ASSESSMENT CREDIT POLICY OF RUSI MOTORCYCLE LIBERTAD

BRANCH, BUTUAN CITY

A Thesis
Presented to the Faculty of the College of Business Administration
ACLC COLLEGE OF BUTUAN

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Science in Business Administration

by

Hillary Sean Liparanon

Norfred Allen Ducena
Benjamin Acido
Norlailah Asum
Jolina Peligro
Roan Cañete
Background of the Study

The Motorcycle Dealers' of RUSI BUTUAN CITY LIBERTAD BRANCH was

established on November 1st, 2010, located in km.6 Libertad Butuan City and

have been serving the residence in Butuan for 12 years. Rusi Libertad is the

main branch of all branches in caraga region, as part of RUSI Corporation.

With the mission “As a trustworthy and dedicated company, we commit

to:Provide efficient and immediate delivery of services to customers through

direct selling from an extensive network strategically located around the

country.”

the company had 5,895 total account sales, 183,065,810 total account

receivable, 9,505,610 total number of bad debts, and 2,000 clients with

delayed payments. This year, they sold approximately 4,485 motorcycles for

cash and credit. The motorcycle models that are being sold are the XRM

DELTA 110, RAIDER DL 150, and the most popular model, the HABAL-

HABAL type, because of their style that fits in with having a business,

especially in an rural area. While having a great sale is a success, they also

had credit problems, just like any other business. They currently have

accounts of clients who deal with late payments, instances where the creditor

is missing, and so the motorcycle, or in other words, a bogus buyer and a

turn-over of the item. A driving license, proof of income, a co-maker (who

should be a family member), a valid ID, and two recent photos are required in

order to purchase a motorcycle. The consumer can choose an installment

period of 12 months, 24 months, or 36 months. There would be a 3% monthly

penalty if the creditor failed to pay it by the maturity date. RUSSI motorcycle

dealers offer daily, weekly, every 15th, and monthly payments for the

convenience of their customers. A temporary deposit will be made with the

store up until a promissory note is made if the debtor is unable to pay after a

month. In the event that the creditor is unable to complete payment during the

grace period of six months and does not return the motorcycle, they will either

charge the co-maker or have a summons issued to their address. Legal action

will be taken if payment is not received for more than six (6) months and will

be reported to the Department of Action Center six months after the summons

was issued in the barangay.

Motorcycles are inexpensive form of motorized transport in any part of

the world. In the country, it is used as a personal service and public transport

like tricycle and “habal-habal” especially, in the sub-urban areas all over the

Philippines (Guillen & Ishida, 2004). Many passengers and car owners are

choosing to acquire and utilize motorcycles as a form of transportation in

today's traffic circumstances, where commuters are complaining of the daily

traffic snarl on the city's main roads (Hanlon, 2012; Reinsalu, 2018). In fact,

Magkilat (2014) stated that in terms of production volume, the Philippines

ranked the fourth largest in ASEAN surpassing Malaysia. The Philippines also

ranked 8th world’s motorcycle hub overtaking Japan. Aside from a strong

domestic market, motorcycle manufacturing has also a wide industry linkage

(Carmudi, 2018; Tamehiro, 2019). The annual registration of new motorcycle

is much higher than the annual registration of all other type of vehicles

combined (Department of Land Transportation, 2015).

 Credit risk management is an approach structured to manage

uncertainties through identification, assessment, monitoring, and control of

credit risk arising from any possibility of default from repayment of a loan

(Bashabe, Kalu, & Amu, 2017). Providing credit allows the firms' revenue to

increase and ultimately drive up the financial success. Most businesses use

credit as their primary source of income, but they also consider credit

management, which helps them reduce risk and prevent financial trouble and

bankruptcy. This is because when businesses extend credit, they run the risk

of default (risks of interest and principal repayment), which must be efficiently

managed to achieve the necessary level of loan growth and performance

(Banta et.al., 2017).

The researchers conducted this study to identify the problems

encountered by motorcycle dealers and to determine how motorcycle dealers

manage their accounts receivable in terms of payments from their customers

and what penalties they imposed. This study intends to assist their credit

policy by reducing losses and monitoring their credit risk. The organization

may enhance its overall performance and gain a competitive edge by

implementing effective credit risk management.

 
Theoretical Framework

This study is anchor to the Fico scoring model developed by Fair Isaac

Corporation in 1989. This model is considered the most reliable because it

has the best track record for customer credit scores. Credit scores are a way

to measure and assess a person's creditworthiness. Customers receive a

score between 300 and 850 using the "traditional" FICO scoring approach. A

score of less than 600 is regarded as poor. An outstanding score is one that is

higher than 740. Between average and above average is regarded as in

between. A customer's credit information, such as repayment history,

delinquency history, duration of credit history, and total debt, is used to create

a credit scoring model. All of this credit information for a new client is

compiled from credit groups and agencies. Businesses can determine a

customer's credit score, risk class, and credit limit by incorporating this credit

data into a scoring model.

 This model is regarded as the most reliable because it has the finest

track record for consumer credit scores. Credit scores are used to quantify

and analyze a person's creditworthiness. Regarding our research, it is all

about evaluating Rusi Motorcycle's credit policy. We can examine all of the

sales track records, not just sales, but also, as in this example, the customer's

credit information, such as repayment history, delinquency history, duration of

credit history, and total debt. The credit score is a way to evaluate and assess

a person's creditworthiness in this model, and in our study, it is a tool to

assess the credit policy of the company Rusi Motorcycle.