Final Hardbound

BORROWER’S APTITUDE AND ATTITUDE TOWARDS MICROFINANCE
LOAN PAYMENT
PACARAT, REJE ANN B.

SAING, ROBERTO JR. C.
An Undergraduate Thesis
Submitted to the Institute of Cateel Extension Campus
of the Davao Oriental State University
In Partial Fulfillment of the Requirements
For the Degree
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

MAJOR IN FINANCIAL MANAGEMENT
June 2024
ii
APPROVAL SHEET
This thesis here to attached entitled “Borrower’s Aptitude and Attitude
Towards Microfinance Loan Payment”, prepared and submitted by Reje Ann
B. Pacarat and Roberto Jr. C. Saing, is hereby recommended for approval and
acceptance.
Endorsed by:
LENETH PEARL S. PINGOT

Adviser
____________________
Date
Approved by the Panel Members:
RICHARD C. MARAVILLAS
Chair
____________________
Date
REMAR I. PABALAY JADE S. CERVANTES

Member Member
____________________ ___________________
Date Date
Accepted in partial fulfillment of the requirements for the degree in Bachelor of

Science in Business Administration Major in Financial Management.
JILLA MAE D. SUSADA

Thesis Coordinator
____________________
Date
JILLA MAE D. SUSADA RICHARD C. MARAVILLAS

Program Head Dean
____________________ _____ __________________
Date Date
iii
DEDICATION
This study was dedicated wholeheartedly to those individuals who
significantly contributed to the process of fulfilling this research.
To our very supportive parents who tirelessly showed efforts to motivate,
provided us with our needs, and helped us with any problem we faced that
inspired us to do so in this field.
To our sisters, who are always there to check on us and believe we can
make it.
To our home friends, who are our constant support and encouragement,
who make us feel better and motivate us to finish this research.
To our panelist and advisers who helped us improve our research, made
the extra effort to check and accommodate us despite their busy schedules, and
made this research more valuable and impactful.
Lastly, we offer to our Almighty God, who gives us wisdom, strength, mind
power, and skills that we can use to accomplish this research.

iv
ACKNOWLEDGEMENT
This research has been a collaborative effort and we are indebted to
numerous individuals and entities whose contributions have been invaluable
throughout this journey.
First and foremost, we would like to express our sincere gratitude to
Davao Oriental State University for providing us with the opportunity to undertake
this research project. To Richard C. Maravillas, esteemed chair panelist, and
panel members Remar I. Pabalay and Jade S. Cervantes, we highly appreciate
your priceless support, without which we could not have gone through this
endeavor. Also, we give our heartfelt appreciation to our adviser, Leneth Pearl S.
Pingot, whose technical knowledge, patience, and motivation played an
important role in shaping our work and making it better than it would have been.
Additionally, we would like to thank our respondents who without whom
this study could not have taken place as they provided their cooperation and
participated in it. We cannot forget the role that our families and friends played in
supporting us throughout this journey who continuously motivated us till now
financially and emotionally.
Lastly, but never least of all, may we humbly recognize the blessings of
God Almighty, whose divine guidance has served as our inspiration and strength
along the way.
REJE and ROBERTO

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TABLE OF CONTENTS
TITLE PAGE
Title Page i
Approval Sheet ii
Dedication iii
Acknowledgement iv
Table of Contents v
List of Tables vii
List of Figures ix
List of Appendices x
List Plates xi
Abstract xii
CHAPTER 1 INTRODUCTION
Background of the Study 1
Significance of the Study 3
Statement of the Problem 4
Objectives of the Study 5
Scope and Limitation 5
Conceptual Framework 5
Definition of Terms 6
CHAPTER 2 REVIEW OF RELATED LITERATURE
Microfinance Industry in the Philippines 7

vi
Borrowers Qualities for Loan Availment in

Microfinance Institution 9
Borrowers Loan Repayment Performance 16
Borrowers Attitude and Aptitude Loan

Repayment Performance 23
CHAPTER 3 METHODOLOGY
Research Locale and Duration 32
Research Design 33
Respondents and Sampling Procedure 33
Research Instrument 33
Data Gathering Procedure 34
Data Analysis 35
CHAPTER 4 RESULTS AND DISCUSSION
Demographic Profile of the Respondents (Aptitude) 37
Level of Borrowers' Attitude toward Loan Payment 42
Significant Difference between the Aptitude and

Attitude of Borrowers toward Loan Payment 48
CHAPTER 5 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary 55
Conclusion 57
Recommendations 58
REFERENCES 59
APPENDICES 69
PLATES 79
CURRICULUM VITAE 80
vii
LIST OF TABLES
TABLE NO. PAGE
1 Interpretation Table for Borrower’s Attitude 36
2 Distribution of respondents in terms of Marital status 37
3 Distribution of respondents in terms of the number of

Dependents 38
4 Distribution of respondents in terms of Age level 39
5 Distribution of respondents in terms of Educational level 40
6 Distribution of respondents in terms of Income level 40
7 Distribution of respondents in terms of Type of Savings 41
8 Distribution of respondents in terms of Type of Assets 42
9 Level of Borrowers Attitude towards loan payment 42
10 Level of Borrowers Attitude on Willingness to Pay 44
11 Level of Borrowers Attitude on Timeliness 45
12 Level of Borrowers Attitude on Ease of Payment 46
13 Level of Borrower’s Attitude on Credit Investigation 47
14 Mean comparison of borrower's attitude among

respondents in terms of their marital status 48

respondents in terms of their number of dependents 49

respondents in terms of their age level 49
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respondents in terms of their educational level 50

respondents in terms of their income level 51

respondents in terms of type of savings 52

respondents in terms of the type of assets 53
ix
LIST OF FIGURES
FIGURE PAGE
1 Conceptual Diagram of the study 6
2 The map of Boston, Davao Oriental Philippines 32

x
LIST OF APPENDICES
APPENDIX PAGE
A Survey Questionnaire 69
B Request Letter to Microfinance Institutions in Boston

Davao Oriental Philippines 72
C Informed Consent letter to the respondents 74
D Sample sheet of the translated survey questionnaire 76
E Tac Recommendations with the indicated signatures

of panelists 77
F Routing Form with the indicated signatures of panelists 78

xi
LIST OF PLATES
PLATE PAGE
A During the research survey among the microfinance

borrowers’ in Boston Davao Oriental, which was conducted
on May 11, 2024, Saturday morning and afternoon 77
B The researchers during the final defense held on June 07, 2024
at Faculty office 77
xii
ABSTRACT
Reje Ann B. Pacarat and Roberto Jr. C. Saing.“BORROWER’S APTITUDE

AND ATTITUDE TOWARDS MICROFINANCE LOAN PAYMENT”
(Undergraduate Thesis). Davao Oriental State University, Cateel Extension
Campus June 2024.
Adviser: Leneth Pearl S. Pingot
Microfinance institutions are vital financial services providers to

underserved communities through economic empowerment and poverty relief.
Nevertheless, the sustainability of these institutions depends on the ability and
behavior of borrowers to repay them. One hundred seventy-six (176)
respondents who availed of loans in microfinance institutions in Boston, Davao
Oriental, Philippines, were surveyed for this research. The main findings
suggested that borrowers who are married (85.2%), have few dependents peak
earning, are between 31 and 40 years old (39.8%), achieved high educational
levels (secondary 48.3%, tertiary 5.1%), save constantly (75%), and own
business assets (51.1%) may have better potential for repaying loans. In contrast,
those who earn little (<10k/month) at 70.5% might be unable to repay their debts
when they become due. Moreover, the respondents had an exceptionally positive
attitude toward payment, including timeliness, with a mean score of 4.26, credit
investigation score of 4.03, ease of payment score of 3.95, and willingness to pay
scores of 3.87. Furthermore, the significance of borrowers' attitudes and attitudes
based on their demographic profiles: educational level, type of savings, and level
of income (for timeliness) significantly influenced borrowers' attitudes, while
factors like marital status, number of dependents, level of income (at ease of
payment, willingness and credit investigation), age, and type of assets did not
have a significant impact.
Keywords: microfinance institution, borrowers’ aptitude, borrowers' attitude, loan

payment
CHAPTER 1
INTRODUCTION
Background of the Study
The ongoing surge in loan default toward loan payment has become a
problem for some lending institutions because not all loans disbursed are repaid
on the due date (Makorere, 2014). For instance, the Federal Reserve Bank of
New York's Center for Microeconomic Data stated that 3 million loan borrowers
defaulted in 2021. This dilemma arises when the borrowers need help to meet up
to their loan payment day (Denning & Jones, 2019). Additionally, the loan
defaults of borrowers in microfinance institutions are produced by the borrower's
aptitude and attitude to loan payment performance (Angaine & Waari, 2014).
Correspondingly, the attitude of borrowers in Microfinance Institutions
contributes to the loan payment performance which includes the willingness to
pay, timeliness, and ease of payment of the borrowers (Ssekiziyivu et al., 2018).
According to Gallenstein et al. (2019), some borrowers are willing to pay on time
to avoid more risk toward their loan credit score. Making early payments
indicates positive performance; however, some borrowers have too high a cost of
debt, making them unwilling and delinquent to pay loans, which results in loan
default (Alcott et al., 2021).
On the other hand, if borrowers are to gain from or readily access
microcredit institution services such as loans, they should possess certain
features (Nyangiru et al., 2014). Borrowers' aptitudes are the qualities applicants
need to exhibit to access loan facilities (Sun & Gao, 2019). Borrowers' ability to
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secure loans is closely tied to lending institutions’ importance on these borrower
characteristics during the loan evaluation process. These borrower
characteristics encompass many factors, including marital status, education, age,
experience, assets owned by the borrowers, and their capacity to make
repayments (Nanayakkara & Stewart, 2015).
Upon reviewing excessive literature involving the aptitude and attitude of
borrowers toward loan payment, the researchers observed a need for more local
research in this field. Because of its high default rates, microfinance has trouble
being sustainable, even with its enormous potential to reduce poverty (Kurniawan
et al., 2022). Furthermore, Rendall et al. (2021) urged the need to study this
underexplored area of microfinance regarding loan payment. Considering the
lack of literature in this field, this study was conducted for essential use at the
local and national levels in additional knowledge collection. In light of this context,
the present study was designed to reconcile these conflicting findings, and the
study aimed to find a significant difference between borrowers' aptitude and their
attitude towards loan payment.
The findings of this study are essential to policymakers in developing
policies to prevent over-indebtedness among microfinance institutions' borrowers.
The research study was crucial to examining the difficulties and delivering vital
information in developing borrowers' knowledge and decision-making skills. By
assessing this industry's financial obstacles, the research study's findings offer
empirical support and recommendations for policy to microfinance institutions,
MSE lending and support groups, scholars, and government policymakers.

