Vulnerabilities of Microfinance Institutions and Low-Income Borrowers in Occidental Mindoro, Philippines: A Proposed Multisectoral Assistance Plan
Jason G. Ramirez1, Ambrosio M. Dela Cruz2
https://orcid.org/0009-0004-1637-3693
ramirez1908401@ceu.edu.ph, 2amdelacruz@ceu.edu.ph
1-2Graduate School, Centro Escolar University, Manila, Philippines
DOI: https://doi.org/10.54476/ioer-imrj/397942
ABSTRACT
Microfinance institutions in the Philippines are crucial in supporting low-income households with small businesses. However, credit defaults pose a challenge to both microfinance institutions and borrowers, hindering sustainable financial progress. To address this, a study used the Credit Risk Management Mechanism Model to investigate credit vulnerabilities and proposed a multisectoral assistance plan. The study utilized the descriptive-comparative research design and was conducted in Occidental Mindoro, Philippines, and collected data from 32 microfinance institutions and 242 low-income borrowers using complete enumeration and stratified random sampling. Socio-demographic profiles and data for the assistance plan were gathered using frequency and percentage distribution. Credit vulnerabilities were measured using weighted arithmetic mean and standard deviation, and the disparity was analyzed using independent samples t-test and one-way analysis of variance. The findings showed a notable difference in credit vulnerabilities between microfinance institutions and borrowers. To bridge this gap, microfinance institutions should invest in comprehensive training programs for staff and loan officers, improving credit assessment processes, risk identification, and tailored financial products. Collaboration with experts, and consultants, and continuous monitoring is vital. Low-income borrowers should utilize financial literacy and education programs provided by microfinance institutions and other organizations. These programs must be accessible, culturally sensitive, and customized. Effective development and delivery require collaboration between microfinance institutions, community organizations, non-governmental organizations, and government agencies. Microfinance institutions should actively promote these programs for widespread awareness among low-income individuals.
Keywords: level of credit vulnerabilities, microfinance institutions, low-income borrowers, credit risk, proposed multisectoral assistance plan