Performance Of Micro Enterprises In The City Of Tuguegarao.docx

PERFORMANCE OF MICRO-ENTERPRISES IN THE CITY OF TUGUEGARAO

A Thesis Presented to the The Faculty of the Graduate School Sanit Paul University Manila

In Partial Fulfillment of the requirements for the Degree Master in Business Administration

by

PELAGIO C. LABANG JR.

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ABSTRACT

Title:

PERFORMANCE OF MICRO-ENTERPRISES IN TUGUEGARAO CITY

Researcher: Degree: School: School Year: Adviser: No. of Pages:

Pelagio C. Labang Jr. Master in Business Adminstration Saint Paul University Manila 2017-2018 Mrs. Marilou Urbina, MBA

Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards economic development of the country. Entrepreneurs are said to be the pillar of economic progress of the country. They contribute to the pecuniary growth of the nation in terms of economic and stability of business in a global competitive world. It is however through the support given by thegovernment where these entrepreneurs hold strength in pursuit to their advocacy of building wealth to their family and for the nation. Helping the low-income individual to build a booming and profitable business so they could become economically selfsufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013) The researcher utilized the descriptive method of research that describes the nature of the situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al., 2010). The descriptive method was used in this study. According to Calderon and Gonzales (2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices, beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate interpretation about such data with or without the aid of statistical methods. As they stated, correlational research investigates a range of factors, including the nature of the relationship between two or more variables. This study aimed at determining the performance of micro-enterprises that availed microfinancing in Tuguegarao City, Cagayan. Specifically, this study sought answers to the five (5) sub-problems.First, what is the profile of the micro-enterprises in terms of form of business, type of business and years in operation? Second, what is the performance of the micro-enterprises that availed of micro-financing in Tuguegarao City, Cagayan in terms of Sales, Cash flow, Liquidity and Return of Investment (ROI)? Third, is there a significant difference in the level of performance of micro-enterprises for the availment of micro-financing when grouped according to profile variables? Forth, what are the problems encountered by micro-enterprises in Tuguegarao City? And lastly, what action plan can be proposed to address the problems encountered by micro-enterprises in Tuguegarao City?

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The findings of the study were arranged according to the statement of the problem. First was on the profile of the Micro-enterprises, the findings show the majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of Operations. Second, was on the performance of Micro-enterprises, the findings show the majority of the respondents had Sales of 100,001 – 500,000 and Return of Investment (ROI) of 21-40, and nearly half of the respondents had Cash flow of 50,001 – 100,000 and Liquidity of 1.51:1 – 3.00:1. Third was on the difference in the performance of the Micro-enterprises when they are grouped according to profile variable, the findings show p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to form of business. Forth was on the difference in the performance of Micro-enterprises when they are grouped according to type of business, the findings show p values of 0.427, 0.206 and 0.359 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the respondents are grouped according to type of business. Meanwhile, p value of 0.017 was obtained which was lower than the 0.05 level of significance. This shows that there is significant difference in the micro-enterprises’ performance in terms of sales when the respondents are grouped according to type of business. Fifth was on the difference in the performance of Micro-enterprises when they are grouped according to years of operations, the findings show p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to years of operation. Sixth was on the problems encountered by Micro-enterprises, the findings show the most common problems encounterd were, not enough cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in handling business, high cost of sales that resulted to the increase in selling price and natural calamities. And lastly, there is a need to proposed an action plan to enhance the Micro-enterprises in the Minicipality of Balatan, Camarines Sur. In the light of the above findingsof the study, the following conclusions were derived. (1) The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years in Operations. (2) The majority of the respondents had sales of 100,001 – 500,000 and Return of Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 – 100,000 and Liquidity of 1.51:1 – 3.00:1. (3) The micro-enterprises performance in terms of sales, cash flow, liquidity and return of investment is the same regardless of form of business. (4) The micro-enterprises performance in terms of cash flow, liquidity and return of investment is the same regardless of type of business. Meanwhile, the micro-enterprises in the services business has sales than those in the retail business. (5) The micro-enterprises performance in terms of sales, cash flow, liquidity and return of investment is the same regardless of their years of operation. (6) The most common problems encountered were, not enough cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in handling business, high cost of sales that resulted to the increase in selling price and natural calamities. (7) There is a need to comprehensively implement the proposed action plan to enhance the microenterprise in Tuguegarao City.

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TABLE OF CONTENTS Page Title Page

i

Recommendation for Oral Examination

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Approval by the Panel of Examiners

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Abstract

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Table of Contents

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Chapter 1

Page

THE PROBLEM AND ITS SETTING Introduction

1

Theoretical/Conceptual Framework

4

Operational Framework Operating Model

6 7

Statement of the Problem

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Statement of Hypothesis

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Assumption of the Study

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3

1

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Scope and Delimitation

9

Significance of the Study

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Definition of Terms

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REVIEW OF RELATED LITERATURE

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Synthesis of the Reviewed Literature

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Gaps/s Bridged by the Present Study

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RESEARCH METHODOLOGY

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Research Design

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Sources of Data Population of the Study Instrumentation and Validation Data Gathering Procedure Statistical Treatment of Data

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PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA Profile of the Micro-enterprises Performance of the Micro-enterprises That availedof Micro-financing Difference in the Performance of Micro-enterprises When they are grouped according to Form of Business Difference in the Performance of Micro-enterprises When they are grouped according to Type of Business Difference in the Performance of Micro-enterprises When they are grouped according to Years of Operation Problems Encounterd by Micro-enterprises

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SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS Summary of Findings Conclusions Recommendations

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Chapter 1 THE PROBLEM AND ITS SETTING

Introduction Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards economic development of the country. Entrepreneurs are said to be the pillar of economic progress of the country. They contribute to the pecuniary growth of the nation in terms of economic and stability of business in a global competitive world. It is however through the support given by the government where these entrepreneurs hold strength in pursuit to their advocacy of building wealth to their family and for the nation. Helping the low-income individualto build a booming and profitable business so they could become economically selfsufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013). Microfinancing in a most classical sense, helps those unemployed or low-income entity to capitulate high income as they deserve to prosper even in the small entrepreneurial economy. Most microfinance institutions (MFIs) operated on the assumption that providing micro entrepreneurs loans without articulating how, where and when microfinance would work and for whom it could work, would help the underprivileged, however, over the years, these MFIs have realized that access to credit alone will not move the poor out of poverty. Thus, from being a single-service provider of credit and nothing more, the institutions have shifted to providing what is now commonly referred to as Business Development Services (BDS). According to the most recent data, "the microfinance industry is estimated at $60 to 100 billion, with 200 million clients." However, there is much criticism on the concept. Microloans are smaller than traditional bank loans, but they have much higher interest rates. Many believe the loans are not enough to start a successful business and only provide basic needs, like food 6

and shelter, which eventually lead to more debt. However, there are many ways to ensure timely repayment on the loans. According to Investopedia, many microlenders allow borrowers to work together to repay their loans, helping each other when needed. This holds borrowers more accountable for their repayments, which in turn leads to better credit and sets them off on the right foot (World Bank, 2017). In some poor countries the people desperately need loans for them to operate or expands their farms or small businesses. Micro finance is commercial bank have histories been reluctant to make small loans to people little or no collateral. This occurs when financial organizations provide loads to low-income clients or solidarity lending groups who traditionally lack access to banking or related services (Lawrence and Weber, 2017). Micro finance can help those included in the micro-enterprises. It is generally defined as a small business employing nine (9) people or fewer, and having a Balance Sheet or turnover less than a certain amount. The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by microcredit the term microenterprise is often used. Similarly, when referring to a small, usually legal business that is not financed by microcredit, the term microbusiness (or micro-business) is often used. Internationally, most microenterprises are family businesses employing one or two persons. Most microenterprise owners are primarily interested in earning a living to support themselves and their families. They only grow the business when something in their lives changes and they need to generate a larger income. According to information found on the Census.gov website, microenterprises make up 95% of the 28 million US companies tracked by the census. From these premises, the researcher determinedthe performance of micro-enterprise in Tuguegarao City.

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Theoretical/ Conceptual Framework The study considered the concept by Ogindo (2006) of micro-financing which arose out of the need to provide to the low-income earners who were left out by formal financial institutions. The practice of micro-credit dates bank to as early as 1700 and can be traced to the Irish Loan Fund System, which provided small loans to the rural poor with no collateral. The rise of the microfinance industry represents a remarkable accomplishment taken within historical context. It has overturned established ideas of the poor as consumers of financial services, shattered stereotypes of the poor as not bankable, spawned a variety of lending methodologies demonstrating that it is possible to provide cost-effective financial services to the poor, and mobilized millions of dollars of social investment for the poor. It must be emphasized too, that the animating motivation behind the microfinance movement was poverty alleviation. Not only that, but microfinance offered the potential to alleviate poverty while paying for itself and perhaps even turning a profit doing well by doing good. This potential, perhaps more than anything, accounts for the emergence of microfinance onto the global stage. Two theoretical propositions on the macro-level for supporting microfinance interventions: economic and human resources. By enabling the establishment of new microenterprises, microfinance supports the efficient use of labour and capital as factors of production and therefore contributing to economic growth and ultimately to sustainable development. The human resources theory is quite similar to the economic one. Since it is generally accepted that microfinance is labour-intensive, facilitating access to microfinance is likely to result in the acquisition of new skills and the upgrading of existing ones and thus improve on the capacity of the poor to generate income and improve their livelihood. In addition to the discussed theories underlying microfinance, another spinoff theory is that of empowerment: the poor become

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empowered when they participate in microfinance activities. By self-selecting themselves into groups and self-managing their groups, and gaining control over the means of making a living, poor people become empowered and independent. Empowerment has been particularly relevant for women who are perceived as being marginalized in most developing countries(Chester and Kuhn, 2002).

