PERFORMANCE OF MICRO-ENTERPRISES IN THE CITY OF

TUGUEGARAO

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

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

by

PELAGIO C. LABANG JR.

1
 ABSTRACT

Title: PERFORMANCE OF MICRO-ENTERPRISES IN

TUGUEGARAO CITY

Researcher: Pelagio C. Labang Jr.

Degree: Master in Business Adminstration
School: Saint Paul University Manila
School Year: 2017-2018
Adviser: Mrs. Marilou Urbina, MBA
No. of Pages:

Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards
economic development of the country. Entrepreneurs are said to be the pillar of economic
progress of the country. They contribute to the pecuniary growth of the nation in terms of
economic and stability of business in a global competitive world. It is however through the
support given by thegovernment where these entrepreneurs hold strength in pursuit to their
advocacy of building wealth to their family and for the nation. Helping the low-income
individual to build a booming and profitable business so they could become economically self-
sufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013)

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

This study aimed at determining the performance of micro-enterprises that availed micro-
financing in Tuguegarao City, Cagayan. Specifically, this study sought answers to the five (5)
sub-problems.First, what is the profile of the micro-enterprises in terms of form of business, type
of business and years in operation? Second, what is the performance of the micro-enterprises that
availed of micro-financing in Tuguegarao City, Cagayan in terms of Sales, Cash flow, Liquidity
and Return of Investment (ROI)? Third, is there a significant difference in the level of
performance of micro-enterprises for the availment of micro-financing when grouped according
to profile variables? Forth, what are the problems encountered by micro-enterprises in
Tuguegarao City? And lastly, what action plan can be proposed to address the problems
encountered by micro-enterprises in Tuguegarao City?

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

In the light of the above findingsof the study, the following conclusions were derived. (1)
The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years in
Operations. (2) The majority of the respondents had sales of 100,001 – 500,000 and Return of
Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 –
100,000 and Liquidity of 1.51:1 – 3.00:1. (3) The micro-enterprises performance in terms of
sales, cash flow, liquidity and return of investment is the same regardless of form of business. (4)
The micro-enterprises performance in terms of cash flow, liquidity and return of investment is
the same regardless of type of business. Meanwhile, the micro-enterprises in the services
business has sales than those in the retail business. (5) The micro-enterprises performance in
terms of sales, cash flow, liquidity and return of investment is the same regardless of their years
of operation. (6) The most common problems encountered were, not enough cash to purchase
raw materials, merchandise and supplies, lots of competitors, lack of training in handling
business, high cost of sales that resulted to the increase in selling price and natural calamities. (7)
There is a need to comprehensively implement the proposed action plan to enhance the micro-
enterprise in Tuguegarao City.

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 TABLE OF CONTENTS

Page
Title Page i

Recommendation for Oral Examination ii

Approval by the Panel of Examiners iii

Abstract iv

Table of Contents v

Chapter Page

1 THE PROBLEM AND ITS SETTING 1

Introduction 1

Theoretical/Conceptual Framework 4

Operational Framework 6
Operating Model 7

Statement of the Problem 8

Statement of Hypothesis 9

Assumption of the Study 9

Scope and Delimitation 9

Significance of the Study 10

Definition of Terms 12

2 REVIEW OF RELATED LITERATURE 14

Synthesis of the Reviewed Literature 20

Gaps/s Bridged by the Present Study 21

3 RESEARCH METHODOLOGY 14

Research Design 23

4
 Sources of Data

Population of the Study

Instrumentation and Validation

Data Gathering Procedure

Statistical Treatment of Data

4 PRESENTATION, ANALYSIS AND

INTERPRETATION OF DATA

Profile of the Micro-enterprises

Performance of the Micro-enterprises

That availedof Micro-financing

Difference in the Performance of Micro-enterprises

When they are grouped according to Form of Business

Difference in the Performance of Micro-enterprises

When they are grouped according to Type of Business

Difference in the Performance of Micro-enterprises

When they are grouped according to Years of Operation

Problems Encounterd by Micro-enterprises

5 SUMMARY OF FINDINGS, CONCLUSION

AND RECOMMENDATIONS

Summary of Findings

Conclusions

Recommendations

5
 Chapter 1

THE PROBLEM AND ITS SETTING

Introduction

Micro entrepreneurs or the entrepreneurial poor are considered worthy partners towards

