South City Homes Academy

Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

Chapter 1

INTRODUCTION

Background of the Study

Many individuals thought that if you have a business, life would be easier. In

order to establish a business, you need to have a capital. There are different business

operation strategies based on how the owner will execute to make it successful.

Entrepreneurs start their business by using their personal funds and gathering business

partners. On other cases, some businesses are already successful and already has a name

on the industry they belong because they inherited it from their family. But entrepreneurs

cannot be stopped there. Some entrepreneurs that want to start up their business, do not

that have funds. To be able to have money for the business, they take the risk of applying

for a loan from lending companies.

Small business need loan to meet their daily operation needs until they are earning

assets that are sufficient to cover their working capital needs. Lending companies are

financial institutions that temporary give money to selected people in the community with

the expectation that the borrowed money will be repaid. They provide funds for those

who want to establish a business but with interest to gain profit. As the business grows

and enable them to earn money, they can repay the capital they borrowed from the bank

or lending companies.

According to Lobell (2018) there are several reasons why starting a small

business is attractive to many people and here are the common answers provided by the

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

entrepreneurs. 1.) Entrepreneurs can work for themselves, people would rather be

independent workers, looking after themselves, instead of being observed by higher-ups.

2.) Entrepreneurs want to be more hands on, according to a survey from Cox Business, a

reason why employees decide that starting a small business is right for them is the fact

that they can build something from scratch. 3.) Entrepreneurs want more money, it is

another factor in employees’ decisions to take on a new career as an entrepreneur.

Perhaps a person’s current job does not pay enough, or he or she started a side business

that suddenly became lucrative and required more time than he or she thought it would.

4.) Entrepreneurs want to take on additional roles, small business owners do not fit into

one job description. They are multi-talented and do not want to be pigeon-holed as an

accountant, data entry clerk, or human resources manager.

This thesis reports about the small business’ operating procedures of capital

borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna. It aims to

target all the small businesses that operate for about a year and beyond. In addition, it

helps in identifying the contribution and impacts of lending companies to the family,

society, economy, and the business itself.

Theoretical Framework

Financial Intermediation Theory

Financial Intermediation Theory considers banks as financial intermediaries both

individually and collectively, rendering them indistinguishable from other non-bank

financial institutions in their behavior, especially concerning the deposit and lending

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

businesses, being unable to create money individually or collectively.

(https://www.sciencedirect.com/science/article/pii/S1057521915001477)

Operational Framework

The independent variable includes the demographic profile of the respondents

particularly, age and gender. It also includes capital borrowers. The dependent variable

includes the difference of small business operating procedures to capital borrowers in

Pragmatic Sto. Tomas, Biñan City, Laguna.

Dependent Variable
Independent Variable
The difference of small business
1. Demographic Profile operating procedures to capital
o Age borrowers in South City Homes
o Gender
Subdivision
2. Capital Borrowers

Figure 1.0 Operational Framework

Statement of the Problem

This study is to determine the small business operating procedures of capital

borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna .

Specifically, it seeks answers to the following research questions:

1. What is the profile of the respondents in terms of;

1.1. Age

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

1.2. Gender

2. What is the benefit of borrowing in CARD Bank Inc. to capital borrowers?

3. What is the impact of capital borrowing to the;

3.1. Business

3.2. Family

3.3. Society

3.4. Economy

4. Is there a significant difference between capital borrowing in CARD Bank Inc. to

small business operating procedures in Pragmatic Sto. Tomas, Biñan City, Laguna?

Assumption of the Study

This study rested on the following assumption:

1. The Effectiveness of assistive technology in the academic performance.

2. Assistive technology affects the way of teaching of the teachers.

3. The respondents answered the questions asked by the researchers based on the

experience in the assistive technology.

Scope and Limitation

This study focused on the descriptive study on small business operating

procedures of capital borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas Biñan City,

Laguna. The respondents of the study are limited only to the small business at Pragmatic

Sto. Tomas Biñan City, Laguna both male and female. The gathered data from the

respondents will be used to identify the different business operating procedures for future

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

actions to apply. Furthermore, to deepen the knowledge of the small business and future

researchers about different kinds of business operations.

Significance of the Study

The research is about “A Descriptive Study on Small Business Operating Procedures of

Capital Borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas Biñan City, Laguna”

will expose the capital borrowers’ life, family, business affected by having loans and

identifying the impact of lending companies in the society and economy. The research

strongly believed that this research study will provides a vital information and importance

to the following:

To Borrowers- The borrowers can use the finding of the study to deepen their

knowledge about the procedures of lending companies.