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Significance of the Study
This research is significant and beneficial to the following who had primary
involvement in the study:
Borrowers. It will guide loan borrowers in making informed decisions
regarding their engagement with microfinance institutions and their behavior in
borrowing. It enables them to assess their financial capabilities and make
responsible choices regarding loans and debt management. It also helps them
understand their strengths and weaknesses.
Microfinance Institutions (MFIs). It will help them to develop a standard
or criteria for choosing and granting loans to the beneficiaries. Furthermore, the
research findings may help provide financial products and services that cater to
different borrower groups' specific needs and preferences. It can promote
financial inclusion by making loans more accessible and manageable for a
broader range of individuals.
Other Researchers. The study will contribute to academic knowledge on
microfinance and its impact on loan borrowers. It can be a reference for future
research and scholarly discussions on similar topics.

4
Statement of the Problem
This research sought to answer the following questions:
1. What is the aptitude (profile of the respondents) when analyzed according
to the following demographics:
a. Marital Status;
b. Number of Dependents;
c. Age Level;
d. Educational Level;
e. Income Level;
f. Type of Savings; and
g. Types of Assets?
2. What is the level of attitude of borrowers toward loan payment in Boston,
Davao Oriental in terms of:
a. Willingness to Pay;
b. Timeliness;
c. Ease of Payment; and
d. Credit Investigation?
3. Is there a significant difference between the aptitude (demographic profile)
and attitude of borrowers toward loan payment in Boston, Davao Oriental?

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Objectives of the study
The objectives of this study are the following:
1. To determine the aptitude of the borrowers.
2. To determine the level of attitude of borrowers toward loan repayment.
3. To determine the significant difference between the aptitude
(Demographic Profile) and attitude of borrowers toward loan repayment.
Scope and Limitation
This study focused on determining the significant difference between the
aptitude and attitude of MFI borrowers in Boston, Davao Oriental. It was
conducted in May 2024 in Boston, Davao Oriental. The respondents were the
borrowers who had a loan from a microfinance institution in the said locale
between 2022 and 2023. To extract data from the respondents, the researchers
utilized the adapted survey questionnaire as a tool.
Conceptual Framework
The conceptual diagram represented the relationship between the study's
variables. This study is composed of two variables: the borrowers' aptitude,
which contains the demographic profile of the respondents, and the borrowers'
attitude. It consists of four indicators: willingness to pay, timeliness, ease of
payment, and credit investigation. In this study, the conceptual framework is
designed based on the study developed by Ssekiziyivu et al. (2018). For the last
indicator, the credit investigation was added based on the instrument used by the
microfinance institution.
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Figure 1. Conceptual diagram of the study
Definition of Terms
The following are terms deemed significant to the study.
Aptitude. It refers to the ability or capacity of the borrowers to repay loans;
it is a demographic profile that determines the ability to pay and assets owned by
the borrowers (Ssekiziyivu et al., 2018).
Attitude. It refers to the loan performance and the behavior of the
borrowers regarding their payments, whether the borrowers will pay on time, late,
or default (Chong, 2021). It pertains to the borrowers' willingness to pay,
timeliness, and ease of payment (Ssekiziyivu et al., 2018).
Borrowers. In this study, a borrower is an individual or entity that receives
funds, typically in the form of a loan or credit, from a microfinance institution with
the agreement to repay the borrowed amount over a specified period, often with
interest (Chong, 2021).
Microfinance Institution. Refers to banking assistance offered to
individuals or collectives with limited financial means, granting them access to
financial services they might not typically have access to (Kagan, 2023).
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CHAPTER 2
REVIEW OF RELATED LITERATURE
Microfinance Industry in the Philippines
In simple terms, microfinance provides financial services to low-income or
underprivileged individuals (Watkins, 2016). These people have historically been
seen as "high-risk" and have not gotten enough support from traditional financial
institutions like banks, credit card companies, and mutual funds.
In many world regions, particularly developing nations, microfinance has
become essential for reducing poverty (Bent, 2019). Pham and Huynh (2020)
show that having access to finance makes it easier for companies to grow by
recruiting qualified staff, implementing cutting-edge manufacturing techniques,
and purchasing cutting-edge technologies. With the overarching goal of reducing
poverty, microfinance institutions have a specific mission to provide small loans
and other financial services, like savings and insurance, to impoverished people
who generally do not have access to formal sources of credit (Tafamel, 2019).
Their financial services usually target low-income individuals and small
enterprises (Iqbal et al., 2015).
The Philippine microfinance industry has grown significantly over the last
ten years in terms of outreach, loan disbursements, and savings accumulation,
among other important criteria, and by consolidating a list of microfinance
organizations, Habaradas and Umali (2014) discovered that the number of active
borrowers increased from 2.88 million at the end of 2009 to 3.6 million at the end
of 2011. It is a roughly 25% increase. NGOs comprised 68.83% of the total active
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borrower base in 2011, with banks making up 28.67%. In the same two-year
period, outstanding loan amounts increased by 25%, going from P16.5 billion in
2009 to P20.6 billion in 2011, with NGOs bearing the lion's share (62%) of these
debts. Furthermore, the total savings deposits increased from P6.84 billion in
2009 to P9.22 billion in 2011, an almost one-third increase. Growth was
nevertheless accomplished even after the market saw a slight consolidation after
2007 when the overall number of MFIs peaked at 258. The number of MFIs fell to
218 by the end of 2011, mainly due to fewer rural banks participating in
microfinance operations. Of the 218 MFIs, 181 were involved in microfinance, 9
were focused on microfinance, 25 were non-governmental organizations, and 3
were cooperatives.
The following MFIs were included in the alphabetical list of the Top 10 in
terms of both gross loan portfolio and active borrowers: Valley Bank (ranked first
in terms of gross loan portfolio and 9th in terms of active borrowers), ASA
Philippines (ranked second and fourth), ASKI - Alalay sa Kaunlaran, Inc. (ranked
10th and 7th), CARD Bank (ranked third and third), CARD NGO (ranked first and
second), and TSPI - Tulay sa Pag-unlad, Inc. (ranked fourth and fifth).
The promotion of financial inclusion is greatly aided by microfinance
institutions (MFIs), according to Bangko Sentral ng Pilipinas (2020). This is
because MFIs are prevalent in rural areas and target particular populations.
These organizations provide microfinance services, defined by the Securities and
Exchange Commission (2020) as the long-term, sustainable provision of financial
services to low-income people involved in microenterprises and livelihood

9
activities. They also help advance the smart cities concept (Alarca et al., 2022).
Gyimah and Boachie (2018) elucidated that the services offered by MFIs assist
small firms in growing and reducing the dangers related to moral hazard.
Furthermore, MFIs are a valuable tool for addressing business failures brought
on by calamities like the pandemic (Dagpin et al., 2022).
Borrowers Qualities for Loan Availment in Microfinance Institution
Borrower traits significantly impact loan default in MFIs. Borrowers should
have specific characteristics to benefit from or easily access microcredit
institution services (Nyangiru et al., 2014). The degree of the borrowers'
accessibility to credit will depend on how seriously MFIs take their characteristics
prior to extending credit to clients (Nanayakkara & Stewart, 2015). For example,
borrowers with assets will have an easier time getting credit because there is a
lower risk that the lender may lose money.
The characteristics and attributes that borrowers must possess to be
eligible for lending facilities are known as borrowers' attributes (Sun & Gao,
2019). Lending institutions' weighting of these borrower attributes in the loan
appraisal process directly impacts borrowers' capacity to obtain loans. Numerous
variables are included in these borrower characteristics, such as the borrowers'
age, experience, marital status, level of education, possession of assets, and
ability to repay debt (Nanayakkara & Stewart, 2015).

10
Several investigations have examined the elements propelling loan
demand in developed and emerging nations. These studies focus on individuals'
socio-demographic and economic traits.
Marital Status. The correlation between repayment performance and
marital status exhibits an unclear sign. Since married couples typically repay their
debts more quickly than single borrowers, they are frequently believed to be
more mature, responsible, or reliable (Baklouti, 2013). However, it was
discovered that having a spouse had a favorable impact on the likelihood of
seeking loans, as those who had marital duties were more likely to do so (Cheng
& Ahmed, 2014). Because of shared financial responsibilities and commitments
within the household, loan repayments have become less burdensome for
married individuals compared to other categories of marital status.
Number of Dependents. Due to the likelihood that family obligations
would result in loan diversions to pay fees or purchase food, a large household
size (high number of children) was positively connected to loan default in FIs
(Tundui & Tundui, 2013). Large household sizes are associated with higher
health and consumption expenses, which harm loan performance (Tundui &
Tundui, 2013). This is consistent with the findings of Pasha and Negese (2014),
who discovered that a household's number of dependents, both inside and
outside, plays a significant role in loan default. According to their findings, the
default rate is lowered by 0.158 for every drop in one dependent.
Age Level. Age significantly impacts loan default in financial institutions
(FIs) since older borrowers are more likely to make better payments than
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younger ones, especially if they have business expertise and can rein in
needless spending. According to Pasha and Negese (2014), an older business
owner is better able to repay a loan than a younger one because he is more
established, has amassed wealth, has expertise running a company, and can
acquire financing more easily.
The borrower's age is an essential predictor of loan repayment (Jote,
2018). The available evidence indicates that young (less than 30 years) and
older (above 60 years) borrowers have less probability of defaulting on their
loans. Thus, they have a low risk of bankruptcy. A high probability of default is
associated with borrowers in their middle age (Thayaparan & Sivatharshika,
2019). Older borrowers are characterized by a high level of maturity and
business experience that are likely to drive the productivity and performance of
their businesses, thus likely to pay their loans on time.
Another study by Baklouti (2013) suggested that the likelihood of default
declines as borrower age grows. It makes sense because older people are
thought to be wiser, more responsible, less risk-taking, and more knowledgeable
than younger people, which makes them less likely to default (Baklouti, 2013). In
the meantime, Ifeanyi et al. (2014) investigated how smallholder cooperative
borrowers repaid their loans. They discovered a negative correlation between
respondents' age and ability to repay debt, suggesting that younger farmers were
more likely to do so than older ones.
Educational Level. According to Cheng and Ahmed (2014), older adults
were less likely to apply for loans since they were generally less educated and
12
had fewer aspirations for productivity and investments. Moreover, the authors
suggested that people with more education frequently have valuable expertise,
skills, and investment goals, which affects their decision to apply for a loan when
money is hard to come by. According to Ogubazghi and Muturi's (2014) research,
there is a favorable relationship between bank loan accessibility and age and
educational attainment.
Further, at the 1% significance level, Pasha and Negese (2014)
discovered that education level had a favorable and substantial impact on loan
repayment. The likelihood of loan repayment increases by 4.939% for every
additional year of education. This graph shows that borrowers with higher
educational attainment are four times more likely to raise their loan repayment
than borrowers with lower educational attainment or no literacy. Borrowers with
higher levels of education might have access to company data.
Income Level. One of the most important indicators of how well a
borrower would repay a loan is their income. Low-income borrowers are often
thought to be more likely to miss payments on their outstanding loan agreements
with lending institutions (Thayaparan & Sivatharshika, 2019). Conversely,
borrowers with bank accounts and comparatively greater incomes are less likely
to miss loan payments. Increased income suggests borrowers have more
significant resources to repay the loan (Thayaparan & Sivatharshika, 2019).
Type of Savings. As per Pasha and Negese (2014), the payback rate is
positively impacted by voluntary savings. Borrowers and non-borrowers can
make deposits or withdrawals based on their requirements using voluntary or

