BIBLIOGRAPHY NALICAO, MICHELLE T....
BIBLIOGRAPHY
NALICAO, MICHELLE T. APRIL, 2013. Assessment on the Loan Operation of
Akmet Farmers Association Inc. in Akmet, Bulalacao, Mankayan, Benguet. Benguet State
University, La Trinidad, Benguet.
Adviser: Evangeline B. Cungihan, MSc.
ABSTRACT
This study was done to find out the types of loans offered by the Akmet Farmers
Association Inc.; assess the status of their loan operation, determine the number of
borrowers and the number of borrowers paying regularly, the kinds of loan availed by the
borrowers and find out the problems encountered by the association and members and get
the suggestions of the borrowers on how to solve the problem.
One hundred twenty borrowers were taken as respondents of the study. The results
of the study showed that the amount of loan released by the association had been increasing
from 2004 to 2012. The number of borrowers had been increasing and the number of
delinquent borrowers had been increasing too. As of 2012, the amount of delinquency was
over one million pesos. There were three kinds of loan offered by the association; the
agricultural loan, emergency loan, and commercial loan. Most of the borrowers had been
availing the agricultural loan. The problems encountered by the association was loan
delinquency and inadequate collaterals offered by the borrowers. The problems
encountered by the borrowers were the following: delayed approval of loans and delayed
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
release, limited sources for loan payment, and the short duration for paying the loan.
Majority however did not meet any problem.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
INTRODUCTION
Rationale
Akmet Farmers Association Inc. was organized through the efforts of Mr. and Mrs.
Calancio Tanacio together with their children to assist the farmers particularly their
relatives in sitio Ca-ew, Bulalacao, Mankayan, Benguet. The association started with 150
members who are related to the Tanacio family either by affinity or consanguinity. The
initial capital was P250, 000, provided by the Tanacio family. The association was
registered with the Securities and Exchange Commission (SEC) in 2004 with registration
no. CN200429057.
The organizer used the name of their place or “purok” as the name of their association
which is Akmet. The association has four main purposes for their incorporation, namely:
concern on the economic welfare of all members and neighborhood; strengthen
brotherhood, unity, and cooperation among the members-relatives and the residents of
Akmet and Liwang and if possible to the entire barangay; be recognized and be honored
to help the barangay officials in promoting brighter and progressive future development of
their community; and conduct microfinance operation pursuant to Republic Act no. 8425
also known as the “Social Reform Act.
The association has two services: lending and savings. There are also two types of savings:
private deposit and association deposit. For private deposits, the depositor is given a
passbook while for the association deposit the depositor is only given a receipt of the
amount deposited. In addition, private deposits can be withdrawn anytime and this will
only earn interest (3% per month) when it is given out as loan. The association deposit
earns three percent (3%) per month (assured) but can only be withdrawn after five years.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
All members have the option to choose either Private deposit account or Association money
account. Collections from savings are given out as loans to members and non-members as
well.
In terms of lending, association deposit or money is given priority for lending. Private
deposits are only loaned out if all the association money is already given out as loan. Since
Private deposit account only earns interest when it is loaned out what the association does
is to loan it on a first come first served basis to avoid conflict for those who deposit in this
account. In case nobody borrows from this account the Association will inform the private
depositor to get his money back. In some case, if there are borrower and if the private
depositor need his money but the borrower did not yet pay his loans; the association will
borrow or get the money of others in the said account.
Statement of the Problem
This study tried to seek answers to the following problems:
1. What are the kinds of Loans offered and the loan policies of Akmet
Farmers Association Inc.?
2. What is the status of loan operation of Akmet Farmers Association Inc.?
3. How many of the members are availing?
4. How many are paying their loan regularly?
5. What are the types of loans availed?
6. What are the problems encountered by the association and members and
the possible Solution?
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Objective of the Study
The objectives of the study were the following:
1. To determine the kinds of Loans offered and the loan policies of Akmet
Farmers Association Inc.;
2. To determine the status of loan operation of Akmet Farmers Association
Inc.;
3. To determine the number of members availing loan;
4. To determine the number of member paying their loan regularly;
5. To determine the kind of loan availed; and
6. To determine the problems encountered by the association and members
and the possible solution.
Importance of the Study
The result of the study would help the members and non-members of Akmet Farmers
Association Inc. to know the status of their association and also help them improve their
loan operation. Result would serve as a document to Akmet Farmers Association Inc. and
a guide to the officers and management staff to strengthen their loan operation. It can also
be a source of information for further research on other related studies.
Scope and Delimitation of the Study
This study concentrated on finding out the types of loan they offered and the loan policies,
the status of the loan operation, number of members availing the loan, members who are
paying regularly and the problems they encountered.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
REVIEW OF LITERATURE
Association Defined
Association is a group or organization showing the same interest who wishes to be
affiliated with each other. This affiliation may be formal organized or loosely structured,
world-wild in a space to be a single building. An association is composed of people who
join together in an organized manner to pursue a common interest. Generally, this group
has a formal structure. There were some kinds of agreement that members involves: one-
some types of interaction, second- a sense of belonging or membership, three-shared
interest on values and lastly a structure (Suan, 2008).
Incorporated Association
Incorporation is a voluntary, simple and inexpensive means of establishing a legal
entity, separate from the individual members. It is particularly suitable for small,
community-based groups. Incorporated Associations are not profit organizations. Any
profits made should be kept by the association and should not be used by members for
personal gain (http://www.ocba.sa.gov.au, 2011).
Importance of Loans
ADB (1990) as cited by Zamora (2006) the use of credit in the broad sense of an
exchange of current for future recourses is probably as old as organized society. It can
promote economic growth and contribution to nation wealth. By this, a business firm may
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
borrow to put loan proceeds to work in an income producing assets which are expected to
earn, in due course, more than the amount borrowed.
Loan Requirement
In granting loan, Decoyna (2006) suggested to consider the borrower’s background through
credit investigation and background investigation (CIBI) which focuses on the character,
capacity, collateral and condition of the borrowers and the capacity of the co-maker.
Problems Encountered on Loan
According to Dequit (2003), in the loaning process, people in the rural areas hardly
have any access to institutionalize credit facilities to reasonable term. The cover risk of
loans practically deprives the small farmers of the service of the usual credit system.
Loan Payment
Brazil (2002) as cited by Decoyna (2006), payment in law is the discharge of a legal
obligation by the delivery of money or whatever. The creditor in lieu of money accepted
should be made at exact time and place agreed upon or implied by the law. It must be made
to proper party either to the person to whom the debt id due or his legal representative.