Operational Framework The study was anchored on the concept of micro-financing as cited by Ogindo (2006), which summarizes that microfinance is a development tool that grants or provides financial services and products such as very small loans, savings, micro leasing, micro-insurance and money transfer to assist the very or exceptionally poor in expanding or establishing their own businesses. It is mostly used in developing economies where small businesses do not have access to other sources of financial assistance. Financial services generally include savings and credit; however some finance organizations also provide insurance and payment services. In addition to financial intermediation, many micro-finance provide social intermediation services such as group formation, development of self confidence and training in financial literacy and management capabilities among members of a group. The study had independent variables and dependent variables whereby the independent variables are the profile of micro-enterprises; the dependent variables are the level of performance of micro-entreprises in Tuguegarao City in terms of Sales, Cash Flow, Liquidity and Return of Investment (ROI).

Operational Model 9

Independent Variable Profile of microenterprise   

Form of Business Type of Business Years in Operation

Dependent Variable Performance of micro-enterprise  Sales  Cash Flow  Liquidity  Return of Investment

Proposed Action plan to address the problems encountered by micro-enterprises

Figure 1. The operational model of the study showing the relationship among variables.

Statement of the Problem This study aimed at determining the performance of micro-enterprisesthatavailed microfinancing in the municipality of BalatanCamarines Sur. Specifically, this study sought answers to the following questions: 1. What is the profileof the micro-enterprisesin terms of: 1.1. Form of Business 1.2. Type of Business 1.3. Years in Operation 2. What is the performance ofthe micro-enterprises that availed of micro-financing in the Municipality of BalatanCamarines Sur in terms of: 2.1. Sales 2.2. Cash Flow 2.3. Liquidity 2.4. Return of Investment (ROI)

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3. Is there a significant difference in the level of performance of micro-enterprises for the availment of micro-financing when grouped according to profile variables? 4. What are the problems encountered by micro-enterprises in BalatanCamarines Sur? 5. What action plan can be proposed to address the problems encounteredby micro-enterprises in the Municipality of BalatanCamarines Sur?

Statement of Hypothesis This study tested the following null hypothesis: Ho:

There is no significant difference in the level of performance of micro-enterprises for the

availment of micro-financing when grouped according to profile variables.

Assumptions of the Study The study rested on the following assumptions: 1. Micro-enterprises play an important role in employment creation and income generation. 2. Micro-financing helps the poor, especially rural women, develop new and strengthen existing income generation activities. 3. Respondents were objective and capable in assessing the level of performance of microenterprises in theavailment of micro financing considering some situations .

Scope and Delimitation The study sought to assess the performance of micro-enterprises in Tuguegarao City. This assessment focused on the perception of respondents on the performance of their businesses.This study involved the registered micro-enterprises of Balatan Camarines Sur 11

Business Permits and Licensing office as of September 30, 2017. It covered fifty-five (55) microenterprises whose assets and capital were less than P3million and who had availed of microfinancing from either formal or informal institutions. This study was conducted during the Academic year 2017-2018.

Significance of the Study The findings of the study in determining the performance of the micro-enterprises would benefit of the following: Micro-enterprises owners, this would help them toeasily manage their business activities most especially on the financial management side. Micro-financing institutions (MFIs), this would help the micro-enterprises addressed the problems and implement possible solutions foran effective deliverance of financing services to micro-enterprises. Prospect businessmen, this would help them about the knowledge of funding sources and idea regarding loan and profit that will compose them to become better businessmen. Official of the Province of Camarines Sur,this would help thegovernment officials in the design and implementation of the programs that could really help the micro-entrepreneurs and the micro-financial institutions. National Government Officials, this could improve public service through MFIs programs on the creation of an enabling environment, supportive regulations and provisions for a legal framework to micro-financing. Researcher,this would aid them in an effective management of financing and lending services.

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Future Researchers, this research would serveas a guide in doing their research related but not limited to what is being stated and declared.

Definition of Terms To facilitate understanding of the study, important terms were defined contextually and for operationally: Performance refers to the accomplishment of a given task measured against preset known standards of accurancy,completeness, cost and speed (Business Dictionary,2017)In the study, it refers to the return provided by micro-financing on the micro-enterprises business in Tuguegarao City. Micro-enterprises are small business with minimal employees and capital. Due to a lock of quality education, jobs and training available to people in poverty in developing countries. Micro-enterprises add value to economy and lives by creating small business opportunities, improving income and promoting commerce (Funds2orgs, 2018). In the study, these are the business with assets and capital of P3 million and below in the Municipality of BalatanCamarines Sur. Performance of Micro-enterprisesis an encompassing concept and can be defined in terms of job generation, growth, profitability, sustainability, survival and stability (Storey, 1994). In the study, this refers to the capability and ability of the micro-enterprises to compete with their competitors. Salesthe exchange or transfer of property for money or its equivalent (Spiceland, Thomas, Herrmann 2009)

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Cash Flow provides a summary of cash inflows and cash outflows during the reporting period. (Nick Aduana, 2015) Liquidity refers to the ability of a business entity to settle its currently maturing financial obligations. Obligations are currently maturing if they become due within one year from the date of the statement of financial position notwithstandingthe normal operating cycle of a business. (Nick Aduana, 2015) Return of Investmentrefers to the ratio of net income to the average total assets which is calculated by dividing the net income by the average total assets (Spiceland, Thomas, Herrmann, 2009) Micro-financing microfinance, also known as microcredit, is a type of banking service that is provided to unemployed or low-income individuals or groups who otherwise have no other access to financial services (Lawrence and Weber, 2017). In the study, this refers to a system of providing credit, mobilizing deposits and generating investment at the micro-level. Profile is a set of data often in graphic form portraying the features of something (Merriam-Webster, 2018). In the study, this refers to the characteristic, type and form of the micro-enterprises in Tuguegarao City. Single or Sole Proprietorship had a single owner called the proprietor, who often manages the business. Proprietors tend to be small retail stores or professional businesses (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the single owner of the microenterprise in Tuguegarao City Partnershipan uncorporated business owned by two or more persons voluntarily acting as partners or co-owners (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the

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type of business organization with two (2) or more owners of micro-enterprise in Tuguegarao City. Corporation is a type of business organization that is recognized under the law as an entity separate from its owners. Therefore the owners of a corporation are not personally liable for the debts of the business. (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the owners of the business who are registered to SEC. Retail a firm which sells goods to individual customers ( Collins English Disctionary, 2013). In the study, this refers to the micro-enterprises that sells goods or groceries directly to the consumers with the goal of earning a profit. Manufacturing the process of converting raw materials, components or parts into finished goods that meet a customer’s expectations or specifications(Business Dictionary, 2017). In the study, this refers to the micro-enterprises that uses components, parts or raw materials to make a finished goods. Service the action of helping or doing work for someone. No transfer of possession or ownership takes place when services are sold (Business Dictionary, 2017). In the study, this refers to the micro-enterprises who rendered services to their clients.

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Chapter 2

REVIEW OF RELATED LITERATURE

This chapter presents the literature and studies, which are significant to present the study. A synthesis of review of literature and Gaps Bridge by the present study was also included in this chapter.

State of the Art The literature and studies that were reviewed were found to have bearing on the present study. They served as bases for the conceptualization the study’s problem, research design and methodology. Financial Services Through Micro-finance According to United State Agency International Development (USAID), ensuring economic growth is broad based and reduces poverty has become a fundamental development challenge. In many countries, poor people cannot fully participate in, or enjoy the benefits of, economic growth. Poor people, women in particular, in the developing world often lack access to safe places to keep their savings. They cannot obtain credit to start a business or to grow their businesses or farms.

The poor often do not have basic services like insurance to protect themselves against drought and natural disasters. Small and very small firms owned by the poor often have little help in getting access to new technologies or business networks that could improve opportunities to sell their products and or services.

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USAID programs enhance poor people’s access to financial services such as savings accounts and credits. These programs seek to improve the quality and affordability of financial services. Extend access to excluded populations such as women, persons with disability and those living in remote areas.Assist smallholder farmers and small business entrepreneurs in selling their products by linking them with buyers and suppliers of good and services.

These programs also help small businesses access new inputs, new technology and services that lead to improved products that bigger businesses are looking to purchase.

USAID microenterprise programs improve the lives of the very poor, helping them to: recover from shocks such as a flood or death in the family; protect themselves against risks such as illness or drought; and steady home food and family purchases so that they have the ‘breathing space’ that allows them to work and toremove themselves out of poverty.

Additionally, USAID works to broaden micro-financing product offerings to include health, education, and energy, to meet the needs of the mass market.

In USAID's experience,

microfinance, when offered with other services, improves household earnings. Another major area of focus is expanding poor people’s access to financial services through mobile phone technology. Mobile money services help the poor to reduce the cost of banking transactions and have been shown to increase savings. Along with developing these services, the Agency is working to support a robust regulatory environment to ensure users’ money is not put at risk. Many small entrepreneur and micro enterprises are having a hard time in putting up or expanding a business. This is mainly because of the working capital need to start up a business. That is the main reason why micro financing being develop by several banks and institution.

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Opportunity on Availing Micro-finance

Microfinance, also called microcredit, is a type of banking service that is provided to unemployed or low-income individuals or groups who otherwise have no other access to financial services. While institutions participating in the area of microfinance are most often associated with lending (microloans can be anywhere from $100 to $25,000), many offer additional services, including bank accounts and micro-insurance products, and provide financial and business education. Ultimately, the goal of microfinance is to give impoverished people an opportunity to become self-sufficient (Lawrence and Weber, 2017).