To Family- The outcome of this study serves as a reference to the family that are

planning to start a business.

To Businessman- The results of the study may serve as a guide in handling their

business.

To the Economy- The business will help the economy as it grows and contributes

to the economic growth and development.

To the Future Researcher- This study may serve as a reference for conducting a

study that is related to this.

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

Hypothesis

H 0: There is no significant difference of capital borrowers to small business operating

procedures in South City Homes Subdivision.

Definition of Terms

Capital Borrowers. The one’s who borrows money from lending company to make an

investment.

Entrepreneurs. A person who organizes and operates a business, taking on greater than

normal risks in order to do so.

Lending Company. In its most general sense is the temporary giving of money or

property to another person with the expectation that it will repaid. In a business and

financial context, lending includes many different types of commercial.

CARD Bank Inc.

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

CHAPTER 2

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter presents the literature and the studies that are related to the major

components of the study. This chapter presents the literature and the studies that are

related to the major components of the study. This is organized by concept that is related

to the research. Each of these is organized under major ideas which are used to conduct

the study. In a Descriptive Study on the Business Operating Procedures of Capital

Borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna is seemed

to be helpful to have a wider view of some relevant circumstances. In view of above

considerations, studies are presented as they lead justification to the study. Towards the

end of this chapter, a synthesis of the review and the gap/s bridged by the study was

presented.

State of the Art

This portion presents a review of several literatures that would be beneficial to the

study summarized from previous writings, shooting detailed facts asserted by several

people on a Descriptive Study on the Business Operating Procedures of Capital

Borrowers of CARD Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna. On this

element of study some reviews of the proponents and author’s passage in order to help

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

the proponents to find ways in contact with the problem that have been encountered. The

literature and the studies reviewed and found to be relevant to the presented study. They

served as the bases for the conceptualization of the study's problem, research design and

methodology.

Related Literature

Background of Lending and Other Information

According to Loukil and Jarboul (2015), the bank and borrower will establish a

close lending relationship because of: 1.) If the manager (borrower) has good morals, 2.)

If the company (borrower) is solvent enough to pay its debt to the bank as soon as

possible and 3.) If the bank has good information about the company they are going to

lend.

Utang and Instant Pautang: A Simple Guide to the Lending Culture in Philippines,

(2018) enumerated the different lending practices used in the Philippines which are: 1.)

5-6 Loan, it was was brought by Indian nationals in the 70’s and it has spread like a

wildfire. They didn’t need any advertisements. The Indians’ lending business was

popularized by gossips in the neighborhood. Since borrowing money is part of the

Filipino’s culture, this lending system was greatly accepted despite the staggering interest

rate of 20%. 2.) Fix Rate Loan, this is usually a verbal agreement between the lender and

the borrower. There is no standard interest rate; they just talk about the fixed amount of

money to top up when it comes to repayment. 3.) Incremental Borrowing Rate, the

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

interest rate increases after a certain period of time. With this system, the borrowers are

forced to pay as soon as possible or they will have to pay more. While this secures the

lenders that they will get some profit from the basic principal loan, it is too risky for the

borrower. The interest rate may start in as small as 3%. 4.) Diminishing Interest, many

Filipinos prefer this system. The borrower will pay monthly installments and the amount

of interest will seem to decrease as it will be based on the current outstanding balance of

the capital. 5.) Recurring Interest, the lender will keep on collecting the interest as long

as the lender had not paid the debt in full a payment, not by installment. This is the

lending system used by pawnshops in the Philippines. 6.) Pooling Funds, this is

commonly done within a neighborhood or close circle of friends or workmates. A group

of people will collect a certain amount from each other then they will draw lots to know

which one will be the first to use the pooled fund. 7.) Private Lenders, short-term loans,

with least required documents- sometimes none with the case of Bombays. 8.) Banks, it

has many requirements that is needed to be submitted, takes a week to process and don’t

usually offers short-term loan. 9.) Online Private Lenders, it is a type of lending company

that offer short-term loans at the shortest process borrowers can ever experience. Lenders

can even disburse cash within the day of application.

Microfinance and Microcredit Background Information, its Impact, and Problems

According to Cu (2017), although the microfinance industry in the Philippines

showed consistent growth every year there are still hurdles that are not yet solved. A

study conducted by Raymund B. Habaradas and Mar Andriel Umali in 2013 titled, “The

Microfinance Industry in the Philippines: Striving for Financial Inclusion in the Midst of

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

Growth” that the problems in the microfinance industry are credit access; usage and

quality of microfinance products; and the impact on the borrower or consumers welfare

after using the microfinance products. Credit access means the availability of financial

products from formal institutions, while usage pertains to the levels of use of different

financial services. The authors defined quality as the experience of the consumer,

demonstrated in attitudes toward microfinance products that are available to them.