13
flexible savings (Bruno & Khachatryan, 2020). According to Bruno and
Khachatryan (2020), voluntary savings suggest that credit and savings are
essential elements of financial intermediation and that savers are already aware
of the benefits and strategies for saving. According to Chakravarty and Shahriar
(2015), voluntary savings are a payback enforcement and diversification tool.
As a substitute for collateral that imposes a positive inducement for
repayment, mandatory or compelled savings are described as the minimum
savings that condition the borrower's access to loans (Bruno & Khachatryan,
2020). Until the loan is repaid, MFI regulations typically prohibit the withdrawal
and use of those savings. Research has shown that required savings are a
fantastic way to encourage repayment and a valuable tool for MFIs to obtain
client data (Chakravarty & Shahriar, 2015). Ayele (2015) proved that the loan
default rate decreased when lenders provided microcredit backed by required
savings. While formal collateral is uncommon among the impoverished, some
lenders do utilize their borrowers' land as collateral, according to Ahlin and
Waters (2016). Because most borrowers are so devoted to their land that they
would not consent to taking it away due to loan default, the technique decreased
the loan default rate (Ahlin & Waters, 2016).
Types of Assets. The degree to which MFIs take the borrower's
characteristics seriously before giving credit to clients will determine the
borrower's accessibility to credit (Nanayakkara & Stewart, 2015). Borrowers who
possess assets, for example, will find it easier to obtain credit because there is
less chance that the institutions will lose their money.

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A study by Davies and colleagues (2019) found that homeowners have a
well-documented tendency to borrow at more excellent rates than non-
homeowners. This borrowing behavior is strongly correlated with the value of
their housing assets. Although much data supports this link, little is known about
how liquid savings affect borrowing behavior. Despite this, other studies have
stressed the value of saving money and shown how not having any savings
might make a person more vulnerable to debt-related problems.
Access to loans is very possible when a person has assets. A bank loan is
more likely to be secured when the borrower has assets that may be deposited
as collateral (Pozzolo, 2016). According to Pozzolo (2016), even though it makes
sense to assume that they would be less risky, borrowers with greater availability
of resources that can be posted as collateral are more likely to secure their loans.
This is demonstrated by the positive coefficients on the shares of physical and
liquid assets and the negative coefficient on the share of immaterial assets.
Additionally, the finding that collateralized loans are more common among older
firms—but only for those over 60—is also probably explained by the fact that they
probably have more assets to post as collateral.
Various microfinance leaders substitute different products for collateral.
Initially, some MFIs required borrowers to pay 0.5% of each borrowed unit, based
on the Grameen Bank model (Ibtissem & Bouri, 2013). As insurance against loan
default, death, or disability, the MFIs place the money into an emergency fund
(Ibtissem & Bouri, 2013). As group tax, the borrowers paid an extra 5% of the
loan amount (Ibtissem & Bouri, 2013). According to Ibtissem and Bouri (2013),
15
lenders typically collect these fees from the members' loans or include them in
the required monthly contributions the borrowers must make. Dower and
Potamites (2014) presented a new class of collateral substitutes. These
substitutes might include the borrower's valuable documents, such as their
marriage certificate, degree, or driver's license. Using these valuables, Bank
Rakyat Indonesia, a prominent microfinance institution in Indonesia, successfully
applied the collateral substitution strategy (Dower & Potamites, 2014). According
to research by Sun and Im (2015), household items with enough personal worth
for the borrowers could be accepted as collateral by Russian lenders. Lenders in
rural Albania accepted tangible assets as collateral, including livestock (Sun & Im,
2015).
Chisasa (2014) demonstrated that lenders occasionally demand
guarantors to back up their clients' loans. In a related study, Roberts (2013)
issued a warning, stating that the guarantor's involvement must be a significant
consideration in approving the loan and not only a secondary source of
repayment. If the requirement for a guarantor necessitates expensive efforts for
people with a poor loan repayment record, the presentation of a guarantor lowers
the lender's risk of adverse selection (Giné & Karlan, 2014).
Because borrowers prioritize loan utilization and payback to prevent the
loss of their collateral assets, the availability of dependable collateral is likely to
improve MSEs' loan repayment performance. Abuye and Shiferaw (2019), who
discovered that collateral is the primary necessity to guarantee borrowers' loan
repayment practices, corroborate this finding.

16
Borrowers Loan Repayment Performance
Prompt loan repayment is essential for lending institutions and borrowers.
According to Worokinasih and Potipiroon (2019), loan repayment performance is
the borrower's commitment to repaying the loan within the allotted time frame. It
evaluates whether borrowers meet their commitment to return the loan in full by
the conditions of the agreement. The stronger the lending institution's financial
stability and ability to successfully satisfy its debt commitments, the better its loan
payback performance (Rafay et al., 2020).
Financial organizations can cut interest rates for borrowers with strong
loan payback performance, lowering the total cost of borrowing money. As a
result of this greater affordability, more borrowers can obtain funding.
Furthermore, high loan payback performance improves lending institutions'
capacity to suitably satisfy borrowers' financial requirements (Salifu et al., 2018).
Even though many nations are currently enthusiastic about using the
notion of microfinance as a tool to reduce poverty, risk management
considerations such as loan default in microfinance should be considered
(Setargie, 2013). One of the main reasons MFIs fail in many countries is loan
default (Tumwine et al., 2015). According to the National Bank of Rwanda (2014),
Rwanda's microfinance loan default rate was 7% in 2014, 40% more than the
maximum default-rate margin required to maintain MFI operations (Tumwine et
al., 2015).
In another study, Setargie (2013) found that the MFI default rate went up
and averaged 27.1% over the review period. It was discovered that subpar
17
company performance was the primary cause of default. In addition, other factors
that contributed to credit default included tenancy issues, several dependents,
domestic issues, and credit diversion to unprofitable uses. Additionally, the
inference results from the probit model and descriptive statistics demonstrate that
credit diversion and loan size significantly increase credit default. In contrast,
education, income, loan supervision, suitability of repayment period, and
availability of other credit sources are essential and significant factors that
enhance credit repayment performance. The screening process that the
institutions used had major flaws; for example, good payers and literate
borrowers were rationed more heavily than borrowers who contributed to the
default problem and applied for bigger loan amounts.
In the words of Addae-Korankye (2020), loan delinquency and default are
issues that microfinance institutions, including private microfinance institutions,
must deal with since they could have long-term repercussions if ignored. In a
2014 study, Asongo and Idama looked at factors contributing to loan default in
microfinance. The results of the investigation show that there was a high rate of
staff turnover and customer attrition, a lack of sanctions for some defaulters, a
lack of work experience among the staff, inadequate client supervision regarding
repayment, a high percentage of non-repayment among the clients, excessive
borrowing on their part, and a lack of compliance policies.
According to a 2013 study by Fawad and Taqadus, non-performing loans
impact banks' financial performance. Harelimana (2017) endorsed this notion.

18
Willingness to Pay. Analyzing a borrower's desire to pay requires
understanding his character (Puri, 2021). The borrower's credit history
determines the willingness to pay, or in the absence of one, statements from
suppliers and neighbors are used to gauge the borrower's reputation and
promptness (Munene & Guyo, 2013).
Puri's study (2021) emphasizes that the borrowers' desire to pay requires
understanding their character. As stated by Niyomigisha et al. (2019), some
possible factors influencing the willingness to pay off borrowers who made
payments with the help of their members must be considered. The factors
influencing the borrowers' willingness to pay include the family income and the
number of people living in the household.
A few of the factors influencing the borrowers' willingness to pay include
the total family income, the number of people living in the household, prior
business experience, the total annual household expenses, any loans owed to
other credit providers, the distance between the home and the bank, the
frequency of credit officer visits each month, and the frequency of training
sessions held each year (Niyomigisha et al., 2019). They observed an increase
in the readiness to repay the debt for every year of experience gained. It is
because more experience is linked to a greater understanding of managing a
business, which lowers losses and raises profits—profits that are then converted
into funds for loan repayment.
Group lending was one of the distinguishing characteristics of many early
microlenders. Banerjee (2013). According to Banerjee (2013), debtors were

19
grouped and held jointly responsible for each other's debts; if a group member
defaulted, the rest would also be held accountable and subject to penalties until
they settled for their fellow defaulter. Furthermore, every successful borrower
contributes a small amount to assist their less fortunate group members fulfill
their responsibilities without giving up excessive spending. Here, the joint
obligation increases efficiency by ensuring that, ex-post, the successful
borrowers do not just walk away from their commitments. As a result, interest
rates are reduced, and more loans are repaid.
Timeliness. Factors impacting loan payback, according to Garomsa
(2017), include variables like credit timeliness, repayment time suitability, and
monthly payment trends, which are determined to be significant factors that affect
the borrowers' loan repayment rate. Insolvency is meaningless if a borrower
consistently fulfills all loan obligations by the deadline (Kassegn & Endris, 2021).
According to Kassegn and Endris (2021), a debtor breaches an obligation or
agreement in the finance industry when they do not fulfill their obligations, such
as making timely payments or adhering to other restrictions.
The repayment schedule is described by Charles, Raphael, Dorcas, and
Kwadwo (2013) as the period when loan debtors are expected to make payments.
The loan borrowers are guided in their repayment procedure by the payback plan.
Numerous studies demonstrate that the repayment schedule impacts loan
repayment defaults. According to Nawai and Shariff's (2013) research, loan
borrowers will opt to default on their debts if their firm does not generate enough
revenue on the due date to cover the payment. Consequently, there is a

20
connection between loan payback defaults and the repayment schedule. Due to
rigorous repayment schedules, loan repayment default occurs when debtors
cannot make timely loan payments (Puri, 2021).
Asongo and Idama's (2014) study found that various factors contribute to
loan default in microfinance institutions, such as specific customers' failure to
monitor how they utilize their loan funds and their failure to remind themselves to
return the loan. They discovered that most clients will only voluntarily repay their
debts once the bank continually reminds them to.
Furthermore, Asongo and Idama (2014) supported that various factors
contribute to loan default in microfinance institutions, such as certain customers'
failure to monitor how they utilize their loan funds and to remind themselves to
return the loan. Most clients will not voluntarily repay their debts once the bank
continually reminds them to. Additionally, According to Garomsa (2017),
variables like credit timeliness, repayment time suitability, and monthly payment
trend are determined to be significant factors that affect the borrowers' loan
repayment. Hence, with the high level of borrowers' attitudes toward timeliness,
MF borrowers have paid their loans on time given by the lenders. Lastly, using
credit scoring to display a borrower's credit history had a favorable and
noteworthy impact on payback performance. It is consistent with Brown, Falk,
and Fehr, referenced by Mwangangi (2014), who suggest that better credit
scores lead to better banking connections, encouraging more significant effort
and prompt payback.