economic development of the country. Entrepreneurs are said to be the pillar of economic

progress of the country. They contribute to the pecuniary growth of the nation in terms of

economic and stability of business in a global competitive world. It is however through the

support given by the government where these entrepreneurs hold strength in pursuit to their

advocacy of building wealth to their family and for the nation. Helping the low-income

individualto build a booming and profitable business so they could become economically self-

sufficient is the key to moving them out from dearth(Bangko Sentral ng Pilipinas,2013).

Microfinancing in a most classical sense, helps those unemployed or low-income entity

to capitulate high income as they deserve to prosper even in the small entrepreneurial economy.

Most microfinance institutions (MFIs) operated on the assumption that providing micro

entrepreneurs loans without articulating how, where and when microfinance would work and for

whom it could work, would help the underprivileged, however, over the years, these MFIs have

realized that access to credit alone will not move the poor out of poverty. Thus, from being a

single-service provider of credit and nothing more, the institutions have shifted to providing what

is now commonly referred to as Business Development Services (BDS).

According to the most recent data, "the microfinance industry is estimated at $60 to 100

billion, with 200 million clients." However, there is much criticism on the concept. Microloans

are smaller than traditional bank loans, but they have much higher interest rates. Many believe

the loans are not enough to start a successful business and only provide basic needs, like food

6
and shelter, which eventually lead to more debt. However, there are many ways to ensure timely

repayment on the loans. According to Investopedia, many microlenders allow borrowers to work

together to repay their loans, helping each other when needed. This holds borrowers more

accountable for their repayments, which in turn leads to better credit and sets them off on the

right foot (World Bank, 2017).

In some poor countries the people desperately need loans for them to operate or expands

their farms or small businesses. Micro finance is commercial bank have histories been reluctant

to make small loans to people little or no collateral. This occurs when financial organizations

provide loads to low-income clients or solidarity lending groups who traditionally lack access to

banking or related services (Lawrence and Weber, 2017).

Micro finance can help those included in the micro-enterprises. It is generally defined as

a small business employing nine (9) people or fewer, and having a Balance Sheet or turnover less

than a certain amount. The terms microenterprise and microbusiness have the same meaning,

though traditionally when referring to a small business financed by microcredit the term

microenterprise is often used. Similarly, when referring to a small, usually legal business that is

not financed by microcredit, the term microbusiness (or micro-business) is often used.

Internationally, most microenterprises are family businesses employing one or two persons. Most

microenterprise owners are primarily interested in earning a living to support themselves and

their families. They only grow the business when something in their lives changes and they need

to generate a larger income. According to information found on the Census.gov website,

microenterprises make up 95% of the 28 million US companies tracked by the census.

From these premises, the researcher determinedthe performance of micro-enterprise in

Tuguegarao City.

7
Theoretical/ Conceptual Framework

The study considered the concept by Ogindo (2006) of micro-financing which arose out

of the need to provide to the low-income earners who were left out by formal financial

institutions. The practice of micro-credit dates bank to as early as 1700 and can be traced to the

Irish Loan Fund System, which provided small loans to the rural poor with no collateral. The rise

of the microfinance industry represents a remarkable accomplishment taken within historical

context. It has overturned established ideas of the poor as consumers of financial services,

shattered stereotypes of the poor as not bankable, spawned a variety of lending methodologies

demonstrating that it is possible to provide cost-effective financial services to the poor, and

mobilized millions of dollars of social investment for the poor. It must be emphasized too, that

the animating motivation behind the microfinance movement was poverty alleviation. Not only

that, but microfinance offered the potential to alleviate poverty while paying for itself and

perhaps even turning a profit doing well by doing good. This potential, perhaps more than

anything, accounts for the emergence of microfinance onto the global stage.