Factors Affecting Loan Repayment Delinquency
Taganas (1979) as cited by Lab-isen (2006) found out in her study that the failure
of farmers to pay loan on time at maturity was caused by diversion of loan to non-farm
activities. This was due to late release of the loan, which motivated them to divert it to
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
other than the intended purpose. This condition credits in them the attitude of spending
loaned money from the bank elsewhere. As a result, nothing was used on the intended
purpose. This further resulted to the extent of selling house, land or lots just to augment the
amount needed for the land preparation and expenditures in one cropping seasons. Other
sold their house to pay their debt when the collateral used was forfeited.
Brazil (2006) stated that most farmers are incapable of paying their loans for the
reason that there is a low rate of production, lack of market and low level of capacity among
members. The study found out that this was due to improper farm management, which
means that the farmers did not use high, yielding seeds, did not follow the required fertilizer
and lack of irrigation facilities.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
METHODOLOGY
Locale and Time of the Study
The Municipality of Mankayan, Benguet have 12 barangays. The areas covered by the
study were: Balili, Bedbed, Bulalacao, Cabiten, Colalo, Guinaoang, Paco, Poblacion,
Sapid, Suyoc, Tabio, and Taneg.
Respondents of the Study
The respondents of the study were 120 borrowers of the Akmet Association Inc. The 120
borrowers were equally distributed from the 12 barangays covered by the association.
Data Collection
The data were gathered with the aid of survey questionnaire. The questionnaires were given
personally to the respondents by the researcher. For the respondent that could not read and
write, the researcher interviewed them.
Data Gathered
The data gathered included information about the status of the loan operation of the
association such as; number of members availing the loan, kinds of loan availed, and the
repayment status, repayment practices and problems met by the borrowers in their
repayment.
Data Analysis
The data was analyzed and interpreted according to the objectives of the study
using descriptive analysis like frequency and percentage.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
RESULTS AND DISCUSSION
Loan Policies of the Association
There were three (3) kinds of loans offered by the association. Agricultural loan,
emergency loan, and the commercial loan. Borrowers of any kind of loan may either be
members of the association or non-members. As to their qualification; they must be of legal
age (18 – 60 years old), have titled collateral with no encumbrance, and have no record of
bad debts. The policy of the association on term of loan is semi-annual and the method of
collection is to require all borrowers to personally pay their loan installments at the office
of the association. In case a borrower fails to pay his or her loan the association reminds
the borrower through a letter. If it is past due, the borrower is required to pay at least the
interest due in order to lessen their debts. With regards to foreclosure of collateral the
association can only foreclose the collateral when the amount of the loan (principal plus
interest) is equal to the value of the collateral. Their policy on interest is add-on.
Amount of Loan Released and Amount Delinquent
Table 1 shows that amount of loan released had been increasing every year from only P450,
050 in 2004 to P5, 267,101 in 2012. This increment was due to the increasing number of
borrowers and the higher amount of loan borr5owed by each borrower. The amount of
delinquent loan had also been increasing for the same period. The amount of loan released
per year had been increasing at an average rate of 36% and the delinquent amount had been
increasing also by the same rate.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Table 1. Yearly loan releases and delinquent amount (in pesos)
YEAR
AMOUNT RELEASED
AMOUNT DELINQUENT
2004
450,050
162,018
2005
612,068
220,344
2006
832,412
299,668
2007
1,132,412
407,548
2008
1,539,628
554,267
2009
2,093,895
753,802
2010
2,847,697
1,025,171
2011
3,872,868
1,394,233
2012
5,267,101
-
Average Rate of Increase
36%
36%
Number of Borrowers and Number of Borrowers
Paying Regularly
Table 2 presents the number of borrowers per year by type of loan and the number
of borrowers who had been paying regularly. The result shows that the number of
borrowers had been increasing every year especially for agricultural loan. This implies that
an increasing number of farmers in Akmet are financing their farm operations from
borrowings. According to the respondents their emergency loans are sometimes used also
to finance their farm operation. The result also shows that the number of borrowers paying
regularly had been decreasing every year for both agricultural loan and emergency loan.
This explains the increasing amount of delinquency.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
In the case of the commercial loan the number of borrowers had been increasing
also but the number of borrowers was fewer relative to agricultural and emergency loans.
This is because this type of loan can only be availed by those who have business. The
finding also shows that almost all the borrowers of the commercial loan had been paying
regularly every year except for 2006, 2010 and 2012.
Table 2. Numbers of borrowers and numbers of borrowers paying regularly from 2004-
2012
LOAN AVAILED
2004 2005 2006 2007 2008 2009 2010 2011 2012
Agricultural loan
No. of borrowers 23
34
46
63
86
116
158 215
293
No. paying reg.
20
29
39
60
83
114
150
200
287
% delinquent
13
14.7 15
4.8
3.5
2
5
7
2
Emergency loan
No. of borrowers 15
20
28
38
51
70
95
129
176
No. paying reg.
14
20
27
33
49
67
90
127
170
% delinquent
6.7
0
3.6
13
4
4
5.2
2
3
Commercial loan
No. of borrowers 5
7
9
13
17
23
32
43
59
No. paying reg.
5
7
7
13
17
23
30
43
56
% delinquent
0
0
22
0
0
0
6
0
5
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Problems Encountered by the Association
The problems encountered by the association in its operation were the following:
inadequate collateral offered and loan delinquency. The association encountered many
cases of borrowers who apply for a loan which is not sufficiently covered by their collateral.
In these cases, they have to reduce the amount of loan which can be covered by their
collateral.
In the case of loan delinquency, the management observed that the reasons why
borrowers cannot pay their debts is because they do not know how plan their production
period that usually result to too much supply of the same kind of vegetables which cause
the price to be low. The association is giving three months grace period to delinquent
borrowers to settle their debts. If still they could not pay, they have to sell their collaterals
through bidding.
Profile of the Borrower Respondents
Table 3 presents the profile of the borrowers in terms of membership to the
association, gender, civil status, educational attainment, and occupation. Most of the
respondents (89%) were members while 11% were not members of the association. This
finding shows that the association is giving out loans to non-members but is residing in the
place where the association is operating.
The finding also shows that many of the borrowers from the association were
female and most of them were married. As to their educational background, 12.5% were
elementary graduate, 25% high school graduate, 20.8% college graduate, and 25% were
college undergraduate. Ten percent of the respondents did not indicate their educational
attainment.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
As to the occupation of the respondents majority (52%) were engaged in farming,
13% were self-employed managing their own small businesses. Two of them were teaching
while 32.5% did not indicate their occupation.