Fauster (2014) emphasized the impact of micro-finance institutions (MFIs) on small and medium scale enterprises (SMEs) is still fraught with inconsistent results, with some concluding on positive impacts while others reporting negative impacts. This paper therefore sets out to assess the impact that the study-MFIs are making on their SMEs-client in the Wa Municipality. The with and without approach, coupled with a quasi-longitudinal approach was employed for the study. Data were gathered from the study-MFIs’ documents and questionnaire administration. Simple percentage change was used as a measure of growth of mean sales revenue. Analysis of variance(ANOVA), Spearman’s correlation coefficient (r) and coefficient of determination were also used in the analyses, with various hypotheses tests. It is concluded that the study-MFIs make positive impacts on the mean sales revenues of their client – SMEs, with great differences between those of SAT and MTA clients on the one hand and those of the control group on the other. A slight difference that exists between the two study-MFIs was accounted for by

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differences in their management approaches. A strong positive correlation exists between average sales revenue on one hand and micro loans, level of education and training on the other. MFIs generally set poverty reduction, based on microcredit, as their major goal. For example, Micro Credit Summit Campaign, an umbrella organization of major MFIs in the world, has its themes of operation and goals as: Reaching the Poorest, Empowering, Building Financially Selfsufficient Institutions, and Ensuring a Positive, Measurable Impact on the Lives of Clients and their Families(Ayesha, 2006). The success story of most of these MFIs, especially in poverty reduction and financial self-sufficiency, with some transforming into regulated non-banking financial institutions with profit motive, and others becoming banking financial institutions is now serving as an indicator of profitability to analysts, policy makers, academics and development practitioners. However, with the statement: “You’ll see that they are definitely poor… They repay the loans through nothing but hard work, every day”, the question can be raised as to whether the growth generated by the SSEs can be attributed to the support from the MFIs.

Micro-finance Revolution

According to Ledgerwood (2013) committed to strengthening financial inclusion and the microfinance sector by promoting transparency, MIX provides information on the performance of MFIs, funders, networks, and service providers serving low-income clients. Incorporated in 2002, MIX collects and reviews financial, operational, product, client, and social performance data, standardizing the information for comparability. Its published data track development of the industry, both for its operators and for those supporting it through funding, policy, or analysis. Its primary data platform, MIX Market, has delivered MFI profiles and annual standard

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performance reports since 2002. Between 2002 and 2012, its public database has grown from covering just over 100 MFIs to more than2,000 providers around the world. Its platform data include benchmarks and comparative analysis, along with quarterly results. In addition, MIX publishes annual regional updates and topical analysis of the sector through the long-standing Micro Banking Bulletin.

Based on the book of Armendariz (2010) the microfinance revolution, begun with independent initiatives in Latin America andSouth Asia starting in the 1970s, has so far allowed 65 million poor people aroundthe world to receive small loans without collateral, build up assets, and buyinsurance. This comprehensive survey of microfinance seeks to bridge the gap inthe existing literature on microfinance between academic economists and practitioners. According to Khan (2007), there are about three billion people, half of the world’s population, living on the income of less than two dollars a day. Among these poor communities, one child in five does not live to see his or her fifth birthday. One study in 2006 showed that the ratio of the income between the 5% richest and 5% poorest of the population is 74 to 1 as compared to the ratio in 1960, which was 30 to 1. To enhance international development, the United Nations Organization (UNO) announced the millennium development goals, aimed to eradicate poverty by 2015. In this regard, microfinance is the form of financial development that has its primary aim to alleviate the poverty. Governments, donors and NGOs around the world responded enthusiastically with plans and promised to work together towards the realization of these goals. In the recognition of microfinance, the UNO celebrated the year 2005 as a year of micro-credit, as a result this financing instrument is perceived worldwide as a very effective mean against hunger and poverty, mainly in developing countries.

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Microfinance is a credit methodology, which employs effective collateral substitute for shortterm and working capital loans to micro-entrepreneurs. The level of a country’s poverty has long been linked with measures of its economic development. Little consideration was given to the social reorganization of the natural resources (e.g. empowerment vs. alienation of people, sustainable use vs. depletion of the environment).

The economies with positive growth rate of Gross National Product (GNP) were measured by their poverty mitigation. This gratitude emphasized on the achievement of wealth and technology as a path for development and assumed that improved lives for all would be the natural consequence.

Microfinance is not a new development. Some developed countries as well as developing countries particularly in Asia have a long history of microfinance. During the eighteenth and nineteenth centuries, in number of European countries, microfinance evolved as a type of the informal banking for the poor. Informal finance and self-help have been at the foundation of microfinance in Europe. The early history of microfinance in Ireland can be traced back to 18th century. It is a history of how self-help led to financial innovation, legal backing and conductive regulation, and creating a mass microfinance movement. But the unpleasant regulations prompted by commercial banking brought it down. The so-called Irish loan funds appeared in early eighteenth as charities, initially financed from donated resources and offering interest free loans. They were soon replaced by financial intermediation between savers and borrowers. Loans were granted on short–term basis and installments were scheduled on weekly basis. To enforce the repayment, monitoring process was used.

Micro and Small Enterprises 21

In developing countries, micro and small enterprises (MSEs) comprise the largest part of the industrial fabric and are among the most important development agents in society. MSEs offer many millions of poor people around the world the possibility of earning money, training, work experience and employment. However, empirical evidence shows that most small enterprises never develop the business beyond a certain scale and only a small minority of them manages to upgrade to the next level of productivity, income and employment (Berner / Gomez / Knorringa 2008). The pioneering research of Mead suggests that across developed and developing economies, most MSEs are stagnating with only a handful of them managing to grow to more 20 employees. In Sierra Leone, Bangladesh, Jamaica, Honduras, Thailand and Egypt, Liedholm and Mead (1987) found that only 1 per cent of enterprises with four workers or fewer managed to upgrade into the next size category. In Kenya, Cotter (1996) found that enterprise upgrading rates are either zero or so low that no policy intervention could remedy the situation. These findings indicate the need for targeted policy interventions supported by empirical evidence – especially to stimulate MSEs and harness the private sector’s potential to be engines of economic growth in developing countries. Using the Philippines as a country case, this study explores why only a few MSEs manage to grow to medium-size or large and why enterprise growth remains elusive for most micro and small firms (Milagrosa, 2014)

According to Aldaba (2012) the Philippines has two operational definitions of small and medium enterprises. Based on employment which is the most commonly used definition in the country, the different size categories are classified as follows: Micro enterprises: 1-9 employees Small enterprises: 10-99 employees Medium: 100-199 employees Large: 200 or more employees In terms of the assets, SMEs are defined as follows: Micro enterprises: P3 million or less Small enterprises: P3-15 million Medium: P15-100 million Large: P100 or more In terms of number of 22

establishments; micro, small, and medium enterprises (MSMEs) dominate the economy and account for almost 99.6% of the total number of establishments in 2008. With a share of about 92%, micro enterprises are more predominant than small and medium enterprises which account for only 8% of the total number of establishments. Geographically, both micro and SMEs are highly concentrated in the National Capital Region (NCR) and Calabarzon area.

Micro businesses in the Philippines can be defined according to the size of assets, size of equity capital, and number of employees. A typical micro business is a business that employs nine people or fewer, with assets of ₱3 million and below. In the Philippines, about 90 percent of all the businesses are categorized as micro businesses. These consist of enterprises engaged in industry, agribusiness and or services, whether single proprietorship, cooperative, partnership or corporation. Their total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, have value of not more than ₱3 million. Of all micro businesses, about 46 percent are involved in the wholesale, retail and repair business; 27.6 percent are in the accommodations and food service; 13.5 percent are in manufacturing; while 12.5 percent are engaged in other service categories (Abrugar, 2013).

According to Asian Development Bank the impact of the availability of program loans on per capita income is shown to be positive and mildly significant. This is also true for per capita total expenditure and per capita food expenditure. But it was also found that this impact is regressive, that is negative or insignificant for poorer households and becomes only positive and increasing with richer households. This negative or insignificant impact for poorer households and positive impact for richer households provides some explanation of the mild significance of

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the coefficient for the total sample. It is worth mentioning that this is not the only study that found a regressive impact. Coleman using data from Thailand qualified the earlier no significant impact on consumption result in Coleman with the finding of a positive impact for the center leaders which are also the richer segment of the membership and that the insignificant impact is confined to poorer members. Hulme and Mosley using data from Indonesia, India, Bangladesh and Sri Lanka, on the other hand, found positive impact on income on average but in addition like Coleman also found larger impact for better-off members. Thus, the regressive result of this study may not be entirely surprising but is certainly disturbing. This indicates that among poorer borrowers the cost of and availability of program loans appears to be not sufficient to prod them into selecting more productive activities that will not only pay the cost of borrowing but also earn them some profit. One can also view this as the result of MFIs not screening projects enough to have the desired results. This implies that attention to project selection must also be an important component program design.

According to Medina (2012), the Magna Carta for micro, small and medium enterprises is a combination of laws by virtue of amendments and father amendments designed to promote the development of MSMEs. The government units such as DTI, the BangkoSentral, and the Office of the President issued separate directives and/or memoranda to facilitate the implementation of the Magna Carta. Magna Carta for MSMEs consists of Republic Act (77, amended by R.A. 8289, and further amended by R.A. 9501. These important Pieces of Legislation are directed towards the full development of entrepreneurship in the Philippines.

Performance of Micro enterprise in Hosanna

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According to the study of Ababiya (2013) the researcher examined the benefit cost ratio of micro enterprise as related to financial flow and its management to measure the performance and identified the factors that influence the performance of micro enterprise in Hosanna town. All 174 micro enterprises from three sub towns of Hosanna were included in the study and key informants from relevant government office were interviewed to collect necessary data on enterprises performance and determinant factors. Descriptive analyses of the data were computed to assess various characteristics of micro enterprises in the study area. According to the result obtained from benefit cost ratio analysis 71.8% of enterprises found in the study area survived whereas 28.2% failed. In addition, a regression model was used to identify the determinant factors that affected the performance of the enterprises. The results of the regression analysis showed that age of enterprises, age of operators, education level, number of employees, amount of initial capital, entrepreneurial skill, experience of manager, access to training and access to market were statistically significant at less than 1% significance level and had positive relationship with the performance of enterprises.