Two theoretical propositions on the macro-level for supporting microfinance

interventions: economic and human resources. By enabling the establishment of new micro-

enterprises, microfinance supports the efficient use of labour and capital as factors of production

and therefore contributing to economic growth and ultimately to sustainable development. The

human resources theory is quite similar to the economic one. Since it is generally accepted that

microfinance is labour-intensive, facilitating access to microfinance is likely to result in the

acquisition of new skills and the upgrading of existing ones and thus improve on the capacity of

the poor to generate income and improve their livelihood. In addition to the discussed theories

underlying microfinance, another spinoff theory is that of empowerment: the poor become

8
empowered when they participate in microfinance activities. By self-selecting themselves into

groups and self-managing their groups, and gaining control over the means of making a living,

poor people become empowered and independent. Empowerment has been particularly relevant

for women who are perceived as being marginalized in most developing countries(Chester and

Kuhn, 2002).

Operational Framework

The study was anchored on the concept of micro-financing as cited by Ogindo (2006),

which summarizes that microfinance is a development tool that grants or provides financial

services and products such as very small loans, savings, micro leasing, micro-insurance and

money transfer to assist the very or exceptionally poor in expanding or establishing their own

businesses. It is mostly used in developing economies where small businesses do not have access

to other sources of financial assistance. Financial services generally include savings and credit;

however some finance organizations also provide insurance and payment services. In addition to

financial intermediation, many micro-finance provide social intermediation services such as

group formation, development of self confidence and training in financial literacy and

management capabilities among members of a group.

The study had independent variables and dependent variables whereby the independent

variables are the profile of micro-enterprises; the dependent variables are the level of

performance of micro-entreprises in Tuguegarao City in terms of Sales, Cash Flow, Liquidity

and Return of Investment (ROI).

Operational Model

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Independent Variable Dependent Variable

Profile of micro-
enterprise Performance of
micro-enterprise
 Sales Proposed Action
 Form of Business plan to address the
 Type of Business  Cash Flow
problems
 Years in  Liquidity encountered by
Operation  Return of micro-enterprises
Investment

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

Statement of the Problem

This study aimed at determining the performance of micro-enterprisesthatavailed micro-

financing in the municipality of BalatanCamarines Sur.

Specifically, this study sought answers to the following questions:

1. What is the profileof the micro-enterprisesin terms of:

1.1. Form of Business

1.2. Type of Business

1.3. Years in Operation

2. What is the performance ofthe micro-enterprises that availed of micro-financing in the

Municipality of BalatanCamarines Sur in terms of:

2.1. Sales

2.2. Cash Flow

2.3. Liquidity

2.4. Return of Investment (ROI)

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3. Is there a significant difference in the level of performance of micro-enterprises for the

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

4. What are the problems encountered by micro-enterprises in BalatanCamarines Sur?

5. What action plan can be proposed to address the problems encounteredby micro-enterprises

in the Municipality of BalatanCamarines Sur?

Statement of Hypothesis

This study tested the following null hypothesis:

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

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

Assumptions of the Study

The study rested on the following assumptions:

1. Micro-enterprises play an important role in employment creation and income generation.

2. Micro-financing helps the poor, especially rural women, develop new and strengthen

existing income generation activities.

3. Respondents were objective and capable in assessing the level of performance of micro-

enterprises in theavailment of micro financing considering some situations .

Scope and Delimitation

The study sought to assess the performance of micro-enterprises in Tuguegarao City.

This assessment focused on the perception of respondents on the performance of their

businesses.This study involved the registered micro-enterprises of Balatan Camarines Sur

11
Business Permits and Licensing office as of September 30, 2017. It covered fifty-five (55) micro-

enterprises whose assets and capital were less than P3million and who had availed of micro-

financing from either formal or informal institutions. This study was conducted during the

Academic year 2017-2018.

Significance of the Study

The findings of the study in determining the performance of the micro-enterprises would

benefit of the following:

Micro-enterprises owners, this would help them toeasily manage their business

activities most especially on the financial management side.

Micro-financing institutions (MFIs), this would help the micro-enterprises addressed

the problems and implement possible solutions foran effective deliverance of financing services

to micro-enterprises.

Prospect businessmen, this would help them about the knowledge of funding sources

and idea regarding loan and profit that will compose them to become better businessmen.

Official of the Province of Camarines Sur,this would help thegovernment officials in

the design and implementation of the programs that could really help the micro-entrepreneurs

and the micro-financial institutions.