Table 3. Profile of the respondents
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Membership
Member
107
89.20
Non-member
13
10.80
TOTAL
120
100.00
Gender
Male
40
33.30
Female
57
47.50
Missing
23
19.20
TOTAL
120
100.00
Civil status
Single
2
1.70
Married
118
98.30
TOTAL
120
100.00
Educational background
Elementary graduate
15
12.50
Secondary graduate
30
25.00
College graduate
25
20.80
College level
30
25.00
Vocational
8
6.70
Missing
12
10.00
TOTAL
120
100.00
Occupation
Farming
63
52.20
Self-employed
16
13.30
Teaching
2
1.70
Missing
39
32.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Types of Loan Availed and Terms of Payment
Table 4 shows that most of the respondents availed of agricultural loan (75%), only
9% for emergency loan and about 16% availed of commercial loan. As found earlier,
majority of the respondents were farmers so this explains why majority of them availed of
the agricultural loan. This is also consistent with the objective of the association which is
to provide financial assistance to farmers who are relatives of the Tanacio family, the
founder of the association.
The same table presents that most of the borrowers ( 91.7%) availed of the medium
term loan and only 2.5% availed of the long-term loan. There were 5.8% that availed of
the short term loan.
Table 4. Types of loan and terms of payment
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Types of loan
Agricultural loan
90
75.00
Emergency loan
11
9.20
Commercial loan
19
15.80
TOTAL
120
100.00
Terms of loan
Short
7
5.80
Medium
110
91.70
Long
3
2.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Loan Repayment Practices of Borrowers
Table 5 presents how the borrowers pay their loan from the association. These
practices include how payment is made, mode of payment, term of payment, need for
reminder letter, and paying before due date. The table also includes the perceptions of the
respondents whether the duration for paying the loan is long enough or not.
How payment made and mode of payment. Results show that all the borrowers
personally go to the office of the association to pay their loan. This finding validates the
claim of the manager that their policy on loan collection is to require all their borrowers to
personally pay at the office of the association. The policy of the association on mode of
payment is installment basis and one hundred percent of the respondents were paying on
installment.
Terms of payment. The policy of the association regarding term of payment is semi-
annual. However, the finding shows that some of the borrowers were paying on monthly
basis (8.3%) and quarterly (5.8%). Their reason for doing so is to lessen the amount of
interest and it is easier to pay if the large amount is divided into smaller amounts. Most of
the respondents (83.4%) were paying their loans semi-annually. There were about 3%
paying their loans annually.
Reminder letter. All the respondents received reminder letters before the due date
of their loan. This finding confirms the policy of giving reminder letters to the borrowers
to make them aware of their obligations.
Paying before maturity date. The finding shows that only 45% of the respondents
were paying their loans before maturity date while majorities (55%) were either paying
their loans at maturity date or after maturity date.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Perception on the time of paying. Majority ( 58.3%) of the respondents said the
time for paying the loan is long enough for them while 41.7% perceived that the duration
of paying the loan is short or not enough for them to save the amount for payment.
Table 5. Practices for repayment
PARTICLARS
FREQUENCY
PERCENTAGE (%)
How Payment Made
Through the collector
0
0.00
Personally go to the office
12
100.00
TOTAL
120
100.00
Mode of payment
Full cash
0
0.00
Installment
120
100.00
TOTAL
120
100.00
Terms of payment
Monthly
10
8.30
Quarterly
7
5.80
Annually
3
2.50
Semi-annually
100
83.40
TOTAL
120
100.00
Reminding of loans
Yes
120
100.00
No
0
0.00
TOTAL
120
100.00
Response of loan repayment
Long enough
70
58.30
Not enough
50
41.70
Total
120
100.00
Pay before maturity date
Yes
54
45.00
No
66
55.00
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Reasons for not Paying Loan on Time
Table 6 presents several reasons mentioned by the respondents why they were not
able to pay their loans on time. Fifteen percent pointed to the short time for paying, 35.8%
mentioned low production, 25% low market price, 6.7% unsuccessful business because
their customers did not pay their debts, and 17.5% bankruptcy of their operation. Some
said that their farm operation was bankrupt because of calamity, some used their loan for
allowance of their children thus they did not have enough capital for operation.
In addition, the table also presents the sources for loan repayment by the
respondents. It can be noted that many of the respondents (45.8%) have to borrow money
inorder to pay their loan from the association. This is because their businesses were
bankrupt. About fourteen percent used their income from business to pay their loan, 7.5%
used their salaries, and 32.5% from sales of crops.
Table 6. Reasons for not paying on time and sources for payment
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Reasons
Loan term is short
18
15.00
Low production
43
35.80
Low market price
30
25.00
Unsuccessful business
8
6.70
Bankruptcy
21
17.50
TOTAL
120
100.00
Sources of repayment
Income from business
17
14.20
Borrowing from others
55
45.80
Salaries
9
7.50
Sales from crops
39
32.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Problems Encountered by the Borrowers on Borrowing
The problems encountered are grouped into; problems on loan application,
problems on loan release, and other problems (Table. 7).
Loan application. Problems on loan application identified by the respondents were
as follows: delayed approval (12.5%), many requirements (8.3%), limited funds (9.2%),
and first-come-first-served basis (8.3). Delayed approval of loan is a problem to the
borrowers because the loan cannot be released at the time it is badly needed. According to
the manager of the association approval of loans are delayed when the requirements are
incomplete specially the value of the collateral. Some borrowers apply for a loan which is
higher than the value of their collateral thus approval is delayed until the borrower adds
more collateral or the amount to be borrowed is reduced. The other problems are
interrelated with one another like for instance the first-come-first-served is done because
funds for release are limited therefore loans cannot be approved and release
simultaneously. The finding however shows that majority of the respondents did not meet
any problem on loan application.
Loan release. Most of the respondents (87.5%) mentioned that they did not
encounter any problem during the release of their loan. Only a few encountered problem
like delayed release with 4.2% and first-come-first served with 8.3%.