Microenterprise development is one of the most discussed antipoverty strategies in contemporary development discourses. Many developing countries have adopted this strategy to fight against poverty. In Nepal also, a micro-enterprise development program with the objectives of increasing income and employment, and thereby reducing poverty, has been implemented since 1998. Micro-enterprise development is particularly targeted to the households living below the poverty line. Among the people living below that line, the program is more focused on rural women, unemployed youth, and people from socially-excluded communities, besides confirming the hypothesized association of many factors, also nullified several other hypotheses and findings of previous studies, and explored the interesting association of some of the factors with 25

the performance of the microenterprise. The study observed an increase in the level and growth of the measures of the microenterprise’s performance, such as employment, profit, and sales and assets between BS 2068 (April 2011 - March 2012) and 2069 (April 2012 - March 2013). However, a noticeable variation in the level and growth of employment, profit, sales and asset growth among microenterprises was also observed. The study further revealed that entrepreneurrelated factors, particularly gender, educational attainment, managerial skills, the need for achievement, the need for autonomy, creative tendency, internal locus of control, and managerial foresight; enterprise related factors, particularly enterprise age, enterprise size and initial financial constraints; and environment-related factors, particularly environment hostility and social network, were among the key factors determining microenterprise performance in Nepal. On the other hand, the age of the micro-entrepreneur, previous experience, calculated risk taking traits, the enterprise sector, family environment, environmental dynamism, and environmental heterogeneity did not appear to have significant effects on microenterprise performance. The study also revealed the significant mediating effect of managerial foresight on microenterprise performance. Managerial foresight appears to mediate the effects of educational attainment, need for achievement, need for autonomy, enterprise size, initial financial constraint, environmental hostility and social network on the performance of the microenterprise (Thapa, 2013).

Microfinance Industry

Frohberg (2016) state that microfinance has become very important in global poverty reduction debates. The popular assumption is that enabling poor households access to credit helps households begin micro entrepreneurship which would enable them improve their incomes and eventually escape poverty. Evidence from research so far has been scanty, and many results

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have been highly contested. The main objective of the thesis was to analyze the impact of microfinance on household income as well as measure household vulnerability to poverty after access to microfinance. The study is an experimental case of Makueni district where participants in microfinance programmes and non participant households were studied over time; thus yielding a rich pooled data for analysis. On integrating time dynamics in the analysis, the results indicate a positive and significant impact of microfinance on household income. To this end the thesis argues that there is a role of microfinance on the improvement of household incomes. The thesis also re-asserts that providing affordable financial services to the rural population still remains to be an important component of development strategy.

In the study of (Chester, 2014) analyzed and examined in an attempt to determine if loan borrowers believed these programs were beneficial and provided a valuable service. Results from this analysis reveal several concerns facing microfinance institutions and borrowers stemming from issues of high interest rates, loans used for consumption spending, and multiple borrowing. Findings from this study can be used to guide further policy decisions and regulations regarding the microfinance industry.

In the study of Berberg (2011) strives to examine how microfinance activities can be successfully applied in the developed world. This is done through a field study in New York City. Throughout interviews and observations with three of the largest actors in New York: Acción USA, Grameen America and Project Enterprise, as well as interviews with their clients, the lending processes and key characteristics of the organizations have been mapped. Furthermore, the Federal Reserve Bank of New York has been interviewed on the general opinion of microfinance in the US. Previous theory elaborates on some of the major challenges

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with implementing microfinance activities in the developed world, such as lack of funding and cultural differences hindering the lending processes to be carried out as they are in the developing world. Henceforth, problems regarding regulation, awareness and outreach are discussed. Throughout the observation of the institutions we can confirm that some of the challenges brought up in theory actually are apparent. We do, however, question the criticism towards the use of group based lending programs in the developed world. Our study does, in contrast to previous research, imply that the concept does work as well in the US as it does in developing countries.

On the other hand the thesis emphasizes that there is need to come up with innovative microfinance institutions that are supportive of their own role in assets accumulation and wealth creation for their clients. This will involve innovative targeting of potential clients, as well as streamlined microfinance regulations to protect their clients. In particular the study cautions that the ability of households to begin informal sole micro entrepreneurships should not be assumed to be adequate for the improvement of household income. There is need to create a policy framework to spur growth not only in the micro enterprises but also in the overall rural economy that would lead to the creation of employment opportunities and an increment in the agricultural output. This is quite a big task to accomplish and may require more than one particular policy intervention. In essence this calls for both private (microfinance) and public partnerships to create the environment where such poverty reduction objectives could be realized.

Money Lending Business

According to the study of Martinez (2016), challenges are always present in the money lending business, thus, a strategy been formulated to address those challenges. Many business 28

shut down because some could not overcome the challenges, but some succeeded because of their key principles of success. It is in this light that the researcher desired to undertake this study with a view of to lend or not to lend. The research questions occurred as to what is the lived experience of money lenders and how did them apply the key principles of success to their money lending business. The study employing psychological in seven themes (always work on text, facing challenges head on, giving before receiving, ideas turned actions, value of collecting knowledge, recognizes the instinct motivational factors, knowing the importance of extrinsic motivational factor) categorized into textural (what) and structural (how) description of the phenomenon.

In the study of Guliman (2015) showed that college education increases the likelihood of having a higher level of financial literacy relative to high school education. Based on the mean percentage ratings of financial knowledge, this study found out that most of the owners of these enterprises have low levels of financial knowledge in taxation, time value of money, financial institutions and investment securities. Also, the financial skills of the respondents displayed low mean percentage ratings in savings and record keeping yet planning and budgeting skills posted a fair mean percentage rating. Thus, results showed that in general, these entrepreneurs have low levels of total financial literacy based on the measurements used. Furthermore, the correlation between financial knowledge and skills is positive yet very low. The findings have practical relevance to MSMEs and policy makers to be able to determine the interventions necessary to help the MSME sector. It is recommended that future studies be made to substantiate the results of this study considering other municipalities and cities in the Philippines.

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Microcredit is applicable only to the enterprising poor. The application of microcredit to other poverty groups who actually need subsidies and social safety nets would be a mistake. Thus, the EDC sub-component should be reformulated and revitalized following the program design of the Bangladesh Rural Advancement Committee (BRAC). Its graduated strategy for helping the poor should be applied to the poverty pyramid by categorizing the WMCIP beneficiaries into four poverty groups: (1) micro-enterprise operators or the less poor, (2) enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most vulnerable or the ultra-poor. The results further reveal that based on the poverty pyramid, the credit program designs of the Credit Assistance Program for Program Beneficiaries Development (CAP-PBD) and Quedan Rural Credit and Finance Corporation (QUEDANCOR) are readily applicable to the credit needs and financial capabilities of the enterprising poor. Beyond QUEDANCOR’s microcredit facility, the no enterprising poor may actually opt for financial assistance from cooperatives or CAPPBD to help finance their agriculture-and fishery-related production activities. On the other hand, the beneficiaries and their “not-so-strong” organizations that could not readily comply with the minimum credit standards should be provided with farm production subsidies, capability-building services and social safety nets under a special poverty alleviation project. This will enable them to pass minimum credit standards within a transition period of six months to one year (Moreno, 2011). In the study of Gamlanga (2011), the respondents status before the availment of micro – financing was moderate level along all three aspect; Financial, Socio- economic and marketing. On the other hand the status of the respondents after availment of the micro financing along with the three aspect such as financial, socio-economic and marketing is average or satisfactory. They also tested that there is a significant difference on the respondents before and after the availment 30

of micro financing. The problem encountered by the CCT- Binan clientele were high cost financing and short credit terms. While the less serious problems were bureaucratic requirements, insufficient of amount loan, loan installment default, lack of information on government financing program, and collateral requirements. On the whole the problems encountered by the CCT-Binan clientele were less serious.

According to Alzate (2013) the respondents of hybrid rice, hybrid corn, and eggplant production. Were more knowledgeable in terms of the policies implemented in availing of microfinancing than the respondents of ampalaya production. The micro financing program increased the beneficiaries’ annual average income, income per cropping season, and amount spent for food by 55%, 43%, 45% respectively.

Likewise, their crop productivity improved with improved with 29.4 % increase in their yield per cropping cycle. Policies imposed in availing of micro-financing catalyzed the respondents’ adoption of technologies in producing hybrid rice, hybrid corn and eggplant. However, these policies did not influence the respondents’ adoption of ampalaya production technologies.

Small-Scale Business Enterprises

The paper of Ruane (2016) is a two-part study of small-scale business enterprises in the Philippines: survey and empirical analysis, both of which are combined in an attempt to understand what determines entrepreneurial motivations and success in the Philippines. The survey was conducted in order to study entrepreneurship development and motivations in the Philippines and also to understand the challenges and sacrifices faced by Filipino entrepreneurs.

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In particular, this survey is quite comprehensive in scope and comprised 202 questions. Aside from data on the general characteristics of the business enterprise and the entrepreneur, the survey also asks questions about important issues in the study of entrepreneurship such as entrepreneurial intensity, sacrifice, motivation, business plans, the business' effect on the entrepreneur's quality of life, the entrepreneur's personal beliefs and attitudes, and difficulties and problems that the entrepreneur encountered at different stages of operating the business enterprise. This study also presents an empirical analysis of the determinants of success by Filipino small businesses. This analysis made use of the survey data and is based on the estimation of a regression model using Ordinary Least Squares technique. Since the 1990s, there has been a resurgence of interest on the role of small-scaled business enterprises or small and medium enterprises (both will be referred to as "SMEs" hereafter) in national and international economic and social development. This is consistent with the overall shift of development strategies in many countries toward a more decentralized, even localized, approach. As such, many scholars, practitioners, and institutions involved in economic development have begun to recognize the important roles that smaller-scale business entities play in the economy and society. More and more people are becoming convinced that these entities can be a very effective means of achieving, not only economic progress, but social goals (e.g., a more equal income and a greater appreciation for diversity in gender and race) as well. All of these suggest a greater need to increase our understanding of the nature and capabilities of family businesses and SMEs and the kinds of policies and incentive systems that would be appropriate, necessary, and effective in encouraging and strengthening them.