National Government Officials, this could improve public service through MFIs

programs on the creation of an enabling environment, supportive regulations and provisions for a

legal framework to micro-financing.

Researcher,this would aid them in an effective management of financing and lending

services.

12
 Future Researchers, this research would serveas a guide in doing their research related

but not limited to what is being stated and declared.

Definition of Terms

To facilitate understanding of the study, important terms were defined contextually and

for operationally:

Performance refers to the accomplishment of a given task measured against preset

known standards of accurancy,completeness, cost and speed (Business Dictionary,2017)In the

study, it refers to the return provided by micro-financing on the micro-enterprises business in

Tuguegarao City.

Micro-enterprises are small business with minimal employees and capital. Due to a lock

of quality education, jobs and training available to people in poverty in developing countries.

Micro-enterprises add value to economy and lives by creating small business opportunities,

improving income and promoting commerce (Funds2orgs, 2018). In the study, these are the

business with assets and capital of P3 million and below in the Municipality of

BalatanCamarines Sur.

Performance of Micro-enterprisesis an encompassing concept and can be defined in

terms of job generation, growth, profitability, sustainability, survival and stability (Storey, 1994).

In the study, this refers to the capability and ability of the micro-enterprises to compete with their

competitors.

Salesthe exchange or transfer of property for money or its equivalent (Spiceland,

Thomas, Herrmann 2009)

13
 Cash Flow provides a summary of cash inflows and cash outflows during the

reporting period. (Nick Aduana, 2015)

Liquidity refers to the ability of a business entity to settle its currently maturing

financial obligations. Obligations are currently maturing if they become due within one

year from the date of the statement of financial position notwithstandingthe normal

operating cycle of a business. (Nick Aduana, 2015)

Return of Investmentrefers to the ratio of net income to the average total assets which is

calculated by dividing the net income by the average total assets (Spiceland, Thomas, Herrmann,

2009)

Micro-financing microfinance, also known as microcredit, is a type of banking service

that is provided to unemployed or low-income individuals or groups who otherwise have no

other access to financial services (Lawrence and Weber, 2017). In the study, this refers to a

system of providing credit, mobilizing deposits and generating investment at the micro-level.

Profile is a set of data often in graphic form portraying the features of something

(Merriam-Webster, 2018). In the study, this refers to the characteristic, type and form of the

micro-enterprises in Tuguegarao City.

Single or Sole Proprietorship had a single owner called the proprietor, who often

manages the business. Proprietors tend to be small retail stores or professional businesses

(Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the single owner of the micro-

enterprise in Tuguegarao City

Partnershipan uncorporated business owned by two or more persons voluntarily acting

as partners or co-owners (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to the

14
type of business organization with two (2) or more owners of micro-enterprise in Tuguegarao

City.

Corporation is a type of business organization that is recognized under the law as an

entity separate from its owners. Therefore the owners of a corporation are not personally liable

for the debts of the business. (Spiceland,Thomas & Herrmann, 2015). In the study, this refers to

the owners of the business who are registered to SEC.

Retail a firm which sells goods to individual customers ( Collins English

Disctionary, 2013). In the study, this refers to the micro-enterprises that sells goods or

groceries directly to the consumers with the goal of earning a profit.

Manufacturing the process of converting raw materials, components or parts into

finished goods that meet a customer’s expectations or specifications(Business Dictionary,

2017). In the study, this refers to the micro-enterprises that uses components, parts or raw

materials to make a finished goods.

Service the action of helping or doing work for someone. No transfer of

possession or ownership takes place when services are sold (Business Dictionary, 2017).

In the study, this refers to the micro-enterprises who rendered services to their clients.

15
 Chapter 2

REVIEW OF RELATED LITERATURE

This chapter presents the literature and studies, which are significant to present the study.

A synthesis of review of literature and Gaps Bridge by the present study was also included in this

chapter.

State of the Art

The literature and studies that were reviewed were found to have bearing on the present
study. They served as bases for the conceptualization the study’s problem, research design and
methodology.