Other problems. As shown in Table 7, many of the respondents (46.7%) did not
have problem; 10.8% for short duration for paying, 5% for high interest, 13.3% for amount
to be borrowed are based on collateral, 20% for no source of fund to pay the loan, and 4.2%
on second priority for release of loan. These respondents mentioned this because they are
not members of the association so when funds are limited they are second priority for
release.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Table 7. Problems encountered by the borrowers on borrowing
PARTICULARS
FREQUENCY
PERCENTAGE (%)
LOAN APPLICATION
Delayed approval
15
12.50
Many requirements
10
8.30
Limitation of funds
11
9.20
First come first serve
10
8.30
No problem
74
61.70
TOTAL
120
100.00
Loan release
Delayed release
5
4.20
First come first serve
10
8.30
No problem
105
87.50
TOTAL
120
100.00
Other problem
Short duration for payment
13
10.80
High interest rate
6
5.00
Amount to be borrowed
based on collateral
16
13.30
Sources for repayment
24
20.00
Non-members are second priority
5
4.20
No problem
56
46.70
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Solutions and Suggestions to Solve the
Problems on Borrowing
Table 8 presents the solutions used by the respondents to solve their problems and
also their suggestions so that the same problem will not be encountered again in the future.
About twenty nine percent borrowed from other lenders when approval of their loan is
delayed while 16.7% suggested loan applications should be approved on time.
Table 8. Suggested solutions to the problems on borrowing
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Loan application
On time approval
20
16.70
Borrowing from others
35
29.10
No answer
65
54.20
TOTAL
120
100.00
Loan release
On time release
10
8.30
Early application
23
19.20
No answer
87
72.50
TOTAL
120
100.00
Other problem
Borrowing from others
30
25.00
Plant again
60
50.00
No answer
30
20.00
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted to assess the lending operation of AKMET Farmers
Association in Akmet , Bulalacao, Mankayan, Benguet. The objectives of the study were
as follows: 1) to determine the kinds of loan offered and loan policy of the association, 2)
to determine the status of loan operation of the association, 3) to determine the number of
members availing loan, 4) to determine the number of members paying regularly, 5) to
determine the kind of loan availed, and 6) to find out the problems encountered by the
association and the members related to loan of the association.
The data was collected with the use of survey questionnaire and interview. The
interview was done by the researcher at the municipality of Mankayan, Benguet. The data
was analyzed using descriptive analysis like frequency and percentage.
The study found out that the association is offering three types of loans; the
agricultural loan, emergency loan and commercial loan. The association is currently
lending to members as well as non-members of the association. Most of the borrowers
however were members and very few were non-members. The number of borrowers had
been increasing every year from 2000 to 2012. The amount of loan released had been
increasing also for the same period. As the number of borrowers was increasing per year,
the delinquent amount was also increasing especially on the agricultural loan and the
emergency loan. The policies of the association on loan are the following: borrowers must
have collateral and the value of the collateral must be higher the amount of loan applied
for, loans are to be paid on semi-annual basis and borrowers are required to pay personally
at the office of the association. The association sends letter of reminder to the borrowers
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
before the due date. In cases where the borrower cannot pay his/her loan, the association
allows them to pay the interest due and pay the principal on installment. Inadequate
collaterals and loan delinquency were the problems met by the association.
Most of the respondents were members, female, married, and had formal education
were many of them reached college level. A great majority were farmers. The study found
that all the borrowers were following the policies of the association on loan application,
loan release, and loan repayment. Most of the borrowers cannot pay their loan before
maturity date. The reasons are: loan term is short, low production, low market price,
unsuccessful business, and bankruptcy due to natural calamities.
Although majority of the respondents did not meet any problem in the availment of
loan , there were a few who encountered some problems like: delayed approval and
release of loan, limited funds for release that loans are released one at a time on a first-
come-first served basis, short duration for repayment, high interest and limited source of
funds for repayment.
Majority of the respondents suggested the association to approve and release the
loans on time.
Conclusions
Based from the result, the following conclusions were drawn:
1. Borrowers can only avail one type of loan at a time to avoid much delinquency;
2. Most of the borrowers are engaged in farming thus most of the loans were used
to finance farm operations and most of them lack knowledge on the proper management of
their crops that resulted to low production and inability to pay their loans on time;
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
3. Because of the limited source of funds for paying their loans, many of the
borrowers get credit from other lenders inorder to pay their loan amortization;
4.The interest rate which is 3% per month is too much for the borrowers to pay
because their farm production is not harvested immediately therefore the interest for the
three or six months is already accumulated; and
5. The amount of loan handled by the association had been increasing every year
but loan delinquency had been increasing also.
Recommendations
Based from the results the study recommends the following:
1. The management should encourage borrowers to pay on time by giving a reward
or incentive to good payers. This would challenge the borrowers to pay on time;
2. Borrowers should attend meetings called by the association so that they would
be informed or updated regarding policies of the association. They should not only go to
the office when it is time for them to pay their loan;
3. The association should lower the interest rate to a level at which the members
could afford to pay and the association would not be losing;
4. For the association to have a legal personality to run after delinquent borrowers,
it should register with the Securities and Exchange Commission (SEC) or it should convert
into a cooperative and register with the Cooperative Development Authority (CDA) so that
it could avail of necessary technical assistance from concerned Government Organizations
(GOs) or Non-Government Organizations (NGOs); and
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
5. Request assistance from the Cooperative Development Authority or from the
Benguet Provincial Cooperative Union for technical assistance or from the Benguet State
University for the conversion of the association into a cooperative.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
LITERATED CITED
ANONYMOUS. Consumer and Bussiness Service. 2011. Retrieved May 15, 2012 from
www.ocba.sa.gov.au.
BRAZIL, J.O. 2002. Attitudes of Baguio Benguet Community Credit Cooperative towards
loan payment. B.S Thesis. Benguet State University La Trinidad Benguet. P. 27.
DECOYNA, C.L 2006, An assessment by members and officers on the credit operation of
Bakun Farmers and Employees Multi-purpose Cooperative in Amposongan, Bakun,
Benguet. BS Thesis. Benguet State University, La Trinidad Benguet. Pp. 5-6.
DEQUIT, F.J 2003, Attitudes of members of selected cooperatives in La Trinidad towards
borrowing and repaying loans. BS Thesis. Benguet State University, La Trinidad Benguet.
P. 23.
LAB-ISEN, M.N 2006. An assessment on the Credit operation of Sayapot Multi-Purpose
Cooperative in Sayapot, Dacudac, Tadian Mountain Province. P. 6.
SUAN, C.2008. Member’s level of knowledge on cooperative and perspective of Belis
Sayet Coffee Growers Association in Atok, Benguet on their conversion into a
Cooperative. P. 6.