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Small Medium Enterprises Like those in other countries, SMEs in the Philippines make significant contributions to the overall economy and the country's pursuit of economic development. Data show Filipino SMEs to make up more than 99% of all businesses in the country, provide more than two-thirds of the country's employment, and is responsible for almost one-third of the country's income (Philippine Department of Trade and Industry, 2015). Given their economic importance (others also highlight their social significance), Filipino SMEs are an interesting subject of study. Consequently, one would expect to find numerous studies on them. This, however, is not the case, most probably because of a number of issues that complicate their study. One of these issues has to do with the different perspectives on different aspects related to SMEs. Depending on which perspective the researcher uses as the primary source of insight and information, one gets a very different picture. In the study of Filipino SMEs, at least 3 different perspectives could be identified: that of policymakers, SME owners, academician and scholars.

BMBE Law, RA 9178 Act of 2002 In Philippines, government support to SME looks very good. The Barangay Micro Business Enterprise (BMBE) under BMBE law of RA 9178 Act of 2002 was signed by President Gloria Macapagal Arroyo on November 13, 2002, to encourage the formation and growth of BMBE’s by granting them incentives and other benefits. The country recognizes that small businesses are essential to the economic development of the country. Supporting the growth of BMBEs will increase jobs, provide livelihood and a better quality of life for Filipinos. The Act then aims to “integrate micro-enterprises in the informal sector into the mainstream of the economy (Phil. Department of Trade & Industry, 2015). Registered BMBE’s may availed the

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following incentives, Income tax exemption from income arising from the operations of the enterprise; Exemption from the coverage of Minimum Wage Law (BMBE employees will still receive the same social security and health care benefits as other employees); priority to special credit window set up for the financing BMBEs and Technology transfer, production and management training and marketingassistance programs for BMBE beneficiaries; reduce the amount of local taxes, fees and charges imposed or exempt the BMBEs from local taxes, fees and charges. Based on the BMBE law, business or activity is eligible to apply as BMBE if the following were meet: The business is engaged in production, processing or manufacturing of products, including agro-processing, as well as trading and services. It has a total assets of not more than P3 million, including those arising from loans but not the land on which the plant and equipment are located. The business or service provider, in connection with the exercise of his or her profession, is not a professional duly licensed by the government after having passed a government licensure examination, such as accountants, lawyers, doctors and the like. It is not a branch, division or office of a large-scale enterprise and its policies and business modus operandi are not determined by such enterprise or by persons who are not owners or employees of said enterprise, as mandated by the Department of Finance Order No. 17-04.

Cash Management Ahmad (2015) emphasized in his paper that cash management including cash flow, sales, and return of investment are important for all businesses to strengthen their financial management and financial survival. Each business needs to have high level of cash management practices to meet the business expectation. Therefore, this study explores the extent of cash management practices applied in the micro and small businesses in four main states in Peninsular

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Malaysia. Overall findings of this study showed that cash management practices in these states are high. However, the results show that the internal control on cash management has very low implementation level. Thus, the capital providers need to re-educate the entrepreneurs on the importance of having good internal control on cash management in order to avoid any manipulation, cash shortage and other financial issues. Besides that, the result of this study is important to ensure the effectiveness of cash management in order to be able to support the financial sustainability of the business. Small Medium Enterprises (SMEs) play an important role in the economic growth, especially in the developed and developing countries (Ahmad, 2015). However, despite the contributions of small businesses to the local economy, including fostering the Gross Domestic Product (GDP), alleviating poverty, and creating jobs, SMEs worldwide are highly prone to failure. This problem happened when the entrepreneurs have limitation in handling the business from the financial aspect and the nonfinancial aspect. According to Abdul and Ahmad (2013), the financial limitations in SMEs are that the business is unable to manage the cash flow and unable to generate enough sales and revenue. In terms of the non-financial aspect, the failed business has issue with service quality, owner experience, customer satisfaction and competitors. Besides that, Aren and Sibindi (2013) revealed that the majority of SMEs failed due to poor cash management. It is because there are inevitable links between small business failures and poor or careless financial management (Drever & Hartcher, 2003). Moreover, only certain SMEs prepare good cash flow, as others are unaware or unconvinced of the benefits of accounting and financial reporting requirement for the purpose of control and also for decisionmaking (UNCTD, 2000). The study is able to fill the gaps since there are limited literatures on cash management in Malaysia. The issue of cash management practices only arises in other countries for examples, a study by Alala, Deya and Busaka (2013) in Kenya and Uganda, a study

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by Aren and Sibindi (2013) done in South African Retail Sector and a study by Gilbert, Nellson and Nicholas (2013) in Northern Uganda. Therefore, the study aims to explore the current cash management practices in micro and small businesses in Malaysia for the service sector. The contribution of the study is at least twofold. First, the study provides some insights on cash management practices in micro and small businesses. Second, the study could assist the regulators in governing the policy on financial management specifically on cash management. The paper proceeds as follows: section 2 reviews the literature review on cash management practices. Section 3 describes the research method including the sample selection and instrument used. Section 4 presents the results of the study, and the final section concludes the study and addresses its limitations and suggestions for future research. Cash Flow Cash management is the business strategy in managing cash for the purpose of optimizing liquidity (Linert, 2009). Deb, Dey and Shil (2015) specifically defined cash management as the managing of (i) cash flows into and out of the firm, (ii) cash flows within the firm, and (iii) cash balances held by the firm at a point of time. Each business needs to have proper cash management to achieve the targeted goals and objectives by enhancing their allocation and planning in the cash. From that, a good cash management will ensure that the business can achieve their main objectives in the long term period and plan for a good strategy. Although cash management is a good and important practice, many of micro and small businesses do not practice it (Jayabalan, Dorasamy, Roman & Ching; 2009; Sunday, 2011; Alala, Deya & Busaha, 2013). According to Abanis, Sunday, Burani and Eliabu (2013), among the serious issue in cash management practices is that some of the businesses do not have bank account to track and control their business income and expenses. If they have the bank account,

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the business would be able to reduce the tendency of cash shortage, set minimum cash balance and have monthly reconciliation of cash book with the bank to monitor their cash. The business also needs to have internal controls for cash management for example, sell their goods and provide their services using cash. Good internal control also requires the separation of duties in managing cash including the separation of the cashier personnel from the accounting duties. Besides that, the business needs to appoint the person that has the skill and ability to do the budgeting. Some businesses give the responsibility to do the budgeting to the owner or manager who has self interest in the business. Nonetheless, the persons are that involved with the budgeting need to avoid conflict of interest to ensure that they review the cash budget to identify if the budget is prepared based on business needs. The cash management practices are essential for every business to increase profitability, sustainability, and future planning. Cash management practices also include cash budgets and cash flows. Cash management is important in describing the inflow and the outflow of cash, which refers to the movement of cash in the receiving to payment cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari, 2014) in order to maintain the profitability and sustainability of their businesses. Besides that, poor cash management can also become challenging when it is employed to maintain the skill and knowledge among employees. In addition, according to Evans (2012), cash flow management helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor in deficit. It can minimize the positive items and maximize the negative items that affect the cash cycle. Besides that, cash management also helps in spotting potential cash flow gaps. In particular, cash management serves as a reference tool for seeking funds from bankers, and in enhancing effectiveness. Furthermore, cash flow is an important measurement used by investors for evaluating business because cash management focuses on the actual operation, eliminates

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one-time expenses and non-cash charges, and indirectly, it will give a clear picture of what the company is truly doing. Hence, efficient cash flow management system plays a vital role and helps to demonstrate if an SME is profitable (Minnery, 2006). Moreover, proper cash flow management can prevent a business from bankruptcy, and therefore, profitability and sustainability of the business are ensured (Inc., 2013). In fact, proper and efficient management of cash is imperative towards the growth of small businesses. Usually, the cash flow of a small business could become a problem when the business deals with a number of customers who are difficult to be tracked and when the business sells products due to higher demand compared to the competitors (Inc., 2013). These problems can be avoided if cash flow is managed properly.

Internal Control Muinde (2015) contended that the Small and Medium Enterprises (SMEs) play a vital role in economic contribution, property alleviation and employment. However, SMEs faced a number of constraints especially in practicing cash management. According to Abanis, Sunday, Burani and Eliabu (2013), among the weaknesses that occur in micro enterprises in terms of cash management is that, most owners do not have bank account to record their sales. This problem occurred because they do not have experience in managing enterprise. This may cause the owner to be incapable in managing their cash if there is any shortage of money. In addition, unavailability of book account can minimize the ability of owner to monitor their cash flow and manage the usage of their cash (“The importance of keeping on top of your business accounting records”, 2015). Besides that, monthly reconciliation of cash book with the bank to monitor their cash is important to each enterprise. From that, the owner may be aware if there is any cash problem and would be able to improve their cash practices. In addition, internal control plays a

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vital role in cash management practices. However, only some owners practice internal control and are aware of its importance. Those enterprises that sell their goods or services by cash must have proper internal control. In order to improve internal control, owner of enterprise may have separation of duties in managing cash. Besides that, the other element of cash management practices in the enterprise is the ability of the person that is responsible to prepare the budget. Some enterprises give the responsibility to do the budgeting to the owner or the manager. Then, the owner or manager needs to review the cash budget and identify if the budget is prepared based on their needs. In addition, the internal control can help the owner to identify their opportunities and strength of the enterprise (Jim, 2015). Moreover, Abanis et al. (2013) concluded that the person that is responsible in preparing the budget is important because good budget preparation may influence the practices of cash management in the enterprise. The researches done in South Africa and Uganda proved that cash management practices in SMEs are poor (Avika & Hari, 2014; Abanis et al., 2013). A number of small businesses are being managed without appropriate strategy and with poor skills in cash management. The efficiency of a business in managing cash may influence the growth of business operations. Failure to do so can affect business operations, as sustenance of business operations can come to a halt. Marion (2011) proved that out of five, three businesses failed within a short period of time - three years. It shows that in order to be successful in business, entrepreneurs must possess good strategies and ensure that they can achieve their targets. Besides that, according to Guptaa, Wilsonb, Gregorioua and Healya (2014), evidences pertaining to SME financing strongly indicate that firms which are unable to generate sufficient operating cash flow (OCF) are more susceptible to bankruptcy. According to Gilbert, Nelson and Nicholas (2013), problems in cash management practices occur when the management takes for granted the importance of managing cash. This

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happens when the entrepreneur does not focus on cash management. This will directly affect business operation. When businesses do not prepare cash management, they will be unaware if there is any loss in the business. Then, when the businesses realize the loss and the need to recover, loan is obtained from the bank. This will cause the winding up of the businesses as they fail in improving their cash to cover the losses, and are unable to pay their loans.