21
Ease of Payment. Many borrowers' business endeavors need to generate
more cash flow to repay the loan in total, so they default (Puri, 2021). Kebede et
al. (2016) highlight that the borrower's likelihood of repaying their loans matters
when the loan repayment time suits them. On the one hand, Mehta (2022)
asserts that the idea of enough cash flow is crucial since a financial institution's
main worry is whether a borrower will have enough income to pay back the
principal and service the debt. Another critical factor that has been discovered to
influence borrowers' loan repayment success is their repayment time.
Meraj (2016) said borrowers feel more comfortable taking out loans if they
have enough time to get the money when needed. They also feel better about
the loan if the repayment schedule gives them reasonable time to pay it back
based on their income.
Another essential factor that influences borrowers' loan repayment
success is repayment time. It was discovered that borrowers' likelihood of
repaying their loans increased significantly when the repayment time suited them
(Kebede et al., 2016). For customers to work with the loans they borrowed and
schedule the time to collect loans appropriate for them to sell their business
product, the institution must allow enough time for clients.
In West Bengal, India, Mensa et al. (2013) examined the connection
between loan defaults and repayment plans (weekly and monthly). The design of
the study was cross-sectional. The study's conclusions showed that there is not
any conclusive connection between loan default and repayment plans. It
suggests that no correlation exists between monthly and weekly loan defaults
22
and delinquencies. Yogendrarajah and Semisighe (2015) also examined
microcredit repayment in Northern Sri Lanka. The study's conclusions
demonstrated that monthly repayment yielded higher repayment rates than
weekly. It suggests a link between weekly repayment and default or
delinquencies.
Kosanatri (2014) also examined how well repayment plans worked for
Bangladeshi microloan customers. A cross-sectional survey design was utilized
in the study. There were 2400 participants in the survey, and 28 respondents
made up the sample. Through questionnaires and interviews, the primary and
secondary data were gathered. Regression analysis was used to analyze the
data, which was then displayed in charts. According to the study, monthly or
flexible repayment plans result in better repayment than standard or weekly
repayment plans since the weekly method puts greater stress on microfinance
borrowers to repay.
Credit Investigation. As defined by Mendoza et al. (2016), credit
investigation (CI) is a procedure that entails gathering and confirming member-
borrower documentation regarding significant assets and properties.
The borrower's ability to repay the loan indicates their attitude toward
repayment. One of the requirements for lending is capacity. According to
Abdulsaleh and Worthington (2016), it shows the borrower's capacity to create
and manage enough cash to meet all loan commitments. It refers to the
borrower's capacity to repay the debt. The primary goal of a capacity evaluation
is to evaluate a borrower's creditworthiness. Since capacity is the primary source

23
of loan repayment, it is essential to bankers. According to Barona in Abdulsaleh
and Worthington (2016), capacity relies on the borrower's future cash flows,
which rely on additional essential elements, including the company's internal
management and the industry's status.
In the study of Abdulsaleh and Worthington (2016), credit investigation is
the primary goal of a capacity evaluation to evaluate a borrower's
creditworthiness. Additionally, a lender wants to ensure you can return the loan
before extending it to you (Kagan, 2023). For this reason, a large number of them
need security of some kind. As defined by Kagan (2023), collateral is a type of
security that reduces risk for lenders by guaranteeing that borrowers fulfill their
financial obligations. The borrower has a strong incentive to make loan payments
on schedule since they risk losing their house or other collateralized assets if
they do not.
Furthermore, Segal (2023) proposed that a borrower's reputation or track
record for repaying debts or credit history is a reliable indicator of loan non-
default. The borrower's credit reports, which regional or national credit agencies
produce, contain this information. Credit reports include comprehensive data
regarding the amount of money a candidate has previously borrowed and
whether or not they have made loan repayments on schedule (Segal, 2023).
Borrower’s Attitude and Aptitude Towards Loan Repayment Performance
For the benefit of lending institutions and borrowers, prompt loan
repayment is essential. The lending institution's ability to effectively meet its debt
commitments is bolstered by its better loan payback performance (Rafay et al.,

24
2020). According to Adamou et al. (2020), a complete understanding of
borrowers' loan repayment behavior is necessary to operate any credit scheme
efficiently. For example, Ume et al. (2018) and Yimer (2019) only included farmer
borrowers from various MFIs and settings as study participants. Studies that
differ from the setting in which the current study was conducted in terms of
location and culture have also found different results regarding the factors
affecting the borrower's ability to repay their loan on time. On the one hand,
conflicting theories exist in the empirical literature that offer solid proof that the
characteristics of borrowers have a significant impact on their loan repayment
behavior.
Thayaparan and Sivatharshika (2019) indicated that factors including age,
income, and family size can predict how well borrowers in Sri Lanka will repay
their loans. However, in the framework of Uganda, Ssekiziyivu et al. (2018) found
conflicting data indicating no meaningful relationship between the characteristics
of borrowers and their ability to repay loans. Based on the study of Angaine and
Waari (2014), as they explore the various factors that may influence loan
payment, including marital status, they found no significant difference between
borrowers' attitudes. Just like the insignificant number of dependents, according
to the study of Angaine and Waari (2014), it can still be helpful as a parameter in
the predictions of loan default. Jote (2018), however, presents evidence from
Ethiopia that suggests that age and company experience are essential
characteristics that strongly affect loan payback success. Similarly, Ogeisia,

25
Musiega, and Manase (2014) observed a robust correlation between the
attributes of borrowers and their loan repayment conduct.
The ease of payment differs significantly, according to Mwanza (2018), as
it found that borrowers' characteristics, such as educational level, affected the
borrower's inability to repay the loan. In credit history, it significantly differs
because it is a reliable indicator of loan non-default (Segal, 2023). Moreover,
based on the study findings of Dagos (2021), the borrowers that lie between
primary and secondary graduates have only the ability to basic reading and
writing.
Based on the study findings of Dagos (2021), the borrowers that lie
between primary and secondary graduates have only the ability to basic reading
and writing. However, as highlighted in the study of Mehale (2019), borrowers
with higher educational attainment are a predictor of financial literacy that helps
borrowers perform better loan repayment. On the other hand, Sanglay et al.
(2021) determined that monthly income significantly influences borrowers'
behavior. Borrowers with high monthly incomes are expected to pay their loans
on time. In addition, After looking into how household income affected loan
repayment, Tundui et al. (2013) concluded that a higher income is associated
with a lower default rate.
Meanwhile, Davies's study (2019) supports the idea that income and
borrowing are highly relevant. Low-income households are less likely to receive
consumer credit than higher-income households. When they do borrow, it is often
to make ends meet and pay for more essentials.

26
Atsmegiorgis (2013) revealed that the loan repayment rate was also
significantly related to previous loan experience, the purpose of the loan,
educational level, and the type of collateral offered. In addition, SME borrowers
with stable incomes repaid their loans on time (Abdi et al., 2023).
Mwanza (2018) found out that loan characteristics like loan amount,
processing time, and loan diversion, as well as borrower characteristics like
education level, household size, and business experience, as well as project
characteristics like business activity, labor force size, and business ownership, all
affected the borrower's inability to repay the loan to the bank on time. The use of
technology also impacted the ability of clients to make on-time loan payments.
Finally, timely loan repayments to the bank were highly influenced by the
legitimacy of the loan appraisal processes.
Coupled with this, Davies et al. (2019) noted the importance of developing
a savings pot, as saving has an effect on borrowers' aptitude, which shows that
borrowers' are already aware of the benefits of and strategies for savings (Bruno
& Khachatryan, 2020). as Ayele (2015) proved that when lenders provided
microcredit backed by required savings, the rate of loan default will decrease.
Consequently, borrowers not paying loans so well will use compulsory savings as
a substitute for collateral to impose a positive inducement for repayment. These
minimum savings condition the borrower's loan access (Bruno & Khachatryan,
2020).
Davies et al. (2019) contradicted this by having no significant results, as
owning assets has some relation to borrowing behavior. The evidence shows
27
that homeowners have a higher level of borrowing than non-homeowners, and
because of this, their borrowers are linked to their level of housing assets.
A mixed and inconsistent relationship exists betwe en borrowers'
characteristics and loan repayment performance, drawing from extensive
literature and necessitating additional empirical research. Some research
indicates a substantial correlation between borrowers' characteristics and their
ability to repay loans (Jote, 2018), yet other studies find no correlation
(Ssekiziyivu et al., 2018). In light of this, the current study sought to reconcile
these conflicting results and ascertain the influence of borrower characteristics
on loan repayment performance.
Similarly, Rafay et al. (2020) demonstrated that socio-demographic factors
substantially and favorably correlate with loan repayment performance. These
factors include the number of previous loans, marital status, and number of
dependents. There is a strong and positive correlation between loan-related
variables such as loan amount ease, ease of payment, and repayment
performance.
Based on Boateng, Amoah, and Anaglo's (2015) research, loan
repayment was influenced by age groups, which showed differences in
repayment performance. Those who did not complete formal schooling had
higher loan default rates.
Age, income, and education level all had a negative and significant effect
on loan repayment, as Wamalwa (2016) pointed out. Collateral security is
another element that affects loan repayment. Endris (2022) previously predicted
28
(at a significance threshold of 1%) that collateral security has a positive and
statistically significant effect on MSEs' loan repayment performance. Reliability of
collateral dramatically increases the probability of loan payback because
borrowers are driven to make timely repayments to protect their collateral. It is
explained by the fact that businesses with collateral already have the resources
and are prepared to repay their loans. These results are consistent with those of
Abuye and Shiferaw (2019), who also showed that collateral offers assurance
regarding the loan repayment behaviors of borrowers.
It was discovered that marital status mattered in both FIs and MFIs.
Ayagyam et al. (2013) hypothesized that married borrowers’ who are members of
certain groups exhibit greater responsibility in loan repayments, lending credence
to this. The results of Ayagyam et al. contradict those of Kamanza (2014), who
found that married people were more likely to experience loan default due to
conflicting gender norms that prevent women from focusing on their businesses,
making it difficult for them to generate revenue and divert loans. This runs
counter to the findings of Pasha and Negese (2014), who found that a borrower's
marital status has no significant impact on loan repayment in their study on loan
performance in Ethiopia.
After looking into how household income affected loan repayment, Tundui
et al. (2013) concluded that a higher income is associated with a lower default
rate. They explained this relationship by saying that participating in various
business possibilities increases one's ability to make more money, making loan
repayment on time more manageable. A low-income household with above-