Financial Services Through Micro-finance

According to United State Agency International Development (USAID), ensuring

economic growth is broad based and reduces poverty has become a fundamental development

challenge. In many countries, poor people cannot fully participate in, or enjoy the benefits of,

economic growth. Poor people, women in particular, in the developing world often lack access to

safe places to keep their savings. They cannot obtain credit to start a business or to grow their

businesses or farms.

The poor often do not have basic services like insurance to protect themselves against

drought and natural disasters. Small and very small firms owned by the poor often have little

help in getting access to new technologies or business networks that could improve opportunities

to sell their products and or services.

16
 USAID programs enhance poor people’s access to financial services such as savings

accounts and credits. These programs seek to improve the quality and affordability of financial

services. Extend access to excluded populations such as women, persons with disability and

those living in remote areas.Assist smallholder farmers and small business entrepreneurs in

selling their products by linking them with buyers and suppliers of good and services.

These programs also help small businesses access new inputs, new technology and services

that lead to improved products that bigger businesses are looking to purchase.

USAID microenterprise programs improve the lives of the very poor, helping them to:

recover from shocks such as a flood or death in the family; protect themselves against risks such

as illness or drought; and steady home food and family purchases so that they have the ‘breathing

space’ that allows them to work and toremove themselves out of poverty.

Additionally, USAID works to broaden micro-financing product offerings to include health,

education, and energy, to meet the needs of the mass market. In USAID's experience,

microfinance, when offered with other services, improves household earnings.

Another major area of focus is expanding poor people’s access to financial services through

mobile phone technology. Mobile money services help the poor to reduce the cost of banking

transactions and have been shown to increase savings. Along with developing these services, the

Agency is working to support a robust regulatory environment to ensure users’ money is not put

at risk. Many small entrepreneur and micro enterprises are having a hard time in putting up or

expanding a business. This is mainly because of the working capital need to start up a business.

That is the main reason why micro financing being develop by several banks and institution.

17
Opportunity on Availing Micro-finance

Microfinance, also called microcredit, is a type of banking service that is provided to

unemployed or low-income individuals or groups who otherwise have no other access to

financial services. While institutions participating in the area of microfinance are most often

associated with lending (microloans can be anywhere from $100 to $25,000), many offer

additional services, including bank accounts and micro-insurance products, and provide financial

and business education. Ultimately, the goal of microfinance is to give impoverished people an

opportunity to become self-sufficient (Lawrence and Weber, 2017).

Fauster (2014) emphasized the impact of micro-finance institutions (MFIs) on small and

medium scale enterprises (SMEs) is still fraught with inconsistent results, with some concluding

on positive impacts while others reporting negative impacts. This paper therefore sets out to

assess the impact that the study-MFIs are making on their SMEs-client in the Wa Municipality.

The with and without approach, coupled with a quasi-longitudinal approach was employed for

the study.

Data were gathered from the study-MFIs’ documents and questionnaire administration.

Simple percentage change was used as a measure of growth of mean sales revenue. Analysis of

variance(ANOVA), Spearman’s correlation coefficient (r) and coefficient of determination were

also used in the analyses, with various hypotheses tests. It is concluded that the study-MFIs make

positive impacts on the mean sales revenues of their client – SMEs, with great differences

between those of SAT and MTA clients on the one hand and those of the control group on the

other. A slight difference that exists between the two study-MFIs was accounted for by

18
differences in their management approaches. A strong positive correlation exists between

average sales revenue on one hand and micro loans, level of education and training on the other.

MFIs generally set poverty reduction, based on microcredit, as their major goal. For example,

Micro Credit Summit Campaign, an umbrella organization of major MFIs in the world, has its

themes of operation and goals as: Reaching the Poorest, Empowering, Building Financially Self-

sufficient Institutions, and Ensuring a Positive, Measurable Impact on the Lives of Clients and

their Families(Ayesha, 2006). The success story of most of these MFIs, especially in poverty

reduction and financial self-sufficiency, with some transforming into regulated non-banking

financial institutions with profit motive, and others becoming banking financial institutions is

now serving as an indicator of profitability to analysts, policy makers, academics and

development practitioners. However, with the statement: “You’ll see that they are definitely

poor… They repay the loans through nothing but hard work, every day”, the question can be

raised as to whether the growth generated by the SSEs can be attributed to the support from the

MFIs.