Financial Performance of SMEs According to Simon Wakaba (2013) Financial performace is a subjective measure of how well a firm can use assets from its primary mode of business to generate revenues. The term is also used as a general measure of a firms overall financial health over a given period of time, and can be used to compare similar firms across the same industry or compare industries or sectors in aggregation. The most common measure of financial performance is ratios. A ratio is simply a mathematical expression of an amount or amounts in terms of another or others. A ratio can be expressed as a percentage, as a fraction, or a stated comparison between two amounts. The recommended measures for financial analysis that determine a firms financial performance are grouped into five broad categories: liquidity, solvency, profitability, repayment capacity and financial efficiency (Maria, florica and Catalina, 2002). Liquidity refers to an enterprise ability to meet its short term ability to meet it’s short term obligations as and when they fall due. They are used to assess the adequacy of a firm’s working capital. The three basic measures are net working capital, current assets that are financed from long term capital resources that do not require repayment in the short term, implying that the portion is still available for repayment of short term debt. Current ratio measures the dept paying ability of an enterprise. A high current ratio is assumed to indicate a

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strong liquidity position while a low current ratio is assumed to indicate weak liquidity position. Quick ratio on the other hand tests the dept paying ability of an enterprise without having to rely on inventory and repayments (ormiston, 2007). The ratios is important to creditors, shareholders, suppliers, employees and other stakeholders.

Synthesis of the Reviewed Literature

The review of related literature and studies has an implication on the present study. All reviews cited were substantial because it were focused mainly on the impact and performance of micro-finance in some selected local and international rural communities. In the literature, the terms microcredit and microfinance are often used interchangeably, but it is important to highlight the difference between them because both terms are often confused.

The aim of microfinance as cited byMilagrosa (2014) and Aldaba (2012) is not just about providing capital to the poor to combat poverty on an individual level, it also has a role at an institutional level. It seeks to create institutions that deliver financial services to the poor, who are continuously ignored by the formal banking sector. Some literature states that the poor are generally excluded from the financial services sector of the economy so MFIs have emerged to address this market failure. By addressing this gap in the market in a financially sustainable manner, an MFI can become part of the formal financial system of a country and so can access capital markets to fund their lending portfolios, allowing them to dramatically increase the number of poor people they can reach.

Ahmad (2015), Frohberg (2016), Martinez (2016),Chester (2014),Ababiya (2013), Medina (2012) andBerberg (2011), cited that one of the most important aspects of microfinance 41

is savings mobilization, which is discussed in the theory part. Besides these, microfinance methodology, solidarity, human development and liquidity are also discussed in the theoretical framework.

Simon Wakaba (2013), Maria, florica and Catalina (2002), Ormiston, 2007 cited that in financial performance, assets can be considered as primary source used to generater funds. Their researches adhere to the concerns of the success criteria inlcuiding liquidity, solvency, profitability, repayment capacity and financial efficiency as part of the successful business. Moreover, inventory and repayments can or cannot be relied to the extent of a scuess business micro-enterprises.

Ruane (2016), Dey and Shil (2015), Guliman (2015), (Moreno, 2011), Gamlanga (2011) and Alzate (2013) cited that these are important to the present study because it talks about microfinance and its contribution to the improvement and poverty alleviation for millions of the poorest people of Bangladesh. Microfinance has a huge impact on the lives of millions of poor people particularly women. Numerous scholars and NGOs have been working to take microfinance within the reach of poor people, who are still not benefited by the conventional financial system.

Gap/s Bridged by the Present Study

From the above review of related literature and studies, the following gaps were determined:

1. There were no studies yet conducted on performance of micro-enterprises considering micro-enterprises owners as the respondents of the study. 42

2. There were no studies yet conducted on performance of micro-enterprises considering Balatan Camarines Sur as the place of investigation.

In view of the gaps identified, the researcher focused on the performance of the microenterprisesin Tuguegarao City.

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Chapter 3 RESEARCH METHODOLOGY This chapter presents the procedures adapted by the researchers to explain in details the research design, sources of data, population of the study, instrumentation, and validation, data gathering procedure and statistical treatment of data applied in order to come up with this study.

Research Design The researcher utilized the descriptive method of research that describes the nature of the situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al., 2010). The descriptive method was used in this study. According to Calderon and Gonzales (2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices, beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate interpretation about such data with or without the aid of statistical methods. As they stated, correlational research investigates a range of factors, including the nature of the relationship between two or more variables.

Source of Data The study had two sources of data; primary and secondary sources, the primary sources of data were the owner of micro-enterprises availed micro-finance located in Balatan Camarines Sur. Secondary sources of data were the books, thesis, journals, periodicals,magazines and internet deemed necessary to gather the needed information for the study.

Population of the Study

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The targetpopulation of this study was the micro-enterprises in BalatanCamarines Sur. There were fifty five (55) respondents were used by the researcher to provide accurate and valid solutions to those mentioned problems. The targeted population relied on the owners of different micro-enterprises. The researcher personally went to the locale of the study for the precise conduct of the investigation. Total complete enumeration was used in the study.

Instrumentation and Validation The researcher utilized self-made questionnaire consisting of three parts. Part 1 focused on the profile of micro-enterprises, part 2 was about the performance of micro-enterprises in BalatanCamarines Sur and part 3 covers the problems encountered by micro-enterprises in BalatanCamarines Sur. Since the questionnaire was self-made, it was subjected to the face and content validity. It was shown to the panel of experts in the field of specialization, in statistics and in research for their comments and suggestions. After some modifications, it was showned to the adviser for final approval and then distributed to the target respondents.

Data Gathering Procedure The researcher wrote a letter to the owners of micro enterprises. A letter to the respondents was likewise composed. Both letters informed the addressees of the purpose of the study and solicited their support to the undertaking while assuring them that all data generated were kept in strict confidentiality. The researcher explained to the respondents the manner of answering the survey questionnaire before the actual distribution was done.

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Statistical Treatment of Data The following statistical toolswere utilized in the gathered data: 1. Percentage, used to describe the profile of the micro-enterprises. 2. Mean, used to determine the performance of the micro-enterprises that availed microfinancing. 3. Mann-Whitney U test, used to determine if there is significant difference in the performance of the micro-enterprises that availed micro-financing when they are grouped according to form and type of business. 4. Kruskal-Wallis test, used to determine if there is significant difference in the performance of the micro- enterprises that availed micro-financing when they are grouped according to years of operation.

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Chapter 4 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA This chapter deals with the gathered data that will analyzed and interpreted for the better understanding of the study. The framework of the analysis and interpretation is guided by the problems stated in Chapter 1. 1. Profile of the Micro-enterprises Table 1 Profile of the Micro-Enterprises Profile Form of Business Single or Sole Proprietorship Partnership Corporation Type of Business Retail Services Manufacturing Years of Operation 1-5 years 6-10 years 10 years above

Frequency

Percentage

37 18 0

67.3 32.7 0

43 12 0

78.2 21.8 0

21 28 6

38.2 50.9 10.9

Total Number of Respondents = 55

As shown in Table 1, Profile of Micro-enterprises. As to the Forms of Business out of 55 respondents, 37 or 67.3 percent had Single or Sole Proprietorship and 18 or 32.7 percent had Partnership. As to the Type of Business out of 55 respondents, 43 or 78.2 percent had Retail and 12 or 21.8 percent had Services, and as to the Years of Operation out of 55 respondents, 28 or 50.9 percent had 6-10 years, 21 or 38.2 percent had 1-5 years and 6 or 10.9 percent had 10 years abovein operations.The result shows that majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of Operations. 47

The findings of the study support the claims and theory of Fauster (2014) which emphasized that the impact of micro-finance institutions (MFIs) on small and medium scale enterprises (SMEs) is still fraught with inconsistent results, with some concluding on positive impacts while others reporting negative impacts. This paper therefore sets out to assess the impact that the study-MFIs are making on their SMEs-client based on the forms of business, types of business and the number of years in operations. The with and without approach, coupled with a quasi-longitudinal approach was employed for the study.Data were gathered from the study-MFIs’ documents and questionnaire administration. Simple percentage change was used as a measure of growth of mean sales revenue. Analysis of variance(ANOVA), Spearman’s correlation coefficient (r) and coefficient of determination were also used in the analyses, with various hypotheses tests. It is concluded that the study-MFIs make positive impacts on the mean sales revenues of their client – SMEs, with great differences between those of SAT and MTA clients on the one hand and those of the control group on the other. A slight difference that exists between the two study-MFIs was accounted for by differences in their management approaches. A strong positive correlation exists between average sales revenue on one hand and micro loans, level of education and training on the other affecting the types of business, forms of business and the years of operation.

