices applied in the micro and small
businesses in four main states in Peninsular Malaysia. Overall findings of this study showed that
cash management practices in these states are high. However, the results show that the internal
control on cash management has very low implementation level. Thus, the capital providers need
to re-educate the entrepreneurs on the importance of having good internal control on cash
management in order to avoid any manipulation, cash shortage and other financial issues. Each
business needs to have proper cash management to achieve the targeted goals and objectives by
enhancing their allocation and planning in the cash. From that, a good cash management will
ensure that the business can achieve their main objectives in the long term period and plan for a
good strategy.
Table 3.1
Difference in the Performance of Micro-enterprises
50
When They Are Grouped According to Form of Business
As shown in the Table 3.1, for the difference in the micro-enterprises’ performance in
terms of sales, cash flow, liquidity and return of investment when the respondents are grouped
according to form of business, p values of 0.609, 0.057, 0.092 and 0.451 respectively were
obtained which were higher than the 0.05 level of significance. This shows that there is no
significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity
and return of investment when the respondents are grouped according to form of business. The
micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment is
Table 3.2
Difference in the Performance of Micro-enterprises
When They Are Grouped According to Type of Business
51
Sales X1 (Retail) = 229770.79 U = 140.500
X2 (Services) = 571585.67 Z = 2.395 0.017 Significant
As shown in table 3.2 , for the difference in the micro-enterprises’ performance in terms
of cash flow, liquidity and return of investment when the respondents are grouped according to
type of business, p values of 0.427, 0.206 and 0.359 respectively were obtained which were
higher than the 0.05 level of significance. This shows that there is no significant difference in
the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment
when the respondents are grouped according to type of business. The micro-enterprises’
performance in terms of cash flow, liquidity and return of investment is the same regardless of
type of business.
For the difference in the micro-enterprises’ performance in terms of sales when the
respondents are grouped according to type of business, a p value of 0.017 was obtained which
was lower than the 0.05 level of significance. This shows that there is significant difference in
the micro-enterprises’ performance in terms of sales when the respondents are grouped according
to type of business. The micro-enterprises in the services business has sales than those in the
retail business.
Table 3.3
Difference in the Performance of Micro-enterprises
52
When They Are Grouped According to Years of Operation
As shown in the Table 3.3, for the difference in the micro-enterprises’ performance in
terms of “sales”, “cash flow”, “liquidity” and “return of investment” when the respondents are
grouped according to years of operation, p values of 0.058, 0.143, 0.344 and 0.230 respectively
were obtained which were higher than the 0.05 level of significance. This shows that there is no
“liquidity” and “return of investment” when the respondents are grouped according to years of
operation. The micro-enterprises’ performance in terms of “sales”, “cash flow”, “liquidity” and
The findings of the study support also the theory of Cash management by Ahmad (2015)
inflow and the outflow of cash, which refers to the movement of cash in the receiving to payment
cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari, 2014) in
order to maintain the profitability and sustainability of their businesses. Besides that, poor cash
53
management can also become challenging when it is employed to maintain the skill and
knowledge among employees. In addition, according to Evans (2012), cash flow management
helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor in deficit. It
can minimize the positive items and maximize the negative items that affect the cash cycle.
Besides that, cash management also helps in spotting potential cash flow gaps. In particular, cash
management serves as a reference tool for seeking funds from bankers, and in enhancing
evaluating business because cash management focuses on the actual operation, eliminates one-
time expenses and non-cash charges, and indirectly, it will give a clear picture of what the
Table 4
Problems Encounted by Micro-enterprises
Problems Encountered Frequency Percentage Rank
Financial
Not enough cash to purchase raw materials,merchandise &
33 60 1
Supplies
Financial problem in procuring new equipment 6 10.91 2.5
Poor cash management that resulted to a multiple cash loan 6 10.91 2.5
No savings 4 7.27 4.5
Negative ROI 4 7.27 4.5
Profit was used for personal expenses 2 3.64 6
Marketing
There are months that we don’t have income due to calamities
1 1.82 5.5
like typhoon and even we are affected by mayon volcano eruption
None at the moment, theres only few barbershop here in Balatan 1 1.82 5.5
54
Competing with super malls and big grocery stores 12 1.82 3
Lots of competitors 22 40 1
Lack of marketing strategy 16 12.73 2
Lack of business ideas 3 5.45 4
Entrepreneural
Lackof training in handling people 13 23.64 2
Proper customer communication 5 9.09 5
Some farmers forget to pay their debts 2 3.64 6
Lack of idea & Strategy 10 18.18 3
Im not a risk taker; easily discourage 1 1.82 7.5
Lack of training in handling the business 14 25.45 1
Mahirap makipag sabayan sa malalaking kompanya 1 1.82 7.5
Limited knowledge on the new technology 9 16.36 4
Economic
High Tax rate 20 36.36 2
High price of fuel due to additional tax 3 5.45 3
High cost of sales that resulted to the increase in selling price 31 56.36 1
customers complain on our retail price 1 1.82 4