29
average wealth is in a better position than one with below-average wealth. The
existence of wealth also influences the gap between income and consumption.
Given a specific salary, one can raise consumption by spending it all or accruing
debt, whereas one can reduce consumption by saving money and increasing
assets. Hence, it is crucial for MFIs to thoroughly assess and evaluate borrowers
before extending credit to them, as this practice can mitigate the occurrence of
loan defaults.
Various studies show relationships between the aptitude and attitude of
borrowers toward loan payment. Nonetheless, some studies reveal conflicting
conclusions about this relationship. As per Nanayakkara and Stewart (2015), the
degree of the borrowers' accessibility to credit will depend on how seriously MFIs
take their characteristics before extending credit to clients. Hence, borrower
characteristics, such as the borrowers' age, number of dependents, marital status,
level of education, possession of assets, and ability to repay debt, are considered
to measure their repayment performance (Nanayakkara & Stewart, 2015).
According to Adamou et al. (2020), a complete understanding of
borrowers' loan repayment behavior is necessary to operate any credit scheme
efficiently. Niyomigisha et al. (2019) stated that a few of the factors influencing
the borrowers' willingness to pay include the total family income, the number of
people living in the household, prior business experience, the total annual
household expenses, any loans owed to other credit providers, the distance
between the home and the bank, the frequency of credit officer visits each month,
and the frequency of training sessions held each year. Garomsa (2017) revealed
30
that credit timeliness, repayment time suitability, and monthly payment trends are
significant factors affecting the borrowers' loan repayment rate.
Furthermore, ease of payment is also seen as an indicator of borrower
attitude towards loan repayment as Mehta (2022) asserts that the idea of enough
cash flow is crucial since a financial institution's main worry is whether a borrower
will have enough income to pay back the principle and service the debt.
According to Barona in Abdulsaleh and Worthington (2016), capacity relies on
the borrower's future cash flows, which rely on additional essential elements,
including the company's internal management and the industry's status. In this
regard, credit investigation measures if a borrower is worthy of credit. If a
borrower is deemed capable, they are also deemed capable of paying back the
loan (Abdulsaleh & Worthington, 2016).
In conclusion, attributes and characteristics of borrowers are essential in
determining their capability to repay loans and their attitude towards that.
Borrowers' repayment behavior is significantly influenced by age, marital status,
number of dependents, education level, income level, type of savings, and assets
owned. Older married borrowers with higher educational levels and income
perform better on loan repayment than younger single, less educated, and low-
income earning borrowers. Also more likely to repay loans on time are those with
voluntary savings and physical assets that can be used as security. Moreover,
the willingness to pay the borrower, loan purpose used, previous credit history,
and appropriateness of the repayment schedule affect borrower repayment
attitudes and timeliness.

31
Nevertheless, empirical evidence regarding the relationship between
these attributes of borrowers and loan defaulting remains mixed across different
contexts. Some studies find no contradictory linkages, requiring further research
to harmonize opposing arguments. Lastly, understanding and assessing
borrowers' attributes during loan appraisal is very important to microfinance
institutions to minimize default risk and ensure the sustainability of operations. By
assessing their profiles carefully, MFIs can promote their ability and willingness
to make timely repayments.

CHAPTER 3
METHODOLOGY
This chapter presented the different research steps and methods that the
researchers utilized; these involved the research design, research locale,
research instrument, sampling technique, data gathering procedures, and
statistical treatment data.
Research Locale and Duration
This study was conducted in Boston, Davao Oriental. It is a third-class
municipality in the southern tip of the province of Davao Oriental. The
respondents were the borrowers in the mentioned locale who had availed loans
in microfinance institutions. Boston is primarily agricultural, so the rest of the
barangays engage in agri-industrial activities. Because Boston is a rural area and
distant-wise, low-income residents need access to traditional banking and
financial institutions; services offered by microfinance institutions, such as loans
and insurance, to name a few, are a massive advantage for them. The duration
of this study was within the 2nd semester of the Academic Year 2023-2024.
Figure 2. The map of Boston, Davao Oriental

33
Research Design
The researchers utilized a descriptive-comparative quantitative research
design to describe the differences between groups in a population without
manipulating the independent variable (Cantrell, 2011).
Respondents and Sampling Procedure
The respondents of this study were loan borrowers in Boston, Davao
Oriental, who availed of the loan service offered by microfinance institutions and
are officially listed in the legitimately recognized microfinance institutions. There
was a total population of 323 borrowers for 2022-2023. Using Slovin's formula,
this study has a sample mean of 176 respondents. This study utilized simple
random sampling, in which the researcher randomly selected a subset of a
population (Thomas, 2020). This sampling method gave each member of the
population an equal chance to be selected.
Research Instrument
The instrument that was used in the study is an adapted survey
questionnaire developed from the study of Bob Ssekiziyivu, Juma Bananuka,
Isaac Nkote Nabeta, and Zainabu Tumwebaze (2018) titled Borrowers’
Characteristics, Credit Terms and Loan Repayment Performance among Clients
of Microfinance Institutions (MFIs). The overall Cronbach’s reliability index for
borrowers’ characteristics and loan repayment performance was 0.733, and
0.742, respectively. The results affirm that all the instrument components had an
acceptable Cronbach alpha more significant than 0.7, which indicates that the
34
instrument was reliable. Moreover, the credit investigation was adapted and
added in the second section based on the instrument used by the microfinance
institution.
The questionnaire consists of two sections. The first section contains a
checklist that determines the demographic profile of the borrowers. This part
concerns the demographics of the respondents, namely, marital status, number
of dependents, age, education level, income level, type of savings, and type of
assets. The second section used the Likert Scale to measure respondents'
attitudes toward loan repayment. It contains four indicators: willingness to pay,
timeliness, ease of payment, and credit investigation. It underwent validity testing
by an authority expert in this field.
The researcher employed a 5-point likert scale in this study, with the
options being strongly agree, agree, neutral, disagree, and strongly disagree.
The questionnaire comprised 18 items, including 7 items assessing borrowers'
aptitude and 11 items evaluating borrowers' attitude.
Data Gathering Procedure
The researchers followed the proper procedure for gathering the data from
the respondents and the information needed for the study.
The following are the steps in gathering the data:
1. Secure Ethical Clearance. Before conducting the study, the
researchers obtained ethical clearance from the Research Ethics Office of Davao
Oriental State University.

35
2. Informed Consent Form. The researchers provided an Informed
Consent Form for the respondents, which they signed indicating that they agreed
to participate in the study. They also informed the respondents about the study
and assured them of the confidentiality of the information gathered from them.
3. Administration and distribution of the questionnaires. The
questionnaires were translated into vernacular so the survey participants could
understand them. Upon approval, the questionnaires were administered
personally to the study's respondents. The researchers waited for the
respondents until they finished answering the survey questionnaire.
4. Retrieval of the Questionnaires. After the questionnaires are retrieved,
the data is gathered, collated, tallied, analyzed, and subjected to statistical
analysis.
Data Analysis
This study utilized the following statistical tools to address the statement of
the problem.
Frequency and Percentage were used to determine the aptitude of the
borrowers. It was also answered the statement number 1.
Mean employed to determine the level of loan borrowers’ attitude towards
loan repayment.
ANOVA was used to determine whether there was a significant difference
between the borrowers' aptitude and attitude toward loan repayment.

36
The following Likert scale was used to interpret the attitude of the
borrowers.
Table 1. Interpretation table for borrower’s attitude
RANGE OF VERBAL VERBAL INTERPRETATION

MEAN DESCRIPTION
The attitude of the borrowers toward

5.00 - 4.21 Very High loan repayment is very evident.
4.21 – 3.41 High loan repayment is evident.
3.40 – 2.61 Moderate loan repayment is favorable.
2.60 – 1.81 Low loan repayment is unfavorable.
1.80 – 1.00 Very Low loan repayment is very unfavorable.
CHAPTER 4
RESULTS AND DISCUSSION
This chapter presents the data gathered from the respective respondents
and the following findings and explanations. The data is presented in tabular form
by the specific question posited in the problem statement.
Demographic Profile of the Respondents
The following tables present the distribution of respondents according to
their aptitude (demographic profile): marital status, number of dependents, age
level, educational level, income level, type of savings, and types of assets.
Table 2. Distribution of respondents in terms of marital status

Marital Status Frequency Percentage
Single 4 2.30
Married 150 85.20
Separated / Divorced 9 5.10
Widowed 13 7.40
TOTAL 176 100.00
Table 2 shows that most respondents are married, with a frequency of 150,
or 85.20% of the total population. Widowed respondents have a frequency of 13
or 7.40%; separated or divorced respondents have a frequency of 9 or 5.10%;
and single respondents have the lowest frequency at 4 or 2.30% of the total
population. It supported the study findings of Duguma and Amenu Leta (2021),
as highlighted that most of the borrowers who are married were capable of
paying their loans because of shared financial responsibilities and commitments

38
within the household; loan repayments become less burdensome for married
individuals compared to other category in marital status. Additionally, Baklouti
(2013) stated that married couples typically repay their debts more quickly, and it
is frequently believed that they are more mature, responsible, or reliable
borrowers than single ones.
Table 3. Distribution of respondents in terms of number of dependents

Number of Dependents Frequency Percentage
One Dependent 27 15.30
Two Dependents 39 22.20
Three Dependents 44 25.00
Four Dependents 35 19.90
Five Dependents 19 10.80
More than five Dependents 12 6.80
TOTAL 176 100.00
Table 3 reflects that the three dependents with 44 frequency, or 25%,
have the most dependent profiles of respondents. Then, two dependents have a
frequency of 39, or 22.20%, followed closely by four with a frequency of 35%, or
19.90%; one dependent has a frequency of 27 or 15.30% of the total population.
On the one hand, five dependents have a frequency of 19, or 10.80%, and more
than five dependents have a frequency of 12, or 6.80%. With these, respondents'
aptitude among the categories in terms of the number of dependents was
favorable. For Tundui and Tundui (2013), due to the likelihood that family
obligations would result in loan diversions to pay fees or purchase food, a
borrower with a large household size was found incapable of meeting up to their
loan repayment day. Based on the findings of Pasha and Negese (2014),
39
borrowers with only one dependent would have the possibility to make their loan
repayment on time, which lowers the default in microfinance institutions.
Table 4. Distribution of respondents in terms of age level

Age Level Frequency Percentage
30 and below 44 25.00
31 to 40 years old 70 39.80
41 to 50 years old 29 16.50
51 and above years old 33 18.80
TOTAL 176 100.00
Table 4 shows that the age group of 31 to 40 years old consists of most
respondents with a frequency of 70 or 39.80% of the total population; 30 and
below are in the second population, which has a frequency of 44, or 25%; 51 and
above years old have a frequency of 33, or 18.80% of the third population; and
41 to 50 years old have a frequency of 29, or 16.50%, of the respondent's group
of age. Jote (2018) stated that the borrower's age is an essential loan repayment
predictor. Borrowers between the ages of 31-40 typically have significant
financial needs such as housing, education, and business investment that
necessitate borrowing during the working stage of their life. Among age groups,
this age category is more capable. However, another study also showed that
borrowers who are young (less than 30 years) and older (above 60 years) are
commonly responsible for loan payments. It was contradicted by Ifeanyi et al.
(2014), who suggested that younger borrowers were more likely to do so than
older ones. However, for Thayaparan and Sivatharshika (2019), loan default is
associated with borrowers in the middle age.