48

2. Performance of the Micro-enterprise that Availed of Micro-financing Table 2 Performance of the Micro-enterprise that Availed of Micro-financing Performance Sales 100,000 and below 100,001 – 500,000 500,001 – 1,000,000 1,000,001 and above Cash Flow 50,000 and below 50,001 – 100,000 100,001 – 150,000 150,001 and above Liquidity 1.50:1 and below 1.51:1 – 3.00:1 3.01:1 and above Return of Investment 20 and below 21 – 40 41 and above Total Number of Respondents = 55

Frequency

Percentage

10 39 3 3

18.2 70.9 5.5 5.5

15 26 9 5

27.3 47.3 16.4 9.1

20

36.4

24 11

43.6 20

9 35 11

16.4 63.6 20

As shown in Table 2,performance of the Micro-enterprises that availed of microfinancing.As to Sales out of 55 respondents,39 or 70.9 percent had100,001-500,000, 10 or 18.2 had100,000 below and 3 or 5.5 percent had 500,001 – 1,000,000 and 1,000,000 above Annual Sales respectively. As to Cash Flow out of 55 respondents,26 or 47.3 percent had 50,001100,000, 15 or 27.3 percent had 50,000 below, 9 or 16.4 percent had 100,001-150,000 and 5 or 9.1 percent had 150,001 above Annual Cash Flow. As to Liquidity out of 55 respondents, 24 or 43.6 percent had 1.51:1-3.0:1, 20 or 36.4 percent had 1.50:1 below and 11 or 20 percent had 49

3.01:1 above Annual Liquidity Ratio. As to the Return of Investment, 35 or 63.6 percent had 21 – 40, 11 or 20 percent had 41 above and 9 or 16.4 percent had 20 below Annual Return of Investment (ROI). The results shows that majority of the respondents had Sales of 100,001 – 500,000 and Return of Investment of 21-40, and nearly half of the respondents had Cash Flow of 50,001 -100,000 and Liquidity of 1.51:1 – 3.00:1. The findings support the theory of Cash Management by Ahmad (2015) which emphasized that cash management including cash flow, sales, and return of investment are important for all businesses to strengthen their financial management and financial survival. Each business needs to have high level of cash management practices to meet the business expectation. Therefore, this study explores the extent of cash management practices applied in the micro and small businesses in four main states in Peninsular Malaysia. Overall findings of this study showed that cash management practices in these states are high. However, the results show that the internal control on cash management has very low implementation level. Thus, the capital providers need to re-educate the entrepreneurs on the importance of having good internal control on cash management in order to avoid any manipulation, cash shortage and other financial issues. Each business needs to have proper cash management to achieve the targeted goals and objectives by enhancing their allocation and planning in the cash. From that, a good cash management will ensure that the business can achieve their main objectives in the long term period and plan for a good strategy.

3. Difference in the Performance of Micro-enterprises When They Are Grouped According to Profile Variables Table 3.1 Difference in the Performance of Micro-enterprises 50

When They Are Grouped According to Form of Business

Performance

Sales

Cash Flow

Liquidity

Return of Investment

Mean

Statistical Test Mann-Whitney U Test

pvalue

Interpretation

X1 (Single or Sole) = 312524.30 X2 (Partnership) = 287542.94

U = 304.500 Z = 0.511

0.609

Not Significant

X1 (Single or Sole) = 130496.43 X2 (Partnership) = 92577.47

U = 227.000 Z = 1.901

0.057

Not Significant

X1 (Single or Sole) = 2.1316 X2 (Partnership) = 2.4506

U = 239.000 Z = 1.687

0.092

Not Significant

X1 (Single or Sole) = 33.54 X2 (Partnership) = 33.89

U = 291.000 Z = 0.754

0.451

Not Significant

0.05 level of significance As shown in the Table 3.1, for the difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to form of business, p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to form of business. The micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment is the same regardless of form of business. Table 3.2 Difference in the Performance of Micro-enterprises When They Are Grouped According to Type of Business Performance

Mean

Statistical Test Mann-Whitney U Test

51

pvalue

Interpretation

Sales

Cash Flow

Liquidity

Return of Investment

X1 (Retail) = 229770.79 X2 (Services) = 571585.67

U = 140.500 Z = 2.395

0.017

Significant

X1 (Retail) = 75230.97 X2 (Services) = 271652.58

U = 219.000 Z = 0.795

0.427

Not Significant

X1 (Retail) = 2.3395 X2 (Services) = 1.8650

U = 196.000 Z = 1.264

0.206

Not Significant

X1 (Retail) = 33.12 X2 (Services) = 35.58

U = 213.000 Z = 0.918

0.359

Not Significant

0.05 level of significance As shown in table 3.2 , for the difference in the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the respondents are grouped according to type of business, p values of 0.427, 0.206 and 0.359 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the respondents are grouped according to type of business.

The micro-enterprises’

performance in terms of cash flow, liquidity and return of investment is the same regardless of type of business. For the difference in the micro-enterprises’ performance in terms of sales when the respondents are grouped according to type of business, a p value of 0.017 was obtained which was lower than the 0.05 level of significance. This shows that there is significant difference in the micro-enterprises’ performance in terms of sales when the respondents are grouped according to type of business. The micro-enterprises in the services business has sales than those in the retail business. Table 3.3 Difference in the Performance of Micro-enterprises 52

When They Are Grouped According to Years of Operation

Performance

Sales

Cash Flow

Liquidity

Return of Investment

Mean

Statistical Test Kruskal-Wallis Test

pvalue

Interpretation

X1 (1-5 years) = 194631.14 X2 (6-10 years) = 299630.71 X3( 11 years and above) = 710376.33

X2 = 5.705

0.058

Not Significant

X1 (1-5 years) = 65719.33 X2 (6-10 years) = 110704.16 X3( 11 years and above) = 335823.33

X2 = 3.893

0.143

Not Significant

X1 (1-5 years) = 2.1352 X2 (6-10 years) = 2.3546 X3( 11 years and above) = 2.0350

X2 = 2.136

0.344

Not Significant

X1 (1-5 years) = 28.29 X2 (6-10 years) = 34.96 X3( 11 years and above) = 46.33

X2 = 2.943

0.230

Not Significant

0.05 level of significance As shown in the Table 3.3, for the difference in the micro-enterprises’ performance in terms of “sales”, “cash flow”, “liquidity” and “return of investment” when the respondents are grouped according to years of operation, p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of “sales”, “cash flow”, “liquidity” and “return of investment” when the respondents are grouped according to years of operation. The micro-enterprises’ performance in terms of “sales”, “cash flow”, “liquidity” and “return of investment” is the same regardless of their years of operation. The findings of the study support also the theory of Cash management by Ahmad (2015) in which the difference in the performance of micro-enterprises is important in describing the inflow and the outflow of cash, which refers to the movement of cash in the receiving to payment cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari, 2014) in order to maintain the profitability and sustainability of their businesses. Besides that, poor cash 53

management can also become challenging when it is employed to maintain the skill and knowledge among employees. In addition, according to Evans (2012), cash flow management helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor in deficit. It can minimize the positive items and maximize the negative items that affect the cash cycle. Besides that, cash management also helps in spotting potential cash flow gaps. In particular, cash management serves as a reference tool for seeking funds from bankers, and in enhancing effectiveness. Furthermore, cash flow is an important measurement used by investors for evaluating business because cash management focuses on the actual operation, eliminates onetime expenses and non-cash charges, and indirectly, it will give a clear picture of what the company is truly doing.

4. Problems Encountered by Micro-enterprises

Table 4 Problems Encounted by Micro-enterprises Problems Encountered

Frequency

Percentage

Rank

Financial Not enough cash to purchase raw materials,merchandise & Supplies Financial problem in procuring new equipment

33

60

1

6

10.91

2.5

Poor cash management that resulted to a multiple cash loan

6

10.91

2.5

No savings Negative ROI Profit was used for personal expenses Marketing There are months that we don’t have income due to calamities like typhoon and even we are affected by mayon volcano eruption

4 4 2

7.27 7.27 3.64

4.5 4.5 6

1

1.82

5.5

None at the moment, theres only few barbershop here in Balatan

1

1.82

5.5

54

Competing with super malls and big grocery stores Lots of competitors Lack of marketing strategy Lack of business ideas Entrepreneural Lackof training in handling people Proper customer communication Some farmers forget to pay their debts Lack of idea & Strategy Im not a risk taker; easily discourage Lack of training in handling the business Mahirap makipag sabayan sa malalaking kompanya Limited knowledge on the new technology Economic High Tax rate High price of fuel due to additional tax

12 22 16 3

1.82 40 12.73 5.45

3 1 2 4

13 5 2 10 1 14 1 9

23.64 9.09 3.64 18.18 1.82 25.45 1.82 16.36

2 5 6 3 7.5 1 7.5 4

20 3

36.36 5.45

2 3

High cost of sales that resulted to the increase in selling price

31

56.36

1

customers complain on our retail price Social Natural calamities

1

1.82

4

28

50.91

1

customers complian if you did not allow them to buy on credit

9

16.36

2

Customers that are hard to deal Unsecured Facilities None Demanding clients/costumers

5 4 1 8

9.09 7.27 1.82 14.55

4 5 6 3

Total number of respondents = 55

As shown in Table 4, problems encountered by Micro-enterprises. As to financial problems encountered out of 55 respondents, 33 or 60 percent says they “don’t have enough cash to purchase raw materials, merchandise and supplies”, 6 or 10.91 percent says that they are having “financial problem in procuring new equipment” and poor cash management that resulted to a multiple cash loan” respectively, 4 or 7.27 percent says that they “don’t have savings” and had a “negative ROI” respectively while the remaining 2 or 3.64 percent says that their “profit was used for personal expenses”. As to the Marketing problems encountered out of 55 respondents, 22 or 40 percent says they had “lots of competitors”, 16 or 29.09 percent says that they had “lack of marketing strategy”, 12 or 21.82 says that they’re “competing with super malls and big grocery stores” , 3 or 5.45 percent says that they had “lack of business ideas” and 1 or 1.82 percent says “there are months that we don’t have income due to calamities like typhoon 55

and even we are affected by Mayon Volcano eruption” and none at the moment, there’s only few barbershop here in Balatan, respectively. As to the Entrepreneural problems encountered out of 55 respondents, 14 or 25.45 percent says they had “lack of training in handling the business”, 13 or 23.64 percent says they had “lack of training in handling people” , 10 or 18.18 says that they had “lack of idea and strategy” and Limited knowledge on the new technology respectively, 5 or 9.09 percent says that they had problems with “proper customer communication”, 2 or 3.64 percent says that “some farmers forgot to pay their debts” and 1 or 1.82 percent says that she’s “not a risk taker as she got easily discouraged”. As to the Economic problems encountered out of 55 respondents, 31 or 56.36 percent says that “high cost of sales that resulted to the increase on their selling price”, 20 or 36.36 percent says “high tax rate”, 3 or 5.45 percent says “high price of fuel due to additional tax” and 1 or 1.82 percent says “customer complains on their retail price”. As to Social problems encountered out of 55 respondents, 28 or 50.91 percent says “natural calamities” , 9 or 16.36 percent says” customers complain if you did not allow them to buy on credit”, 8 or 14.55 percent says” demanding clients/customers”, 5 or 9.09 percent says “customers that are hard to deal”, 4 or 7.27 percent says “unsecured facilities” and 1 or 1.82 percent says “none”. The results shows the most common problems encounterd were,not enough cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in handling business, high cost of sales that resulted to the increase in selling price and natural calamities.