Micro-finance Revolution

According to Ledgerwood (2013) committed to strengthening financial inclusion and the

microfinance sector by promoting transparency, MIX provides information on the performance

of MFIs, funders, networks, and service providers serving low-income clients. Incorporated in

2002, MIX collects and reviews financial, operational, product, client, and social performance

data, standardizing the information for comparability. Its published data track development of the

industry, both for its operators and for those supporting it through funding, policy, or analysis. Its

primary data platform, MIX Market, has delivered MFI profiles and annual standard

19
performance reports since 2002. Between 2002 and 2012, its public database has grown from

covering just over 100 MFIs to more than2,000 providers around the world. Its platform data

include benchmarks and comparative analysis, along with quarterly results. In addition, MIX

publishes annual regional updates and topical analysis of the sector through the long-standing

Micro Banking Bulletin.

Based on the book of Armendariz (2010) the microfinance revolution, begun with

independent initiatives in Latin America andSouth Asia starting in the 1970s, has so far allowed

65 million poor people aroundthe world to receive small loans without collateral, build up assets,

and buyinsurance. This comprehensive survey of microfinance seeks to bridge the gap inthe

existing literature on microfinance between academic economists and practitioners.

According to Khan (2007), there are about three billion people, half of the world’s

population, living on the income of less than two dollars a day. Among these poor communities,

one child in five does not live to see his or her fifth birthday. One study in 2006 showed that the

ratio of the income between the 5% richest and 5% poorest of the population is 74 to 1 as

compared to the ratio in 1960, which was 30 to 1. To enhance international development, the

United Nations Organization (UNO) announced the millennium development goals, aimed to

eradicate poverty by 2015. In this regard, microfinance is the form of financial development that

has its primary aim to alleviate the poverty. Governments, donors and NGOs around the world

responded enthusiastically with plans and promised to work together towards the realization of

these goals. In the recognition of microfinance, the UNO celebrated the year 2005 as a year of

micro-credit, as a result this financing instrument is perceived worldwide as a very effective

mean against hunger and poverty, mainly in developing countries.

20
 Microfinance is a credit methodology, which employs effective collateral substitute for short-

term and working capital loans to micro-entrepreneurs. The level of a country’s poverty has long

been linked with measures of its economic development. Little consideration was given to the

social reorganization of the natural resources (e.g. empowerment vs. alienation of people,

sustainable use vs. depletion of the environment).

The economies with positive growth rate of Gross National Product (GNP) were measured

by their poverty mitigation. This gratitude emphasized on the achievement of wealth and

technology as a path for development and assumed that improved lives for all would be the

natural consequence.

Microfinance is not a new development. Some developed countries as well as developing

countries particularly in Asia have a long history of microfinance. During the eighteenth and

nineteenth centuries, in number of European countries, microfinance evolved as a type of the

informal banking for the poor. Informal finance and self-help have been at the foundation of

microfinance in Europe. The early history of microfinance in Ireland can be traced back to 18th

century. It is a history of how self-help led to financial innovation, legal backing and conductive

regulation, and creating a mass microfinance movement. But the unpleasant regulations

prompted by commercial banking brought it down. The so-called Irish loan funds appeared in

early eighteenth as charities, initially financed from donated resources and offering interest free

loans. They were soon replaced by financial intermediation between savers and borrowers. Loans

were granted on short–term basis and installments were scheduled on weekly basis. To enforce

the repayment, monitoring process was used.

Micro and Small Enterprises

21
 In developing countries, micro and small enterprises (MSEs) comprise the largest part of

the industrial fabric and are among the most important development agents in society. MSEs

offer many millions of poor people around the world the possibility of earning money, training,

work experience and employment. However, empirical evidence shows that most small

enterprises never develop the business beyond a certain scale and only a small minority of them

manages to upgrade to the next level of productivity, income and employment (Berner / Gomez /

Knorringa 2008). The pioneering research of Mead suggests that across developed and

developing economies, most MSEs are stagnating with only a handful of them managing to grow

to more 20 employees. In Sierra Leone, Bangladesh, Jamaica, Honduras, Thailand and Egypt,

Liedholm and Mead (1987) found that only 1 per cent of enterprises with four workers or fewer

managed to upgrade into the next size category. In Kenya, Cotter (1996) found that enterprise

upgrading rates are either zero or so low that no policy intervention could remedy the situation.