Social
Natural calamities 28 50.91 1
customers complian if you did not allow them to buy on credit 9 16.36 2
Customers that are hard to deal 5 9.09 4
Unsecured Facilities 4 7.27 5
None 1 1.82 6
Demanding clients/costumers 8 14.55 3
Total number of respondents = 55
problems encountered out of 55 respondents, 33 or 60 percent says they “don’t have enough cash
to purchase raw materials, merchandise and supplies”, 6 or 10.91 percent says that they are
having “financial problem in procuring new equipment” and poor cash management that resulted
to a multiple cash loan” respectively, 4 or 7.27 percent says that they “don’t have savings” and
had a “negative ROI” respectively while the remaining 2 or 3.64 percent says that their “profit
was used for personal expenses”. As to the Marketing problems encountered out of 55
respondents, 22 or 40 percent says they had “lots of competitors”, 16 or 29.09 percent says that
they had “lack of marketing strategy”, 12 or 21.82 says that they’re “competing with super malls
and big grocery stores” , 3 or 5.45 percent says that they had “lack of business ideas” and 1 or
1.82 percent says “there are months that we don’t have income due to calamities like typhoon
55
and even we are affected by Mayon Volcano eruption” and none at the moment, there’s only few
55 respondents, 14 or 25.45 percent says they had “lack of training in handling the business”, 13
or 23.64 percent says they had “lack of training in handling people” , 10 or 18.18 says that they
had “lack of idea and strategy” and Limited knowledge on the new technology respectively, 5 or
9.09 percent says that they had problems with “proper customer communication”, 2 or 3.64
percent says that “some farmers forgot to pay their debts” and 1 or 1.82 percent says that she’s
“not a risk taker as she got easily discouraged”. As to the Economic problems encountered out of
55 respondents, 31 or 56.36 percent says that “high cost of sales that resulted to the increase on
their selling price”, 20 or 36.36 percent says “high tax rate”, 3 or 5.45 percent says “high price of
fuel due to additional tax” and 1 or 1.82 percent says “customer complains on their retail price”.
calamities” , 9 or 16.36 percent says” customers complain if you did not allow them to buy on
“customers that are hard to deal”, 4 or 7.27 percent says “unsecured facilities” and 1 or 1.82
percent says “none”. The results shows the most common problems encounterd were,not enough
cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in
handling business, high cost of sales that resulted to the increase in selling price and natural
calamities.
56
Activity Objectives Time Persons Expected Budget Sources of Success
Frame Involved Outcomes Allocatio Fund Indicators
n
Rationale:
57
Meeting To conduct a May Micro- The Micro- 1,000 Aid and 95% of
with the meeting 2018 finance finance and pesos Donation Micro-
Micro- regarding the Institutions, government from finance,
finance proposed plan to Local officials of the Micro- Local
Institution address micro- Governmen municipality finance, Governme
s, Local finance status in t and will be Local nt, NGO’s
Governme Balatan, NGO’s informed about Governme attended
nt and Camarines Sur the plan and nt, NGO’s the
NGO’s ideas meeting
Planning To plan May Micro- The letter of 500 Aid and 95% of the
for the regarding the 2018 finance request will be pesos Donation plans were
various activities to be Institutions, rendered from finalized
activities done in Local intended for Micro-
and addressing Governmen the activities of finance,
program micro-finance t and micro-finance Local
to be done activities in the NGO’s Governme
Municipality of nt, NGO’s
Balatan,
Camarines Sur
Financial Develop a May – Micro- Comprehensiv 1,000 Aid and 97% of the
Literacy comprehensive June finance e Internal pesos Donation comprehen
internal manual 2018 Institutions, Manual to from sive
with procedures Local support client’s Micro- internal
to better educate Governmen awareness finance, manual
and equip the t and Local were
target market NGO’s Governme drafted
with much- nt, NGO’s and ready
needed for
information and reviews
tools to reduce
over-
indebtedness.
Build Develop the May – Local Development 2,000 Donation 95% of
Capacity association’s June Micro- of the pesos from the building
of the internal policies 2018 finance association’s Associatio capacity
Local and procedures Association strategic and n were
Micro- to support its business plan strengthen
finance role as a self- covering its and
Associatio regulatory body activities over enabled.
n and participate the next 5
actively in the years to
activities and support the
meetings of the revised policy
Local Micro- framework.
finance
Association.
Microfina Establishment June Local Development 1,000 Aid from 95% of
nce of and 2018 Micro- of the proper pesos Local supervisor
Legislatio participation in finance legislation, Micro- y and
n a working group Association either in the finance internal
of sector form of a Associatio capacity
representatives specialized law n were
to inform the or regulations, established
process and to define and
ensure that the rationalize
resulting rules activities in the
58
and regulations sector.
promote rather
than hinder the
development of
the
microfinance
sector.
Social Standardize and June Micro- Had 1,000 Aid from 95% of the
Performan increase the 2018 finance undertaken pesos Micro- survey
ce market Institutions, impact study finance were
Monitorin research/client Local on clients to Institution launched
g surveys to Governmen measure the s, Local and social
improve and t, NGO’s, sectors Governme performan
expand the Association capacity, nt, NGO’s, ce
disbursement of s, and success/ failure Associatio indicators
the industry clients reasons. ns, and were
services and clients introduced
resources that .
have the highest
beneficial
impact on the
standard of
living for the
poor and
unemployed
population.
