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1 CHAPTER I

2 THE PROBLEM AND ITS SETTING

4 Introduction

5 The importance of money in the nation’s economy has been clearly

6 indicated and aptly stressed. However, in spite of its multi-varied functions,

7 money is far from enough. In fact, If all economic activities were to rely on the

8 use of money alone, production would tend to slow down its space. And so with

9 consumption. The consequent result will therefore be a lowering of standards of

10 living. Hence, the need for a system of credit.1

11 In the various stages of economic development, not a few former

12 underdeveloped nations have achieved higher levels of stability and growth in

13 both economic and social endeavours. It is most evident that the credit system,

14 among other things, has been very instrumental in the development and

15 progress of nations. Needless to say, that the rate of economic growth of a

16 country depends on the availability of sufficient credit, and of course on the

17 proper use of credit. 2

18 The Credit System reflects in many ways the degree of economic and

19 social values and institutions pervading in a particular society at a given point in

20 time. Credit being a tool of development and progress of people and society,

21 has, since ancient times to the present, served the specific and relevant needs of
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22 the economy. However, in not a few instances in the past and in the present,

23 credit has been improperly used by both individual and institutional borrowers.

24 They have utilized their loans only to promote their own personal interests and

25 welfare at the expense of real productivity and national development.3

26 In recent years with the influx of big investment in consumer’s products:

27 there’s also the trend to increase demand in the market creating vacuum in the

28 purchasing power of the buying public because of unavailable cash on hand.

29 In these context credit facilities need to meet such opportunities which

30 normally cater banks and other big financial institution .However ,with the

31 emerging and fast economic activities: competition to deliver services become a

32 leading scenario wherein Lending businesses fits in to the role to address the

33 leading trend in moving economy in a fast and efficient manner.

34 This research study arose out of the need to know more about the Credit

35 Practices and Performance of Selected Lending Companies in granting loans.

36 Thus, the researchers found this aspect interesting and must be dwelled on. In

37 addition, several lending companies have risen from the past years in Legazpi

38 that shows just how effective this kind of business is.

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43 Statement of the Problem

44 The purpose of this study was to determine the Credit Practices and

45 Performance of Selected Lending Companies in Granting Loans in Legazpi City

46 specifically Equal Lending Investors Corp, Extendedline Credit Corporation and

47 First Inner Trade Credit Corporation this study sought to answer to the following

48 questions:

49 1.) A. What are the profile of selected lending companies terms of:

50 a) Type of Ownership

51 b) Years of Operation

52 c) Loan Exposure

53 d) Average Collection Rate

54 B. What are the profile of the Clients in terms of:

55 a) Type of Borrower

56 b) Average Amount Borrowed

57 2.) What are the Credit Practices and Performance of selected lending

58 companies terms of:

59 A. Lending Practices

60 a) Processing

61 b) Collection

62 c) Terms and Condition

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65 B. Lending Status

66 a) Age of Receivable

67 b) Collection Trend

68 c) Receivable Turnover

69 d) Number of Days Collected

70 3.) What recommendations may be proposed to enhance the credit practices

71 and performance of selected lending companies.

72 Scope and Limitation

73 This study focused on the Credit Practices and Performance of selected

74 lending companies in Legazpi City, which stated in the profile: types of

75 ownership, years of operation, types of loans granted and average collection

76 rate. In addition, for client’s profile: type of borrower and average collection

77 borrowed. Furthermore, lending practices: processing, collection, terms and

78 condition. Also, terms of lending status: age of receivable, collection trend and

79 receivable turnover.

80 This study is limited to Equal Lending Investors Corp, Extendedline Credit

81 Corporation and First Inner Trade Credit Corporation. Any other matter that

82 researchers did not include were not part of the study.

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86 Significance of the Study

87 This study is deemed beneficial to:

88 Management of the selected lending institutions, this study will help

89 the management to enhance their company credit practices and performance.

90 Employees, this study will give awareness and understanding with

91 regards to their credit practices and performance.

92 Borrower, this study may be beneficial to the present and potential

93 borrowers.

94 Government Agencies ( B.I.R ., SEC ,LGU) ,The study will be beneficial

95 to government agencies such as B.I.R, in assessing the taxes to paid from their

96 operation, to the SEC for them to know those in financial industry who are

97 breaking SEC rules and LGU to know how this lending institution contribute in

98 the progress of the city.

99 Present and Future Researchers, this study may be used as one of

100 other sources of the information and data in their research. This may also

101 contribute additional knowledge about credit practices and performance of

102 selected lending companies in granting loans in Legazpi City .

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107 Notes

Gregorio S. Miranda., Ph. D., Essentials of Money Credit and Banking

1

revised edition, 2001, accessed November 29 ,2018.

2
Feliciano R. Fajardo, Manuel M. Manansala ,Money Credit and Banking
4th Edition accessed November 29,2018

3
Feliciano R. Fajardo, Manuel M. Manansala ,Money Credit and Banking
4th Edition accessed November 29,2018