Welfare means the impact of a financial product or service on the lives of consumers.

Microfinance refers to the provision of financial services tailored to the

requirements of low income people like micro-entrepreneurs, particularly the delivery of

small loans, the provision of small loans, receipt of small savings deposits and easy

payment services required by micro-entrepreneurs and other poor people. It is defined as

the provision of thrift, credit and other financial services in little amounts to the

underprivileged to allow enable them to increase their levels of income and enhance their

standard of living. It denotes small-scale business or credit services; which are made

available to people operating selected business; running small enterprises in which goods

are manufactured, reprocessed, repaired or exchanged in rural as well as urban areas.

(Edwin, Kn, & Yewande, 2019)

The BSP also noted that while regional distribution still exhibits the trend where

concentration is in regions such as National Capital Region (NCR) and Calabarzon, it is

interesting to note that there is an active and thriving market for microfinance for some

regions where there is relatively low usage of regular banking products and services. In

2013, the Philippines were once again recognized as first in the world in terms of its

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

regulatory framework and practices for microfinance. The Economist Intelligence Unit

(EIU), in its annual global survey, noted that the BSP continued to promote an enabling

environment for microfinance as a key advocacy to support poverty reduction. It also

cited advances in mobile access to bank accounts, the agent relationships for cross-selling

of micro insurance products and the geospatial mapping currently being undertaken to

account for different types of financial service access points in the country. (Gatdula,

2014)

Microcredit, or the practice of providing very small loans to the poor, often with

group liability, is an increasingly common tool intended to fight poverty and promote

economic growth. But microlending has expanded and evolved into what might be called

its “second generation,” often looking more like traditional retail or small business

lending where for-profit lenders extend individual liability credit in increasingly urban

and competitive settings. The motivation for the continued expansion of microcredit is

the presumption that expanding credit access is an efficient way to fight poverty and

promote growth. Microcredit program in the Philippines has created several impacts in:

1.) Borrowing, being randomly assigned to receive a loan did increase overall borrowing:

the probability of having a loan out in the month prior to the survey increased by 9.4

percentage points in the treatment group relative to comparison. 2.) Business Outcome,

accepted applicants used credit to shrink their businesses. Treated clients who owned

businesses operated 0.1 fewer businesses and employed 0.27 fewer paid employees. One

explanation could be that these smaller businesses cost less and are thus more profitable.

Perhaps clients would more readily invest in and grow their businesses if loan proceeds

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

are tied to detailed business planning or closer monitoring by the lender. 3.) Risk

Management, Evidence suggests that increased access to formal credit complements,

rather than crowds-out local and family risk-sharing mechanisms. Treated clients

substituted away from formal insurance into informal risk sharing mechanisms: there was

a 7.9 percentage point reduction in holding various types of formal insurance, including

life, home, fire, property, and car insurance, and treated clients reported increased access

to informal sources of credit in an emergency, such as family and friends. In all, these

results suggest that microcredit improves the ability of households to manage risk by

giving them additional options: using credit instead of insurance or savings, and

strengthening family and community risk-sharing. (Karlan & Zinman, 2017)

Related Study

The Relationship of Microfinance and SMEs Impact to Economic Growth

Alimukhamedova (2013) stated, microfinance is considered as a unique and non-

standard way to mobilize the enormous savings of millions of the poor that traditional

banking does not serve. Therefore, microfinance is perceived to deepen access to finance

at the household level and hence contribute to financial development.

Microfinance banks’ loans to SMEs option by the Nigerian government is one of

the numerous strategies that have been adopted to alleviate poverty and empower the

poor to establish new ventures or expand existing business through the provision of micro

credits which cannot be accessed through the formal or conventional banking

system. (Ekpudu, Jayeola, & Posi, 2019)

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

Majority of small and medium scale enterprises obtain their external funds from

money lending institutions when they are able to meet the appropriate requirements.

However, most small and medium scale business obtained their startup capital from

family and friends and personal savings. From the findings, it was concluded that

majority of the small and medium scale enterprises agreed that loans from money lending

institutions helped in the overall improvement of their performance, and have had a

positive impact, even though much is still expected from them. Small and medium scale

businesses are in genuine demand for finance to be able to compete with larger firms.