Promote Develop new June - Micro- Development 500 Aid from 97% had
New products that July finance and hand out pesos Micro- applied a
Product will increase 2018 Institutions, customer finance market
Developm depth and Local satisfaction Institution survey
ent breadth of Governmen surveys s, Local covering
outreach (i.e. t, NGO’s, regarding Governme the
home Association current product nt, NGO’s, economica
improvement, s, and portfolio and Associatio l sectors
education, clients prospective ns, and and
environmental products and clients project
conservation, services. characters
etc.) and work in our
to apply the branches
necessary areas.
surveys and
market studies
in order to
provide our
clients with
various products
matching their
growing needs
Explore Adapt the latest June – Micro- Diversified 3,000 Aid from 95% had
Innovative technologies to July finance mode of client pesos Micro- established
Delivery serve the 2018 Institutions, contact and finance joint
Channels microfinance Local loan payment Institution programs
target market Governmen to include the s, Local with
(i.e. mobile t, NGO’s, more Governme reputable
banking, Association innovative nt, NGO’s, developme
computers and s, and services such Associatio nt entities.
59
the internet to clients as mobile ns, and
support banking; in clients
education, etc.). order to
promote time
and fiscal
efficiency for
both client and
company.
Support to Launch the July Micro- Well 1,000 Aid from 97% of the
MFI process of 2018 finance Transformed pesos Micro- MFI were
transforma transformation Institutions, Micro-finance finance transforme
tion into a for profit Local Institutions Institution d and
company. Governmen s, Local developed
t, NGO’s, Governme
Association nt, NGO’s,
s, and Associatio
clients ns, and
clients
Strengthen Monitor and August Micro- Strengthened 3,000 Aid from 95% of the
ing maintain 2018 finance program pesos Micro- operations
operations institutional best Institutions, governance finance and
and practices and Local with Institution governanc
governanc improve Governmen establishment s, Local e practices
e practices institutional t, NGO’s, of independent Governme were
efficiency and Association audit nt, NGO’s, adhered
productivity to s, and committees, Associatio and
reduce clients ALCO ns, and strengthen
operational committees, clients
costs Board meeting
structures etc.
Chapter 5
This chapter presents the summary of findings, conclusion drawn and the
recommendations made by the researcher.This study was based on the results of the data
The researcher utilized the descriptive method of research that describes the nature of the
situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al.,
2010). The descriptive method was used in this study. According to Calderon and Gonzales
60
(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process
of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices,
beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate
interpretation about such data with or without the aid of statistical methods. As they stated,
correlational research investigates a range of factors, including the nature of the relationship
2.1. Sales
2.3. Liquidity
61
Summary of Findings
The finding of the study were arranged according to the statement of the problem:
1. Profile of Micro-enterprises
The findings shows the majority of the respondents were Single or Sole Proprietorship, Retail
and 6-10 years of Operations.
2. Performance of Micro-enterprises
The findings shows the majority of the respondents had sales of 100,001 – 500,000 and Return of
Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 –
The findings shows p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which
were higher than the 0.05 level of significance. This shows that there is no significant difference
in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of
The findings shows p values of 0.427, 0.206 and 0.359 respectively were obtained which were
higher than the 0.05 level of significance. This shows that there is no significant difference in the
micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the
respondents are grouped according to type of business. Meanwhile, p value of 0.017 was obtained
which was lower than the 0.05 level of significance. This shows that there is significant
62
difference in the micro-enterprises’ performance in terms of sales when the respondents are
years of operations
The findings shows p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained
which were higher than the 0.05 level of significance. This shows that there is no
liquidity and return of investment when the respondents are grouped according to years
of operation.
The findings shows the most common problems encounterd were, not enough cash to
purchase raw materials, merchandise and supplies, lots of competitors, lack of training in
handling business, high cost of sales that resulted to the increase in selling price and
natural calamities.
Conclusion
In the light of the above findings of the study, the following conclusions were derived:
1. The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of
Operations.
63
2. The majority of the respondents had sales of 100,001 – 500,000 and Return of Investment
(ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 – 100,000 and
3. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of
investment is the same regardless of form of business.
4. The micro-enterprises performance in terms of cash flow, liquidity and return of investment
is the same regardless of type of business. Meanwhile, the micro-enterprises in the services
5. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of
6. The most common problemsencountered were, not enough cash to purchase raw materials,
merchandise and supplies, lots of competitors, lack of training in handling business, high cost
of sales that resulted to the increase in selling price and natural calamities
7. There is a need to comprehensively implement the proposed action plan to enhance the
Recommendation
In the light of the findings and conclusions, this are offered as recommendation for
possible actions:
1. Training and knowledge dissemination is the need of the hour and microfinance
64
3. Implementing entrepreneurial ideas in microenterprise bring more profit and productive
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