5. Proposed Action Plan to the Micro-Enterprises in Tuguegarao City

56

Activity

Objectives

Time Frame

Persons Involved

Expected Outcomes

Rationale: 57

Budget Allocatio n

Sources of Fund

Success Indicators

Meeting with the Microfinance Institution s, Local Governme nt and NGO’s Planning for the various activities and program to be done

Financial Literacy

Build Capacity of the Local Microfinance Associatio n

Microfina nce Legislatio n

To conduct a meeting regarding the proposed plan to address microfinance status in Balatan, Camarines Sur

May 2018

Microfinance Institutions, Local Governmen t and NGO’s

The Microfinance and government officials of the municipality will be informed about the plan and ideas The letter of request will be rendered intended for the activities of micro-finance

1,000 pesos

Aid and Donation from Microfinance, Local Governme nt, NGO’s

To plan regarding the activities to be done in addressing micro-finance activities in the Municipality of Balatan, Camarines Sur Develop a comprehensive internal manual with procedures to better educate and equip the target market with muchneeded information and tools to reduce overindebtedness. Develop the association’s internal policies and procedures to support its role as a selfregulatory body and participate actively in the activities and meetings of the Local Microfinance Association. Establishment of and participation in a working group of sector representatives to inform the process and ensure that the resulting rules

May 2018

Microfinance Institutions, Local Governmen t and NGO’s

May – June 2018

500 pesos

Aid and Donation from Microfinance, Local Governme nt, NGO’s

Microfinance Institutions, Local Governmen t and NGO’s

Comprehensiv e Internal Manual to support client’s awareness

1,000 pesos

Aid and Donation from Microfinance, Local Governme nt, NGO’s

97% of the comprehen sive internal manual were drafted and ready for reviews

May – June 2018

Local Microfinance Association

Development of the association’s strategic and business plan covering its activities over the next 5 years to support the revised policy framework.

2,000 pesos

Donation from the Associatio n

95% of building capacity were strengthen and enabled.

June 2018

Local Microfinance Association

Development of the proper legislation, either in the form of a specialized law or regulations, to define and rationalize activities in the

1,000 pesos

Aid from Local Microfinance Associatio n

95% of supervisor y and internal capacity were established

58

95% of Microfinance, Local Governme nt, NGO’s attended the meeting 95% of the plans were finalized

Social Performan ce Monitorin g

Promote New Product Developm ent

Explore Innovative Delivery Channels

and regulations promote rather than hinder the development of the microfinance sector. Standardize and increase the market research/client surveys to improve and expand the disbursement of the industry services and resources that have the highest beneficial impact on the standard of living for the poor and unemployed population. Develop new products that will increase depth and breadth of outreach (i.e. home improvement, education, environmental conservation, etc.) and work to apply the necessary surveys and market studies in order to provide our clients with various products matching their growing needs Adapt the latest technologies to serve the microfinance target market (i.e. mobile banking, computers and

sector.

June 2018

Microfinance Institutions, Local Governmen t, NGO’s, Association s, and clients

Had undertaken impact study on clients to measure the sectors capacity, success/ failure reasons.

1,000 pesos

Aid from Microfinance Institution s, Local Governme nt, NGO’s, Associatio ns, and clients

95% of the survey were launched and social performan ce indicators were introduced .

June July 2018

Microfinance Institutions, Local Governmen t, NGO’s, Association s, and clients

Development and hand out customer satisfaction surveys regarding current product portfolio and prospective products and services.

500 pesos

Aid from Microfinance Institution s, Local Governme nt, NGO’s, Associatio ns, and clients

97% had applied a market survey covering the economica l sectors and project characters in our branches areas.

June – July 2018

Microfinance Institutions, Local Governmen t, NGO’s, Association s, and

Diversified mode of client contact and loan payment to include the more innovative services such

3,000 pesos

Aid from Microfinance Institution s, Local Governme nt, NGO’s, Associatio

95% had established joint programs with reputable developme nt entities.

59

the internet to support education, etc.).

clients

Support to MFI transforma tion

Launch the process of transformation into a for profit company.

July 2018

Microfinance Institutions, Local Governmen t, NGO’s, Association s, and clients

Strengthen ing operations and governanc e practices

Monitor and maintain institutional best practices and improve institutional efficiency and productivity to reduce operational costs

August 2018

Microfinance Institutions, Local Governmen t, NGO’s, Association s, and clients

as mobile banking; in order to promote time and fiscal efficiency for both client and company. Well Transformed Micro-finance Institutions

Strengthened program governance with establishment of independent audit committees, ALCO committees, Board meeting structures etc.

ns, and clients

1,000 pesos

3,000 pesos

Aid from Microfinance Institution s, Local Governme nt, NGO’s, Associatio ns, and clients Aid from Microfinance Institution s, Local Governme nt, NGO’s, Associatio ns, and clients

97% of the MFI were transforme d and developed

95% of the operations and governanc e practices were adhered and strengthen

Chapter 5 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

This chapter presents the summary of findings, conclusion drawn and the recommendations made by the researcher.This study was based on the results of the data gathered from the respondents’ questionnaires. The researcher utilized the descriptive method of research that describes the nature of the situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al., 2010). The descriptive method was used in this study. According to Calderon and Gonzales 60

(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices, beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate interpretation about such data with or without the aid of statistical methods. As they stated, correlational research investigates a range of factors, including the nature of the relationship between two or more variables. This study aimed at determining the performance of micro-enterprisesthatavailed microfinancing in the municipality of Tuguegarao City. Specifically, this study sought answers to the following questions: 1. What is the profile of the micro-enterprises in terms of: 1.1. Form of Business 1.2. Type of Business 1.3. Years in Operation 2. What is the performance ofthe micro-enterprisesthat availed of micro-financing in Tuguegarao City in terms of: 2.1. Sales 2.2. Cash Flow 2.3. Liquidity 2.4. Return of Investment (ROI) 3. Is there a significant difference in the level of performance of micro-enterprises for the availment of micro-financing when grouped according to profile variables? 4. What are the problems encountered by micro-enterprises in Tuguegarao City? 5. What action plans can be proposed to address micro-enterprises in Tuguegarao City? 61

Summary of Findings The finding of the study were arranged according to the statement of the problem:

1. Profile of Micro-enterprises The findings shows the majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of Operations. 2. Performance of Micro-enterprises The findings shows the majority of the respondents had sales of 100,001 – 500,000 and Return of Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 – 100,000 and Liquidity of 1.51:1 – 3.00:1.

3. Difference in the Performance of the Micro-enterpriseswhen they are grouped according to profile variable The findings shows p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to form of business.

4. Difference in the performance of Micro-enterprises when they are grouped according to type of business The findings shows p values of 0.427, 0.206 and 0.359 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the respondents are grouped according to type of business. Meanwhile, p value of 0.017 was obtained which was lower than the 0.05 level of significance.

62

This shows that there is significant

difference in the micro-enterprises’ performance in terms of sales when the respondents are grouped according to type of business. 5. Difference in the performance of Micro-enterprises when they are grouped according to years of operations

The findings shows p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained which were higher than the 0.05 level of significance. This shows that there is no significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment when the respondents are grouped according to years of operation. 6. Problems encountered by Micro-enterprises The findings shows the most common problems encounterd were, not enough cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in handling business, high cost of sales that resulted to the increase in selling price and natural calamities.

7. There is a need to proposed an Action plan to enhance the Micro-enterprise in Tuguegarao City.

Conclusion In the light of the above findings of the study, the following conclusions were derived: 1. The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of Operations.

63

2. The majority of the respondents had sales of 100,001 – 500,000 and Return of Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 – 100,000 and Liquidity of 1.51:1 – 3.00:1.

3. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of investment is the same regardless of form of business. 4. The micro-enterprises performance in terms of cash flow, liquidity and return of investment is the same regardless of type of business. Meanwhile, the micro-enterprises in the services business has sales than those in the retail business. 5. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of investment is the same regardless of their years of operation.

6. The most common problemsencountered were, not enough cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in handling business, high cost of sales that resulted to the increase in selling price and natural calamities 7. There is a need to comprehensively implement the proposed action plan to enhance the micro-enterprise in Tuguegarao City.

Recommendation In the light of the findings and conclusions, this are offered as recommendation for possible actions:

1. Training and knowledge dissemination is the need of the hour and microfinance information exchange should be established by NGOs/Other stakeholders with the active support of the government. 2. Absorption of Micro-entrepreneurship by Tuguegarao City, Cagayan and other entities. 64

3. Implementing entrepreneurial ideas in microenterprise bring more profit and productive result as their entrepreneurship is for their survival. Therefore, combination of microfinance and entrepreneurship is a very effective developmental tool that can alleviate poverty and empower people in a better way. 4. This research provides the future researchers an overview of micro-enterprises as to help in sustainable rural development, marketing of products, training and its effectiveness in group management and income generating activities, sustainable alternative livelihood practices brought by microfinance, microfinance and role of microfinance in rural development in the context of the emerging threats of globalization.

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