TAGANAS, P. 1979. Repayment deficiencies of agricultural loan in Bontoc, Mountain
Province. BS. Thesis. Mountain State Agricultural College. P.6.
ZAMORA, A.C 2006. An assessment on the credit operation of San Jacinto Kasakalikasan
Multi-Purpose Cooperative in San Jacinto, Pangasinan. BS Thesis. Benguet State
University, La Trinidad Benguet. P. 6.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
NALICAO, MICHELLE T. APRIL, 2013. Assessment on the Loan Operation of
Akmet Farmers Association Inc. in Akmet, Bulalacao, Mankayan, Benguet. Benguet State
University, La Trinidad, Benguet.
Adviser: Evangeline B. Cungihan, MSc.
ABSTRACT
This study was done to find out the types of loans offered by the Akmet Farmers
Association Inc.; assess the status of their loan operation, determine the number of
borrowers and the number of borrowers paying regularly, the kinds of loan availed by the
borrowers and find out the problems encountered by the association and members and get
the suggestions of the borrowers on how to solve the problem.
One hundred twenty borrowers were taken as respondents of the study. The results
of the study showed that the amount of loan released by the association had been increasing
from 2004 to 2012. The number of borrowers had been increasing and the number of
delinquent borrowers had been increasing too. As of 2012, the amount of delinquency was
over one million pesos. There were three kinds of loan offered by the association; the
agricultural loan, emergency loan, and commercial loan. Most of the borrowers had been
availing the agricultural loan. The problems encountered by the association was loan
delinquency and inadequate collaterals offered by the borrowers. The problems
encountered by the borrowers were the following: delayed approval of loans and delayed
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
release, limited sources for loan payment, and the short duration for paying the loan.
Majority however did not meet any problem.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
INTRODUCTION
Rationale
Akmet Farmers Association Inc. was organized through the efforts of Mr. and Mrs.
Calancio Tanacio together with their children to assist the farmers particularly their
relatives in sitio Ca-ew, Bulalacao, Mankayan, Benguet. The association started with 150
members who are related to the Tanacio family either by affinity or consanguinity. The
initial capital was P250, 000, provided by the Tanacio family. The association was
registered with the Securities and Exchange Commission (SEC) in 2004 with registration
no. CN200429057.
The organizer used the name of their place or “purok” as the name of their association
which is Akmet. The association has four main purposes for their incorporation, namely:
concern on the economic welfare of all members and neighborhood; strengthen
brotherhood, unity, and cooperation among the members-relatives and the residents of
Akmet and Liwang and if possible to the entire barangay; be recognized and be honored
to help the barangay officials in promoting brighter and progressive future development of
their community; and conduct microfinance operation pursuant to Republic Act no. 8425
also known as the “Social Reform Act.
The association has two services: lending and savings. There are also two types of savings:
private deposit and association deposit. For private deposits, the depositor is given a
passbook while for the association deposit the depositor is only given a receipt of the
amount deposited. In addition, private deposits can be withdrawn anytime and this will
only earn interest (3% per month) when it is given out as loan. The association deposit
earns three percent (3%) per month (assured) but can only be withdrawn after five years.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
All members have the option to choose either Private deposit account or Association money
account. Collections from savings are given out as loans to members and non-members as
well.
In terms of lending, association deposit or money is given priority for lending. Private
deposits are only loaned out if all the association money is already given out as loan. Since
Private deposit account only earns interest when it is loaned out what the association does
is to loan it on a first come first served basis to avoid conflict for those who deposit in this
account. In case nobody borrows from this account the Association will inform the private
depositor to get his money back. In some case, if there are borrower and if the private
depositor need his money but the borrower did not yet pay his loans; the association will
borrow or get the money of others in the said account.
Statement of the Problem
This study tried to seek answers to the following problems:
1. What are the kinds of Loans offered and the loan policies of Akmet
Farmers Association Inc.?
2. What is the status of loan operation of Akmet Farmers Association Inc.?
3. How many of the members are availing?
4. How many are paying their loan regularly?
5. What are the types of loans availed?
6. What are the problems encountered by the association and members and
the possible Solution?
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Objective of the Study
The objectives of the study were the following:
1. To determine the kinds of Loans offered and the loan policies of Akmet
Farmers Association Inc.;
2. To determine the status of loan operation of Akmet Farmers Association
Inc.;
3. To determine the number of members availing loan;
4. To determine the number of member paying their loan regularly;
5. To determine the kind of loan availed; and
6. To determine the problems encountered by the association and members
and the possible solution.
Importance of the Study
The result of the study would help the members and non-members of Akmet Farmers
Association Inc. to know the status of their association and also help them improve their
loan operation. Result would serve as a document to Akmet Farmers Association Inc. and
a guide to the officers and management staff to strengthen their loan operation. It can also
be a source of information for further research on other related studies.
Scope and Delimitation of the Study
This study concentrated on finding out the types of loan they offered and the loan policies,
the status of the loan operation, number of members availing the loan, members who are
paying regularly and the problems they encountered.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
REVIEW OF LITERATURE
Association Defined
Association is a group or organization showing the same interest who wishes to be
affiliated with each other. This affiliation may be formal organized or loosely structured,
world-wild in a space to be a single building. An association is composed of people who
join together in an organized manner to pursue a common interest. Generally, this group
has a formal structure. There were some kinds of agreement that members involves: one-
some types of interaction, second- a sense of belonging or membership, three-shared
interest on values and lastly a structure (Suan, 2008).
Incorporated Association
Incorporation is a voluntary, simple and inexpensive means of establishing a legal
entity, separate from the individual members. It is particularly suitable for small,
community-based groups. Incorporated Associations are not profit organizations. Any
profits made should be kept by the association and should not be used by members for
personal gain (http://www.ocba.sa.gov.au, 2011).
Importance of Loans
ADB (1990) as cited by Zamora (2006) the use of credit in the broad sense of an
exchange of current for future recourses is probably as old as organized society. It can
promote economic growth and contribution to nation wealth. By this, a business firm may
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
borrow to put loan proceeds to work in an income producing assets which are expected to
earn, in due course, more than the amount borrowed.
Loan Requirement
In granting loan, Decoyna (2006) suggested to consider the borrower’s background through
credit investigation and background investigation (CIBI) which focuses on the character,
capacity, collateral and condition of the borrowers and the capacity of the co-maker.