40
Table 5. Distribution of respondents in terms of educational level

Education Level Frequency Percentage
Primary Education 82 46.60
Secondary Education 85 48.30
Tertiary Education 9 5.10
TOTAL 176 100.00
Table 5 shows that secondary education has the highest frequency of 85,
or 48.30%, followed by primary education at 82, 46.60%, and tertiary education
at only 9, or 5.10%. It is supported by Pasha and Negeses (2014) findings that
educational level had a favorable and substantial impact on loan repayment.
Those with lower levels of education may need more money as they have limited
job opportunities. At the same time, they make loans to cover basic needs and
start a small business. Nevertheless, Cheng and Ahmed (2014) stated that
people with high educational attainment frequently have valuable expertise, skills,
and investment goals, which affects their decision to apply for a loan when
money is hard to come by.
Table 6. Distribution of respondents in terms of the income level

Income level Frequency Percentage
below ₱ 10k 124 70.50
₱ 10,001 to ₱ 20k 47 26.70
₱ 20,001 to ₱ 30k 5 2.80
TOTAL 176 100.00
Table 6 presents the monthly income. Most of the respondents' income is
below ₱ 10k and has a frequency of 124, or 70.50%. On the contrary, ₱ 10,001
to ₱ 20k have a frequency of a frequency of 47, or 26.70%, and ₱ 20,001 to ₱

41
30k have a frequency of 5, or 2.80%. According to Thayaparan and
Sivatharshika (2019), low-income borrowers are often thought to be more likely
to miss payments on their outstanding loan agreements with lending institutions.
Conversely, comparatively higher-income borrowers are less likely to miss loan
payments. Increased income suggests that borrowers have greater resources
available to repay the loan.
Table 7. Distribution of respondents in terms of Type of Savings

Type of savings Frequency Percentage
Regular Savings 132 75.00

Compulsory Savings 44 25.00
TOTAL 176 100.00
Table 7 shows that most respondents who availed of regular savings have
a frequency of 132, or 75%, while those who availed of compulsory savings have
a frequency of 44, or 25% of the total population. In this situation, regular savings
are supported by the study of Chakravarty and Shahriar (2015); regular savings
serve as a tool for payback enforcement and diversification if the borrowers do
not meet the loan repayment schedule. This means that regular savings are a
measure taken to ensure the timely repayment of loans. On the other hand, the
study of Bruno and Khachatryan (2020), voluntary savings, suggests that credit
and savings are essential of financial intermediation and that savers are already
aware of the benefits and strategies for saving.

42
Table 8. Distribution of respondents in terms of the type of assets

Type of Assets Frequency Percentage
Small Business 90 51.10

Livestock & Agricultural
86 48.90
Assets
TOTAL 176 100.00
Table 8 shows that the respondents have a small business as their asset,
which has a 90 frequency, or 51.10%, while livestock and agricultural assets
have an 86 frequency, or 48.90% of the total population. The study of Chisasa
(2014) demonstrated that lenders occasionally demand guarantors to back up
their clients' loans. Nanayakkara and Stewart (2015) made the idea concrete,
stating that borrowers who possess assets will find it easier to obtain credit.
Level of Borrowers' Attitude Toward Loan Payment
The tables below show the borrower's attitude towards loan payment in
Boston, Davao Oriental. This attitude consists of four indicators: willingness to
pay, timeliness, ease of payment, and credit investigation.
Table 9. Level of borrowers' attitude towards loan payment

Std.
Indicator Mean Interpretation
Deviation
A. Willingness to Pay 3.87 0.43 High
B. Timeliness 4.26 0.67 Very High
C. Ease of Payment 3.95 0.70 High
D. Credit Investigation 4.03 0.51 High
Borrowers Attitude 4.03 0.44 High
43
The level of borrowers' attitudes toward loan payment, as shown in Table
9, is high, with a mean of 4.03. It indicates that the borrower's attitude is evident
toward loan payment. With this, MF borrowers in Boston Davao Oriental have
positive borrowing experiences but may acknowledge occasional challenges and
are primarily satisfied with debt management. This mean score is combined with
the results of the indicators: timeliness, with the highest mean of 4.26, interpreted
that the attitude toward the timeliness of borrowers toward loan payment is very
evident. The study of Kassegn and Endris (2021) highlights that Insolvency is
meaningless if a borrower consistently fulfills all loan obligations by the deadline.
With that, it shows that borrowers can fulfill or have a positive attitude on
timeliness towards loan payments.
On the other hand, credit investigation has a 4.03 mean, ease of payment
with a 3.95 mean, and willingness to pay with a 3.87 mean. These three
indicators, interpreted high, denote that borrowers' attitudes toward these
indicators are evident. To make it into account one of the requirements for
lending is capacity. Credit investigation (CI) is a procedure that entails gathering
and confirming member-borrower documentation regarding significant assets and
properties (Mendoza et al., 2016). The outcome shows that borrowers in Boston
Davao Oriental have passed the credit investigation. However, on ease of
payment, borrowers' likelihood of repaying their loans increased significantly
when the loan repayment time was suitable for them (Kebede et al., 2016). In
terms of ease of payment, its high mean reflects that borrowers are given a
suitable time to pay. However, willingness to pay, supported by the study of Puri
44
(2021), states that a borrower's desire to pay requires understanding his
character.
Table 10. Level of borrowers' attitude on willingness to pay

Std.
No. Description Mean Interpretation
Deviation
Willing to pay without any
1 4.53 0.73 Very high
inducement
Sometimes pay loans with the help
2 3.43 0.84 High
of group members
TOTAL 3.87 0.43 High
As shown in Table 10, the level of borrowers' attitude on willingness to pay
is high, with a total score mean of 3.87, indicating that the attitude on willingness
to pay of the borrowers is evident. The results were obtained from the combined
scores of the two descriptions, and among them, willing to pay without any
inducement has the highest mean of 4.53. It indicated that the attitude on
willingness to pay of the borrowers is very evident. Puri's study (2021)
emphasizes that the borrower's desire to pay requires understanding his/her
character. On the one hand, sometimes paying loans with the help of group
members has a high mean, with 3.20. Indicate that the attitude on willingness to
pay of the borrowers is evident. Meanwhile, some factors influence the
willingness to pay, which should be considered for borrowers who made
payments with the help of their members.

45
Table 11. Level of borrowers' attitude on timeliness

Std.
Deviation
1 Paying loans on due dates 4.27 0.82 Very High
2 Reminded to pay back the loan. 4.25 0.79 Very High
Maintained a good credit history
3 4.27 0.79 Very High
and declared debts timely
TOTAL 4.26 0.67 Very High
As reflected in Table 11, the level of borrowers' attitude toward timeliness
toward loan payment is very high, with a total mean of 4.26, interpreting that the
attitude toward the timeliness of the borrowers is very evident. Subsequently,
among its three descriptions, paying loans on due dates, maintaining a good
credit history, and declaring debts in a timely manner have the same very high
mean of 4.27. Additionally, being reminded to pay back the loan has also been
very high, with a mean of 4.25, which is all interpreted as the attitude toward the
timeliness of the borrowers toward loan payment being very evident. For the
most part, Asongo and Idama (2014) stated that various factors contribute to loan
default in microfinance institutions, such as certain customers' failure to monitor
how they utilize their loan funds and to remind themselves to return the loan.
Most clients would only voluntarily repay their debts once the bank continually
reminds them to. Additionally, according to Garomsa (2017), variables like credit
timeliness, repayment time suitability, and monthly payment trend are determined
to be significant factors that affect the borrowers' loan repayment.

46
Table 12. Level of borrowers’ attitude on ease of payment

Std.
Deviation
1 Comfortable to pay loan 4.20 0.86 High
The business generates enough
2 3.70 0.83 High
cash flow
As shown in Table 12, the level of borrowers' attitude toward ease of
payment is high, with a total score mean of 4.03. The borrowers' attitude toward
ease of payment toward loans is evident. Meanwhile, the two descriptions of
ease of payment, the comfortable to pay with a 4.20 mean and the business
generates enough cash with a mean of 3.70, are high. To support this situation,
Kebede et al. (2016) highlight that borrowers' likelihood of repaying their loans
matters when the loan repayment time suits them. Meraj (2016) said borrowers
feel more comfortable taking out loans if they have enough time to get the money
when needed. They also feel better about the loan if the repayment schedule
gives them reasonable time to pay it back based on their income. On the one
hand, Mehta (2022) asserts that the idea of enough cash flow is crucial since a
financial institution's main worry is whether a borrower will have enough income
to pay back the principal and service the debt. Another critical factor that has
been discovered to influence borrowers' loan repayment success is their
repayment time.
47
Table 13. Level of borrower’s attitude on credit investigation

Std.
No Interpretatio
Description Mean Deviatio
. n
n
1 Having a good credit history 4.19 0.84 High
2 Put up a collateral 3.82 0.80 High
Having enough salary or source of
3 3.70 0.88 High
income to pay the loan.
4 Capable of paying the loan. 4.23 0.65 Very High
The respondents generally had a high attitude toward credit investigation,
as shown in Table 13, with a total mean of 4.03, which may indicate that the
attitude toward Credit Investigation of the borrowers' loan payment is evident—
having the capacity to pay loans with mean of 4.23, is very high. Meanwhile,
having a good credit history has a 4.19 mean, being able to put up collateral with
a 3.82 mean, and having enough salary as the source of income to pay the loan
has a 3.70 mean, and all of them interpreted as high. Furthermore, credit
investigation can determine the capability of the borrowers. It is supported by the
study of Abdulsaleh and Worthington (2016), who state that credit investigation is
the primary goal of a capacity evaluation, which is to evaluate a borrower's
creditworthiness. However, Barona in Abdulsaleh and Worthington (2016) state
that capacity relies on the borrower's future cash flows, which rely on additional
essential elements, including the company's internal management and the
industry's status.
48
Significant Difference between the Aptitude (Demographic Profile) and