(Owusu - Dankwa, & Adoley, 2014)

The Role of Microfinance as a Solution to Poverty and Job Opportunities

A study conducted by Habaradas and Umali (2015) indicated that the Philippine

Government has long recognized the critical role of microfinance in its poverty

alleviation efforts. A key development is the formulation in 1997 of the National

Strategy for Microfinance, which listed the following principles as the foundations of the

government’s microfinance policy: (a) an enabling policy environment that facilitates the

increased participation of the private sector in microfinance, (b) market-oriented

financial and credit policies, (c) non-participation of government line agencies in the

implementation of credit / guarantee programs, and (d) greater role of the private

sector / MFIs in the provision of financial services. These principles served as a

guidepost for subsequent policies and regulations that were put in place to help

microfinance industry players achieve their twin goals of outreach and financial

sustainability. As a result, the Philippines has been recognized for providing a

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Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
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business environment within which microfinance institutions thrive. For example, the

Consultative Group to Assist the Poor (CGAP) declared the country’s microfinance

industry as “the best in implementing microfinance programs to reduce poverty”

during the International Year of Microcredit 2005, a special event of the United Nations

held in New York City (Micu, 2010, p.7). More recently, the Philippines ranked first in

the world in terms of policy and regulatory framework for microfinance, and is in the top

ten in terms of overall microfinance business environment (The Economist Intelligence

Unit Limited, 2012).

Kondo (2007) concluded, the microfinance program (wherein its objectives are:

reduce poverty, create employment opportunities, and enhance the incomes of the poorest

of the rural poor (the ultra-poor)—the bottom 30% of the rural population as measured by

income.) in the Philippines has kept program clients economically active with more

enterprises and more employees. It also helps the micro-entrepreneurs in their business

and can be considered as a poverty-alleviating tool.

Synthesis of the State of the Art

The related literature above had been thoroughly organized and

synthesized by the researchers in the conceptualization of this study. It had been useful to

the researchers as these served as supports and basis for evidence of this study. Primarily

the reviewed literature focuses on the discussions supporting the thesis title which is a

Descriptive Study on the Business Operating Procedures of Capital Borrowers of CARD

Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna .A study of Loukil & Jarboui

(2016) and Utang and Instant Pautang: A Simple Guide to the Lending Culture in

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

Philippines (2018) focuses about Background of Lending and Other Information. Cu

(2017), Edwin, Kn, & Yewande (2019), Gatdula (2014), and Karlan & Zinman (2017)

talks about Microfinance and Microcredit Background Information, its Impact, and

Problems. Alimukhamedova (2013), Ekpudu, Jayeola, & Posi (2019), and Owusu -

Dankwa, & Adoley (2014) discuss The Relationship of Microfinance and SMEs Impact

to Economic Growth. Habaradas and Umali (2015) and Kondo (2007) examines The

Role of Microfinance as a Solution to Poverty and Job Opportunities

The researchers will need all of these for the interpretation of data

comprehensively arrive as its valid findings.

Gaps Bridge of the study

Descriptive Study on the Business Operating Procedures of Capital Borrowers of

CARD Bank Inc. in Pragmatic Sto. Tomas, Biñan City, Laguna

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

CHAPTER 3

Research Methodology

This chapter presents the conduct of this research. It includes the research design

or method of research, population of the study, sources of data, instrumentation and

validation, data gathering procedure and the statistical treatment that the researchers

utilize in the analysis and interpretation of data.

Research Design

The researchers used the descriptive research method to determine the perception

of small business operating procedures of capital borrowers of CARD Bank Inc. of South

City Homes Subdivision. According to FluidSurvey Team (2014). Descriptive research is

conclusive in nature, as opposed to exploratory. This means that descriptive research

gathers quantifiable information that can used for statistical inference to your target

audience through data analysis. As a consequence, this type of research takes the form of

closed-ended question, which limits its ability to provide unique insights. However, if it

is used properly, it can help an organization better define and measure the significance of

something about a group of respondents and the population they represent.

When in comes of online surveying, descriptive is by far the most commonly used

form of research. Most often, organization will use it as a method to reveal and measure

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 South City Homes Academy
Tagbilaran Street, South City Homes, Sto. Tomas, City of Biñan, Laguna
Senior High School Department

the strength of a target group’s opinion, attitude, or behavior with regards to a given

subject. But another common use of descriptive research would be the surveying of

demographical traits in a certain group (age, income, material status, gender, etc.). this

information could then be studied at face value, measuring trends overtime, or for more

advance data analysis like drawing correlations, segmentation, benchmarking and other

statistical techniques.

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