Problems Encountered on Loan
According to Dequit (2003), in the loaning process, people in the rural areas hardly
have any access to institutionalize credit facilities to reasonable term. The cover risk of
loans practically deprives the small farmers of the service of the usual credit system.
Loan Payment
Brazil (2002) as cited by Decoyna (2006), payment in law is the discharge of a legal
obligation by the delivery of money or whatever. The creditor in lieu of money accepted
should be made at exact time and place agreed upon or implied by the law. It must be made
to proper party either to the person to whom the debt id due or his legal representative.
Factors Affecting Loan Repayment Delinquency
Taganas (1979) as cited by Lab-isen (2006) found out in her study that the failure
of farmers to pay loan on time at maturity was caused by diversion of loan to non-farm
activities. This was due to late release of the loan, which motivated them to divert it to
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
other than the intended purpose. This condition credits in them the attitude of spending
loaned money from the bank elsewhere. As a result, nothing was used on the intended
purpose. This further resulted to the extent of selling house, land or lots just to augment the
amount needed for the land preparation and expenditures in one cropping seasons. Other
sold their house to pay their debt when the collateral used was forfeited.
Brazil (2006) stated that most farmers are incapable of paying their loans for the
reason that there is a low rate of production, lack of market and low level of capacity among
members. The study found out that this was due to improper farm management, which
means that the farmers did not use high, yielding seeds, did not follow the required fertilizer
and lack of irrigation facilities.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
METHODOLOGY
Locale and Time of the Study
The Municipality of Mankayan, Benguet have 12 barangays. The areas covered by the
study were: Balili, Bedbed, Bulalacao, Cabiten, Colalo, Guinaoang, Paco, Poblacion,
Sapid, Suyoc, Tabio, and Taneg.
Respondents of the Study
The respondents of the study were 120 borrowers of the Akmet Association Inc. The 120
borrowers were equally distributed from the 12 barangays covered by the association.
Data Collection
The data were gathered with the aid of survey questionnaire. The questionnaires were given
personally to the respondents by the researcher. For the respondent that could not read and
write, the researcher interviewed them.
Data Gathered
The data gathered included information about the status of the loan operation of the
association such as; number of members availing the loan, kinds of loan availed, and the
repayment status, repayment practices and problems met by the borrowers in their
repayment.
Data Analysis
The data was analyzed and interpreted according to the objectives of the study
using descriptive analysis like frequency and percentage.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
RESULTS AND DISCUSSION
Loan Policies of the Association
There were three (3) kinds of loans offered by the association. Agricultural loan,
emergency loan, and the commercial loan. Borrowers of any kind of loan may either be
members of the association or non-members. As to their qualification; they must be of legal
age (18 – 60 years old), have titled collateral with no encumbrance, and have no record of
bad debts. The policy of the association on term of loan is semi-annual and the method of
collection is to require all borrowers to personally pay their loan installments at the office
of the association. In case a borrower fails to pay his or her loan the association reminds
the borrower through a letter. If it is past due, the borrower is required to pay at least the
interest due in order to lessen their debts. With regards to foreclosure of collateral the
association can only foreclose the collateral when the amount of the loan (principal plus
interest) is equal to the value of the collateral. Their policy on interest is add-on.
Amount of Loan Released and Amount Delinquent
Table 1 shows that amount of loan released had been increasing every year from only P450,
050 in 2004 to P5, 267,101 in 2012. This increment was due to the increasing number of
borrowers and the higher amount of loan borr5owed by each borrower. The amount of
delinquent loan had also been increasing for the same period. The amount of loan released
per year had been increasing at an average rate of 36% and the delinquent amount had been
increasing also by the same rate.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Table 1. Yearly loan releases and delinquent amount (in pesos)
YEAR
AMOUNT RELEASED
AMOUNT DELINQUENT
2004
450,050
162,018
2005
612,068
220,344
2006
832,412
299,668
2007
1,132,412
407,548
2008
1,539,628
554,267
2009
2,093,895
753,802
2010
2,847,697
1,025,171
2011
3,872,868
1,394,233
2012
5,267,101
-
Average Rate of Increase
36%
36%
Number of Borrowers and Number of Borrowers
Paying Regularly
Table 2 presents the number of borrowers per year by type of loan and the number
of borrowers who had been paying regularly. The result shows that the number of
borrowers had been increasing every year especially for agricultural loan. This implies that
an increasing number of farmers in Akmet are financing their farm operations from
borrowings. According to the respondents their emergency loans are sometimes used also
to finance their farm operation. The result also shows that the number of borrowers paying
regularly had been decreasing every year for both agricultural loan and emergency loan.
This explains the increasing amount of delinquency.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
In the case of the commercial loan the number of borrowers had been increasing
also but the number of borrowers was fewer relative to agricultural and emergency loans.
This is because this type of loan can only be availed by those who have business. The
finding also shows that almost all the borrowers of the commercial loan had been paying
regularly every year except for 2006, 2010 and 2012.
Table 2. Numbers of borrowers and numbers of borrowers paying regularly from 2004-
2012
LOAN AVAILED
2004 2005 2006 2007 2008 2009 2010 2011 2012
Agricultural loan
No. of borrowers 23
34
46
63
86
116
158 215
293
No. paying reg.
20
29
39
60
83
114
150
200
287
% delinquent
13
14.7 15
4.8
3.5
2
5
7
2
Emergency loan
No. of borrowers 15
20
28
38
51
70
95
129
176
No. paying reg.
14
20
27
33
49
67
90
127
170
% delinquent
6.7
0
3.6
13
4
4
5.2
2
3
Commercial loan
No. of borrowers 5
7
9
13
17
23
32
43
59
No. paying reg.
5
7
7
13
17
23
30
43
56
% delinquent
0
0
22
0
0
0
6
0
5
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Problems Encountered by the Association
The problems encountered by the association in its operation were the following:
inadequate collateral offered and loan delinquency. The association encountered many
cases of borrowers who apply for a loan which is not sufficiently covered by their collateral.
In these cases, they have to reduce the amount of loan which can be covered by their
collateral.
In the case of loan delinquency, the management observed that the reasons why
borrowers cannot pay their debts is because they do not know how plan their production
period that usually result to too much supply of the same kind of vegetables which cause
the price to be low. The association is giving three months grace period to delinquent
borrowers to settle their debts. If still they could not pay, they have to sell their collaterals
through bidding.
Profile of the Borrower Respondents
Table 3 presents the profile of the borrowers in terms of membership to the
association, gender, civil status, educational attainment, and occupation. Most of the
respondents (89%) were members while 11% were not members of the association. This
finding shows that the association is giving out loans to non-members but is residing in the
place where the association is operating.