Attitude of Borrowers toward Loan Payment
This part of the study analyzed how various demographic factors of
borrowers, such as their marital status, number of dependents, age, educational
attainment, monthly income, type of savings, and type of assets, influence their
attitudes toward borrowing and repayment in microfinance. Borrowers' attitudes
were assessed in terms of their willingness to pay, timeliness, ease of payment,
and attitudes toward credit investigation.
Table 14. Mean comparison of borrower's attitude among respondents in terms

of their marital status
Factors F-value p-value Interpretation
A Willingness to Pay 0.504 0.680 Do not differ significantly
B Timeliness 1.789 0.151 Do not differ significantly
C Ease of Payment 1.488 0.219 Do not differ significantly
D Credit Investigation 1.585 0.195 Do not differ significantly
Borrower’s Attitude 1.177 0.320 Do not differ significantly
Table 14 shows the results of an analysis of variance (ANOVA) comparing
the mean values of different factors related to borrowers' attitudes among
respondents with different marital statuses. Moreover, it indicates that the mean
values do not differ significantly among respondents with different marital
statuses for all factors. This is because the p-values for all factors are greater
than the conventional significance level of 0.05. Based on the study of Angaine
and Waari (2014), as they explore the various factors that may influence loan
payment, including marital status, they found no significant difference between

49
borrowers' attitudes. However, the study of Thayaparan and Sivatharshika (2019)
indicated that factors including age, income, and family size can predict how well
borrowers in Sri Lanka will repay their loans.

of their number of dependents
Meanwhile, Table 15 reflects that the number of dependents is similar to
the overall attitude towards borrowing. Despite being insignificant, according to
the study of Angaine and Waari (2014), the number of dependents can still be
helpful as a parameter in predicting loan default. Thus, according to the findings
in the study of Pasha and Negese (2014), the default rate will be lowered by
0.158 for every drop in one dependent.

of their age level

50
As projected in Table 16, age does not significantly influence borrowers'
attitudes toward willingness to pay, timeliness, ease of payment, credit
investigation, or overall attitude toward borrowing. Further, according to
Thayaparan and Sivatharshika (2019), factors like age can predict how well
borrowers in Sri Lanka will repay their loans. However, in the framework of
Uganda, Ssekiziyivu et al. (2018) found conflicting data indicating that there is no
meaningful relationship between the characteristics, specifically the age of
borrowers and their ability to repay loans.

of their educational level
F- Post Hoc Test
Factors p-value Interpretation
value
Do not differ
A Willingness to Pay 0.832 0.437 Not Applicable
significantly
Do not differ
B Timeliness 1.195 0.305 Not Applicable
significantly
Primary
Graduate and
C Ease of Payment 2.753 0.067 Differs significantly
Secondary
Graduate
Primary
Graduate and
D Credit Investigation 2.417 0.092 Differs significantly
Secondary
Graduate
Primary
Graduate and
Borrower’s Attitude 2.442 0.090 Differs significantly
Secondary
Graduate
Based on Table 17, the borrowers' attitude among respondents in terms of
their educational level differs significantly. Moreover, it has been seen that
educational attainment does not significantly influence borrowers' attitudes

51
toward willingness to pay and timeliness. However, it significantly influences their
attitudes toward ease of payment and credit investigation (p-values < 0.05). The
ease of payment differs significantly, according to Mwanza (2018), as it found
that borrowers' characteristics, such as educational level, affected the borrower's
inability to repay the loan, while credit history significantly differs because it is a
reliable indicator of loan non-default (Segal, 2023). The post hoc test indicates a
significant difference between primary and secondary graduate respondents
regarding these factors. Correspondingly, based on the study findings of Dagos
(2021), the borrowers that lie between primary and secondary graduates have
only the ability to basic reading and writing. However, as highlighted in the study
of Mehale (2019), borrowers with higher educational attainment are a predictor of
financial literacy that helps borrowers perform better loan repayment.

of their Income level
Factors F-value p-value Interpretation Post Hoc Test
Willingness to Do not differ
A 1.069 0.345 Not Applicable
Pay significantly
below ₱ 10k
B Timeliness 3.050 0.050 Differs significantly and ₱ 10,001 to
₱ 20k
Do not differ
C Ease of Payment 0.293 0.747 Not Applicable
significantly
Credit Do not differ
D 1.751 0.177 Not Applicable
Investigation significantly
Do not differ
Borrower’s Attitude 1.963 0.144 Not Applicable
significantly
52
As presented in Table 18, the income level significantly influences
borrowers' attitudes only on timeliness (p-value = 0.050). Sanglay et al. (2021)
determined that monthly income significantly influences borrowers' behavior.
Borrowers with high monthly incomes are expected to pay their loans on time. In
addition, after looking into how household income affected loan repayment,
Tundui et al. (2013) concluded that a higher income is associated with a lower
default rate. Furthermore, the post-hoc test indicates that the significant
difference lies between respondents with income below ₱10k and those with
income ₱10,001 to ₱20k. The evidence in the study by Davies (2019) supports
that income and borrowing have a large body of relevance. Low-income
households are less likely to receive consumer credit than higher-income
households. When they do borrow, it is often to make ends meet and pay for
more essentials. So, most borrowers are prone to defaulting on their loans.

of type of savings
Factors t-value p-value Interpretation
A Willingness to Pay 2.384 0.018 Highly differs significantly
B Timeliness 1.720 0.087 Differs significantly
D Credit Investigation 2.231 0.027 Highly differs significantly
Borrower’s Attitude 2.303 0.022 Highly differs significantly
As revealed in Table 19, borrowers' attitudes among respondents in terms
of type of savings highly differ significantly. Davies et al. (2019) have noted the
importance of developing a savings pot, as saving affects borrowers' aptitude.
Moreover, factors like willingness to pay and credit investigation (p-values < 0.05),
53
indicating highly significant differences). It shows that borrowers are already
aware of the benefits of and strategies for savings (Bruno & Khachatryan, 2020).
As shown in Table 8, regular or voluntary savings serve as a tool for payback
enforcement and diversification (Chakravarty & Shahriar, 2015). It also differs
significantly influences their attitudes towards timeliness (p-value = 0.087), as
Ayele (2015) proved that when lenders provide microcredit backed by required
savings, the rate of loan default will decrease. However, it does not significantly
influence their attitudes toward ease of payment (p-value > 0.05). Borrowers' who
are not paying loans so well will do compulsory savings as a substitute for
collateral to impose a positive inducement for repayment and are described as
the minimum savings that condition the borrower's access to loans (Bruno &
Khachatryan, 2020).

of type of assets
Factors t-value p-value Interpretation
B Timeliness – 0.906 0.366 Do not differ significantly
Table 20 shows that the type of assets does not significantly influence
borrowers' attitudes towards willingness to pay, timeliness, ease of payment,
credit investigation, or their overall attitude towards borrowing (p-values > 0.05,
indicating no significant difference). Given this, Davies et al. (2019) contradicted
the results as owning assets has some relation to borrowing behavior in the
54
evidence that homeowners have higher levels of borrowing than non-
homeowners because of this, their borrowers linked to their level of housing
assets.
To sum it up, the profile that highly differs significantly from borrowers'
attitudes is the type of savings. Ayele (2015) proved that the loan default rate will
decrease when lenders provide microcredit backed by required savings. On the
other hand, educational attainment held that it differs significantly from borrowers'
attitudes, with the post hoc test indicating that a significant difference lies
between primary and secondary. However, for the income level, only the
timeliness indicator differs significantly. Income has a significant influence on
borrowers' behavior. However, the attitude of the borrowers is still that they do
not differ significantly. Supported by the study findings of Sanglay et al. (2021),
borrowers with high income levels are expected to pay their loans on time. Lastly,
regarding the number of dependents, age, and type of assets, the mean
comparison of borrowers' attitudes does not differ significantly.

CHAPTER 5
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This chapter provides a summary of the study and a review of its results. It
discusses the study's results and conclusion and presents an overview of study
limitations and recommendations for future research and practice.
Summary
Microfinance institutions have become essential for reducing poverty and
providing financial services to low-income or underprivileged individuals (Watkins,
2016). Along with this are the risks and dependability that the borrowers may
cause in the ongoing surge in loan default toward loan payment (Makorere,
2014). For this reason, the researchers investigated the aptitude (demographic
profile) and the attitude of borrowers in Microfinance Institutions. This research
sought to answer the aptitude when analyzed according to the demographics:
marital status, number of dependents, age level, educational level, income level,
type of savings, and types of assets. They also examined the level of attitude of
borrowers toward loan payment in Boston, Davao Oriental, in terms of
willingness to pay, timeliness, ease of payment, and credit investigation. Lastly,
determine if there is a significant difference between the aptitude (demographic
profile) and attitude of borrowers toward loan payment in Boston, Davao Oriental.
This study used simple random sampling, in which the researchers
randomly selected a subset of a population (Thomas, 2020) with a total
population of 323 and a sample mean of 176 respondents in Boston, Davao
Oriental. Additionally, the respondents were beneficiaries within the year 2022
- 2023. The instrument used in the study is an adapted survey questionnaire