The finding also shows that many of the borrowers from the association were
female and most of them were married. As to their educational background, 12.5% were
elementary graduate, 25% high school graduate, 20.8% college graduate, and 25% were
college undergraduate. Ten percent of the respondents did not indicate their educational
attainment.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
As to the occupation of the respondents majority (52%) were engaged in farming,
13% were self-employed managing their own small businesses. Two of them were teaching
while 32.5% did not indicate their occupation.
Table 3. Profile of the respondents
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Membership
Member
107
89.20
Non-member
13
10.80
TOTAL
120
100.00
Gender
Male
40
33.30
Female
57
47.50
Missing
23
19.20
TOTAL
120
100.00
Civil status
Single
2
1.70
Married
118
98.30
TOTAL
120
100.00
Educational background
Elementary graduate
15
12.50
Secondary graduate
30
25.00
College graduate
25
20.80
College level
30
25.00
Vocational
8
6.70
Missing
12
10.00
TOTAL
120
100.00
Occupation
Farming
63
52.20
Self-employed
16
13.30
Teaching
2
1.70
Missing
39
32.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Types of Loan Availed and Terms of Payment
Table 4 shows that most of the respondents availed of agricultural loan (75%), only
9% for emergency loan and about 16% availed of commercial loan. As found earlier,
majority of the respondents were farmers so this explains why majority of them availed of
the agricultural loan. This is also consistent with the objective of the association which is
to provide financial assistance to farmers who are relatives of the Tanacio family, the
founder of the association.
The same table presents that most of the borrowers ( 91.7%) availed of the medium
term loan and only 2.5% availed of the long-term loan. There were 5.8% that availed of
the short term loan.
Table 4. Types of loan and terms of payment
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Types of loan
Agricultural loan
90
75.00
Emergency loan
11
9.20
Commercial loan
19
15.80
TOTAL
120
100.00
Terms of loan
Short
7
5.80
Medium
110
91.70
Long
3
2.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Loan Repayment Practices of Borrowers
Table 5 presents how the borrowers pay their loan from the association. These
practices include how payment is made, mode of payment, term of payment, need for
reminder letter, and paying before due date. The table also includes the perceptions of the
respondents whether the duration for paying the loan is long enough or not.
How payment made and mode of payment. Results show that all the borrowers
personally go to the office of the association to pay their loan. This finding validates the
claim of the manager that their policy on loan collection is to require all their borrowers to
personally pay at the office of the association. The policy of the association on mode of
payment is installment basis and one hundred percent of the respondents were paying on
installment.
Terms of payment. The policy of the association regarding term of payment is semi-
annual. However, the finding shows that some of the borrowers were paying on monthly
basis (8.3%) and quarterly (5.8%). Their reason for doing so is to lessen the amount of
interest and it is easier to pay if the large amount is divided into smaller amounts. Most of
the respondents (83.4%) were paying their loans semi-annually. There were about 3%
paying their loans annually.
Reminder letter. All the respondents received reminder letters before the due date
of their loan. This finding confirms the policy of giving reminder letters to the borrowers
to make them aware of their obligations.
Paying before maturity date. The finding shows that only 45% of the respondents
were paying their loans before maturity date while majorities (55%) were either paying
their loans at maturity date or after maturity date.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Perception on the time of paying. Majority ( 58.3%) of the respondents said the
time for paying the loan is long enough for them while 41.7% perceived that the duration
of paying the loan is short or not enough for them to save the amount for payment.
Table 5. Practices for repayment
PARTICLARS
FREQUENCY
PERCENTAGE (%)
How Payment Made
Through the collector
0
0.00
Personally go to the office
12
100.00
TOTAL
120
100.00
Mode of payment
Full cash
0
0.00
Installment
120
100.00
TOTAL
120
100.00
Terms of payment
Monthly
10
8.30
Quarterly
7
5.80
Annually
3
2.50
Semi-annually
100
83.40
TOTAL
120
100.00
Reminding of loans
Yes
120
100.00
No
0
0.00
TOTAL
120
100.00
Response of loan repayment
Long enough
70
58.30
Not enough
50
41.70
Total
120
100.00
Pay before maturity date
Yes
54
45.00
No
66
55.00
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Reasons for not Paying Loan on Time
Table 6 presents several reasons mentioned by the respondents why they were not
able to pay their loans on time. Fifteen percent pointed to the short time for paying, 35.8%
mentioned low production, 25% low market price, 6.7% unsuccessful business because
their customers did not pay their debts, and 17.5% bankruptcy of their operation. Some
said that their farm operation was bankrupt because of calamity, some used their loan for
allowance of their children thus they did not have enough capital for operation.
In addition, the table also presents the sources for loan repayment by the
respondents. It can be noted that many of the respondents (45.8%) have to borrow money
inorder to pay their loan from the association. This is because their businesses were
bankrupt. About fourteen percent used their income from business to pay their loan, 7.5%
used their salaries, and 32.5% from sales of crops.
Table 6. Reasons for not paying on time and sources for payment
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Reasons
Loan term is short
18
15.00
Low production
43
35.80
Low market price
30
25.00
Unsuccessful business
8
6.70
Bankruptcy
21
17.50
TOTAL
120
100.00
Sources of repayment
Income from business
17
14.20
Borrowing from others
55
45.80
Salaries
9
7.50
Sales from crops
39
32.50
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Problems Encountered by the Borrowers on Borrowing
The problems encountered are grouped into; problems on loan application,
problems on loan release, and other problems (Table. 7).
Loan application. Problems on loan application identified by the respondents were
as follows: delayed approval (12.5%), many requirements (8.3%), limited funds (9.2%),
and first-come-first-served basis (8.3). Delayed approval of loan is a problem to the
borrowers because the loan cannot be released at the time it is badly needed. According to
the manager of the association approval of loans are delayed when the requirements are
incomplete specially the value of the collateral. Some borrowers apply for a loan which is
higher than the value of their collateral thus approval is delayed until the borrower adds
more collateral or the amount to be borrowed is reduced. The other problems are
interrelated with one another like for instance the first-come-first-served is done because
funds for release are limited therefore loans cannot be approved and release
simultaneously. The finding however shows that majority of the respondents did not meet
any problem on loan application.
Loan release. Most of the respondents (87.5%) mentioned that they did not
encounter any problem during the release of their loan. Only a few encountered problem
like delayed release with 4.2% and first-come-first served with 8.3%.