56
developed from the study of Ssekiziyivu et al. (2018). It consists of two sections.
The first section contains a checklist that determines the demographic profile of
the borrowers. On the other hand, the second section included the Likert Scale,
which measured the respondents' attitude toward loan repayment. Furthermore,
it has undergone validity testing by an authority expert in this field.
As a result of the survey, which comprised 176 microfinance borrowers in
Boston, Davao Oriental, the aptitude (demographic profile) of borrowers in
marital status, married had the most respondents with a frequency of 150
(85.20%). In contrast, the category of dependents constituted three people with a
frequency of 44 (25.00%). At the same time, most clients fall within active
working age groups, with the highest concentration being between 31 and 40
years old, 44 frequency (39.80%). About half of them had graduated from high
school at an 85 frequency (48.30%); primary school graduates constituted about
82 frequency. Moreover, most respondents earned below ₱ 10k, with a
frequency of 124 (26.70%). Most borrowers saved regularly (75%). The
respondents would be almost evenly divided into households that owned small
business properties and those whose assets consisted mainly of livestock and
agriculture-related investments, slightly above the half mark by a margin of 51.10
against 48.90%.
On the other hand, the study's results revealed that borrowers generally
have a positive attitude toward repaying their loans, with an overall mean score
of 4.03, indicating that borrowers' attitudes toward loan payments are evident.
Lastly, the results indicated that educational attainment, income level, timeliness,
57
and type of savings significantly influenced borrowers' attitudes. In contrast,
factors like marital status, number of dependents, age, and type of assets did not
significantly impact.
Conclusions
This study arrives at the following conclusions:
1. The borrowers' aptitude (demographic profile) in Boston, Davao Oriental, has a
high to moderate potential for loan repayment. Most borrowers are between 31
and 40 years old and are married, indicating shared incomes and financial
obligations. Moreover, many borrowers have active savings, participate in
agricultural activities, or own small businesses, suggesting some income
generation and financial planning levels, respectively.
2. Borrowers in Boston and Davao Oriental exhibited an exceptionally positive
attitude towards loan payments. The high total mean scores across various
aspects, such as timeliness, credit investigation, ease of payment, and
willingness to pay, indicate that the borrower's attitude towards loan payment is
evident. Therefore, borrowers have a strong commitment and responsible
mindset toward fulfilling their loan obligations.
3. There was a significant difference in the borrowers' aptitude (educational
attainment and type of savings) and attitude towards loan payment. Conversely,
there was no significant difference in the borrowers' aptitude (marital status,
number of dependents, age group, and level of income) or attitude toward loan
payment.
58
Recommendations
The research has shown that borrower characteristics such as education
level, level of income (for timeliness), and the type of savings influenced their
attitudes toward repaying loans. Microfinance institutions may, therefore,
innovate their lending policies and repayment plans depending on the clients'
backgrounds by providing different repayment schedules or more lenient terms
for borrowers with lower educational qualifications, Offering training programs
and individual counseling sessions to each borrower to ensure everyone
understands the loan terms and other conditions attached to its repayment.
Borrowers are advised to be transparent about their financial positions, academic
histories, and potential barriers that hinder them from settling their debts.
Further, future researchers may explore the reasons behind the
insignificant influence of some demographic factors (marital status, number of
dependents, age level, types of assets, and income level) on borrowers' attitudes.
They may also widen the scope to see if the significance between the forgoing
aptitude (demographic profile) and attitude changes. More tailored and effective
interventions can be developed to promote responsible borrowing and successful
loan repayment by better understanding these contextual factors.

59
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APPENDICES
Appendix A. Survey Questionnaire
Borrower’s Aptitude and Attitude Towards Microfinance Loan Payment

Thank you for participating in the survey. Your input is vital for the
research titled Borrower’s Aptitude and Attitude Towards Microfinance Loan
Payment Please select the most appropriate response for each question.
I. Aptitude (Profile of the Respondents)

Direction: Please fill out the following with correct information.
1. Marital Status
( ) Single
( ) Married
( ) Separated/ Divorced
( ) Widowed
2. Number of Dependents
( ) One
( ) Two
( ) Three
( ) Four
( ) Five
( ) Above Five
3. Age Level
( ) 30 and below
( ) 31 to 40
( ) 41 to 50
( ) 51 and above
4. Educational Level
( ) Illiterate
( ) Primary Education
( ) Secondary Education
( ) Tertiary Education
70
5. Income Level
( ) Below 10,000
( ) 10,001 to 20,000
( ) 21,001 to 30,000
( ) 31,001 to 40,000
( ) 41,001 to 50,000
( ) 51,000 and above
6. Type of Savings
( ) Regular (Voluntary) Savings
( ) Compulsory Savings
7. Types of Assets
( ) Small Business
( ) Livestock and Agricultural Assets
II. Attitude
Direction: Based on your experiences as a borrower, please answer
the following statements by indicating whether you (5) Strongly Agree,
(4) Agree, (3) Neutral, (2) Disagree, and (1) Strongly Disagree, to the
following items. Check the corresponding answer for each statement.
II. Attitudes toward Payment

Description 5 4 3 2 1
Willingness To Pay
1. I willingly pay
my loans
without any
inducement.
2. I sometimes
pay my loans
with the help of
my group
members.
Timeliness
3. I pay my loans
on due dates.
4. The finance
institution
reminds me to
pay back the
loan.
71
5. If there was a
need to
maintain a good
credit history, I
would declare
my debts
timely.
Ease of Payment
6. I am
comfortable to
pay my loan
weekly.
7. My business
generates
enough cash
flows to repay
my loan well.
Credit Investigation
8. I have a good
credit history.
9. I put up a
collateral for my
loan.
10. I have enough
salary or source
of income to
pay for my loan.
11. I am capable to
pay my loan.
Thank you for participating in the survey. Your responses will contribute to
the understanding of the borrower’s aptitude and attitude towards payment.
72
Appendix B
Request Letter to the Microfinance Institutions in Boston
Davao Oriental Philippines
73
74
Appendix C
Informed Consent letter to the respondents
75
76
Appendix D
Sample answered sheet of the translated survey questionnaire
77
Appendix E
Tac Recommendations with the indicated signatures of panelists
78
Appendix F
Routing Form with the indicated signatures of panelists
79
PLATES
Plate 1. During the research survey among the Microfinance borrowers’ in Boston Davao
Oriental which was conducted on May 11 2024, Saturday morning and afternoon.
Plate 2. The proponent during final defense held on June 07, 2024 at faculty office.
80
CURRICULUM VITAE
REJE ANN B. PACARAT

Brgy San Jose, Boston, Davao Oriental, Philippines
09356138284
rejeannpacarat50@gmail.com
CAREER OBJECTIVE:
To obtain a role in the banking or financial services industry, where I can utilized
my expertise in financial analysis and provide valuable solutions to clients.
PERSONAL DATA:
Date of birth : March 16, 2002
Place of Birth : Brgy San Jose, Boston, Dava OrientaL
Age : 22 yrs. old
Gender : Female
Civil Status : Single
Citizenship : Filipino
Religion : Roman Catholic
Height : 5’3 Weight: 70
Father’s Name : Romel C. Pacarat
Mother’s Name : Marissa B. Pacarat
EDUCATIONAL PROFILE :
Primary : San Jose l Elementary School

(2013 – 2014)
Secondary : Cateel Vocational High School
(2019 – 2020)
Tertiary : Davao Oriental State University –
Cateel Campus (2023 - 2024)
81
TRAINING AND SEMINARS ATTENDED
 FINANCIAL LITERACY TRAINING

Davao Oriental State University Cateel Campus
( May 19, 2023)
 TRAINING ON INNOVATIVE MARKETING STRATEGIES

FOR COOPERATIVE PRODUCTS
( December 15, 2023)
SKILLS AND INTEREST
 SOLVING PROBLEM
 GOOD DECISION MAKING
 MOVIES
 PLAYING BASKETBALL AND VOLLEYBALL
82
ROBERTO JR. C. SAING

Purok 3, Cauwayanan, Boston, Davao Oriental
Philippines
09458266551
robertojrsaing@gmail.com
CAREER OBJECTIVE:
To be able to secure a challenging position in a reputable organization where I

can apply my knowledge and skills in business.
PERSONAL DATA:
Date of birth : December 1, 2000
Place of birth : Cauwayanan, Boston, Davao Oriental
Age: : 23 yrs old
Gender : Male
Civil Status : Single
Citizenship : Filipino
Religion : Southern Baptist Church
Height : 5’6
Weight : 60
Father’s Name : Roberto M. Saing Sr.
Mother’s Name : Florida C. Saing
EDUCATIONAL PROFILE :
Primary : Boston Central Elementary School
(2013 – 2014)
Secondary : Boston National High School
(2019 – 2020)
Tertiary : Davao Oriental State University – Cateel
Campus ( 2023-2024)
83
TRAINING AND SEMINARS ATTENDED
 FINANCIAL LITERACY TRAINING

( May 19, 2023)
 TRAINING ON INNOVATIVE MARKETING STRATEGIES

FOR COOPERATIVE PRODUCTS
( December 15, 2023)
 BASIC BOOKEPPING TRAINING (Online)

(January 30, 2024)
WORK EXPERIENCE/S
 SMALL TOWN LOTTERY ( TELLER )

(2021-2022)
SKILLS AND INTEREST
 COMMUNICATING
 COMPOSING
 WRITING
 SINGING

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BORROWER’S APTITUDE AND ATTITUDE TOWARDS MICROFINANCE

PACARAT, REJE ANN B.

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

LENETH PEARL S. PINGOT

Approved by the Panel Members:

REMAR I. PABALAY JADE S. CERVANTES

Accepted in partial fulfillment of the requirements for the degree in Bachelor of

JILLA MAE D. SUSADA

JILLA MAE D. SUSADA RICHARD C. MARAVILLAS

This study was dedicated wholeheartedly to those individuals who

significantly contributed to the process of fulfilling this research.

To our very supportive parents who tirelessly showed efforts to motivate,

inspired us to do so in this field.

who make us feel better and motivate us to finish this research.

made this research more valuable and impactful.

power, and skills that we can use to accomplish this research.

This research has been a collaborative effort and we are indebted to

numerous individuals and entities whose contributions have been invaluable

throughout this journey.

First and foremost, we would like to express our sincere gratitude to

this research project. To Richard C. Maravillas, esteemed chair panelist, and

panel members Remar I. Pabalay and Jade S. Cervantes, we highly appreciate

Pingot, whose technical knowledge, patience, and motivation played an

Additionally, we would like to thank our respondents who without whom

supporting us throughout this journey who continuously motivated us till now

financially and emotionally.

along the way.

REJE and ROBERTO

List of Tables vii

Background of the Study 1

Significance of the Study 3

Statement of the Problem 4

Objectives of the Study 5

Scope and Limitation 5

CHAPTER 2 REVIEW OF RELATED LITERATURE

Microfinance Industry in the Philippines 7

Borrowers Qualities for Loan Availment in

Borrowers Loan Repayment Performance 16

Borrowers Attitude and Aptitude Loan

Research Locale and Duration 32

Respondents and Sampling Procedure 33

Data Gathering Procedure 34

CHAPTER 4 RESULTS AND DISCUSSION

Demographic Profile of the Respondents (Aptitude) 37

Level of Borrowers' Attitude toward Loan Payment 42

Significant Difference between the Aptitude and

CHAPTER 5 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

TABLE NO. PAGE

1 Interpretation Table for Borrower’s Attitude 36

2 Distribution of respondents in terms of Marital status 37

3 Distribution of respondents in terms of the number of

4 Distribution of respondents in terms of Age level 39

5 Distribution of respondents in terms of Educational level 40

6 Distribution of respondents in terms of Income level 40

7 Distribution of respondents in terms of Type of Savings 41

8 Distribution of respondents in terms of Type of Assets 42

9 Level of Borrowers Attitude towards loan payment 42

10 Level of Borrowers Attitude on Willingness to Pay 44

11 Level of Borrowers Attitude on Timeliness 45