Other problems. As shown in Table 7, many of the respondents (46.7%) did not
have problem; 10.8% for short duration for paying, 5% for high interest, 13.3% for amount
to be borrowed are based on collateral, 20% for no source of fund to pay the loan, and 4.2%
on second priority for release of loan. These respondents mentioned this because they are
not members of the association so when funds are limited they are second priority for
release.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Table 7. Problems encountered by the borrowers on borrowing
PARTICULARS
FREQUENCY
PERCENTAGE (%)
LOAN APPLICATION
Delayed approval
15
12.50
Many requirements
10
8.30
Limitation of funds
11
9.20
First come first serve
10
8.30
No problem
74
61.70
TOTAL
120
100.00
Loan release
Delayed release
5
4.20
First come first serve
10
8.30
No problem
105
87.50
TOTAL
120
100.00
Other problem
Short duration for payment
13
10.80
High interest rate
6
5.00
Amount to be borrowed
based on collateral
16
13.30
Sources for repayment
24
20.00
Non-members are second priority
5
4.20
No problem
56
46.70
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
Solutions and Suggestions to Solve the
Problems on Borrowing
Table 8 presents the solutions used by the respondents to solve their problems and
also their suggestions so that the same problem will not be encountered again in the future.
About twenty nine percent borrowed from other lenders when approval of their loan is
delayed while 16.7% suggested loan applications should be approved on time.
Table 8. Suggested solutions to the problems on borrowing
PARTICULARS
FREQUENCY
PERCENTAGE (%)
Loan application
On time approval
20
16.70
Borrowing from others
35
29.10
No answer
65
54.20
TOTAL
120
100.00
Loan release
On time release
10
8.30
Early application
23
19.20
No answer
87
72.50
TOTAL
120
100.00
Other problem
Borrowing from others
30
25.00
Plant again
60
50.00
No answer
30
20.00
TOTAL
120
100.00
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted to assess the lending operation of AKMET Farmers
Association in Akmet , Bulalacao, Mankayan, Benguet. The objectives of the study were
as follows: 1) to determine the kinds of loan offered and loan policy of the association, 2)
to determine the status of loan operation of the association, 3) to determine the number of
members availing loan, 4) to determine the number of members paying regularly, 5) to
determine the kind of loan availed, and 6) to find out the problems encountered by the
association and the members related to loan of the association.
The data was collected with the use of survey questionnaire and interview. The
interview was done by the researcher at the municipality of Mankayan, Benguet. The data
was analyzed using descriptive analysis like frequency and percentage.
The study found out that the association is offering three types of loans; the
agricultural loan, emergency loan and commercial loan. The association is currently
lending to members as well as non-members of the association. Most of the borrowers
however were members and very few were non-members. The number of borrowers had
been increasing every year from 2000 to 2012. The amount of loan released had been
increasing also for the same period. As the number of borrowers was increasing per year,
the delinquent amount was also increasing especially on the agricultural loan and the
emergency loan. The policies of the association on loan are the following: borrowers must
have collateral and the value of the collateral must be higher the amount of loan applied
for, loans are to be paid on semi-annual basis and borrowers are required to pay personally
at the office of the association. The association sends letter of reminder to the borrowers
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
before the due date. In cases where the borrower cannot pay his/her loan, the association
allows them to pay the interest due and pay the principal on installment. Inadequate
collaterals and loan delinquency were the problems met by the association.
Most of the respondents were members, female, married, and had formal education
were many of them reached college level. A great majority were farmers. The study found
that all the borrowers were following the policies of the association on loan application,
loan release, and loan repayment. Most of the borrowers cannot pay their loan before
maturity date. The reasons are: loan term is short, low production, low market price,
unsuccessful business, and bankruptcy due to natural calamities.
Although majority of the respondents did not meet any problem in the availment of
loan , there were a few who encountered some problems like: delayed approval and
release of loan, limited funds for release that loans are released one at a time on a first-
come-first served basis, short duration for repayment, high interest and limited source of
funds for repayment.
Majority of the respondents suggested the association to approve and release the
loans on time.
Conclusions
Based from the result, the following conclusions were drawn:
1. Borrowers can only avail one type of loan at a time to avoid much delinquency;
2. Most of the borrowers are engaged in farming thus most of the loans were used
to finance farm operations and most of them lack knowledge on the proper management of
their crops that resulted to low production and inability to pay their loans on time;
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
3. Because of the limited source of funds for paying their loans, many of the
borrowers get credit from other lenders inorder to pay their loan amortization;
4.The interest rate which is 3% per month is too much for the borrowers to pay
because their farm production is not harvested immediately therefore the interest for the
three or six months is already accumulated; and
5. The amount of loan handled by the association had been increasing every year
but loan delinquency had been increasing also.
Recommendations
Based from the results the study recommends the following:
1. The management should encourage borrowers to pay on time by giving a reward
or incentive to good payers. This would challenge the borrowers to pay on time;
2. Borrowers should attend meetings called by the association so that they would
be informed or updated regarding policies of the association. They should not only go to
the office when it is time for them to pay their loan;
3. The association should lower the interest rate to a level at which the members
could afford to pay and the association would not be losing;
4. For the association to have a legal personality to run after delinquent borrowers,
it should register with the Securities and Exchange Commission (SEC) or it should convert
into a cooperative and register with the Cooperative Development Authority (CDA) so that
it could avail of necessary technical assistance from concerned Government Organizations
(GOs) or Non-Government Organizations (NGOs); and
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
5. Request assistance from the Cooperative Development Authority or from the
Benguet Provincial Cooperative Union for technical assistance or from the Benguet State
University for the conversion of the association into a cooperative.
Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013
LITERATED CITED
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Bakun Farmers and Employees Multi-purpose Cooperative in Amposongan, Bakun,
Benguet. BS Thesis. Benguet State University, La Trinidad Benguet. Pp. 5-6.
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borrowing and repaying loans. BS Thesis. Benguet State University, La Trinidad Benguet.
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Cooperative in Sayapot, Dacudac, Tadian Mountain Province. P. 6.
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TAGANAS, P. 1979. Repayment deficiencies of agricultural loan in Bontoc, Mountain
Province. BS. Thesis. Mountain State Agricultural College. P.6.
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Assessment on the Loan Operation of Akmet Farmers Association Inc. in Akmet, Bulalacao,
Mankayan, Benguet | NALICAO, MICHELLE T. APRIL, 2013