These findings indicate the need for targeted policy interventions supported by empirical

evidence – especially to stimulate MSEs and harness the private sector’s potential to be engines

of economic growth in developing countries. Using the Philippines as a country case, this study

explores why only a few MSEs manage to grow to medium-size or large and why enterprise

growth remains elusive for most micro and small firms (Milagrosa, 2014)

According to Aldaba (2012) the Philippines has two operational definitions of small and

medium enterprises. Based on employment which is the most commonly used definition in the

country, the different size categories are classified as follows: Micro enterprises: 1-9 employees

Small enterprises: 10-99 employees Medium: 100-199 employees Large: 200 or more employees

In terms of the assets, SMEs are defined as follows: Micro enterprises: P3 million or less Small

enterprises: P3-15 million Medium: P15-100 million Large: P100 or more In terms of number of

22
establishments; micro, small, and medium enterprises (MSMEs) dominate the economy and

account for almost 99.6% of the total number of establishments in 2008. With a share of about

92%, micro enterprises are more predominant than small and medium enterprises which account

for only 8% of the total number of establishments. Geographically, both micro and SMEs are

highly concentrated in the National Capital Region (NCR) and Calabarzon area.

Micro businesses in the Philippines can be defined according to the size of assets, size of

equity capital, and number of employees. A typical micro business is a business that employs

nine people or fewer, with assets of ₱3 million and below. In the Philippines, about 90 percent of

all the businesses are categorized as micro businesses. These consist of enterprises engaged in

industry, agribusiness and or services, whether single proprietorship, cooperative, partnership or

corporation. Their total assets, inclusive of those arising from loans but exclusive of the land on

which the particular business entity’s office, plant and equipment are situated, have value of not

more than ₱3 million. Of all micro businesses, about 46 percent are involved in the wholesale,

retail and repair business; 27.6 percent are in the accommodations and food service; 13.5 percent

are in manufacturing; while 12.5 percent are engaged in other service categories (Abrugar,

2013).

According to Asian Development Bank the impact of the availability of program loans on

per capita income is shown to be positive and mildly significant. This is also true for per capita

total expenditure and per capita food expenditure. But it was also found that this impact is

regressive, that is negative or insignificant for poorer households and becomes only positive and

increasing with richer households. This negative or insignificant impact for poorer households

and positive impact for richer households provides some explanation of the mild significance of

23
the coefficient for the total sample. It is worth mentioning that this is not the only study that

found a regressive impact. Coleman using data from Thailand qualified the earlier no significant

impact on consumption result in Coleman with the finding of a positive impact for the center

leaders which are also the richer segment of the membership and that the insignificant impact is

confined to poorer members. Hulme and Mosley using data from Indonesia, India, Bangladesh

and Sri Lanka, on the other hand, found positive impact on income on average but in addition

like Coleman also found larger impact for better-off members. Thus, the regressive result of this

study may not be entirely surprising but is certainly disturbing. This indicates that among poorer

borrowers the cost of and availability of program loans appears to be not sufficient to prod them

into selecting more productive activities that will not only pay the cost of borrowing but also

earn them some profit. One can also view this as the result of MFIs not screening projects

enough to have the desired results. This implies that attention to project selection must also be an

important component program design.

According to Medina (2012), the Magna Carta for micro, small and medium enterprises

is a combination of laws by virtue of amendments and father amendments designed to promote

the development of MSMEs. The government units such as DTI, the BangkoSentral, and the

Office of the President issued separate directives and/or memoranda to facilitate the

implementation of the Magna Carta. Magna Carta for MSMEs consists of Republic Act (77,

amended by R.A. 8289, and further amended by R.A. 9501. These important Pieces of

Legislation are directed towards the full development of entrepreneurship in the Philippines.

Performance of Micro enterprise in Hosanna

24
 According to the study of Ababiya (2013) the researcher examined the benefit cost ratio

of micro enterprise as related to financial flow and its management to measure the performance

and identified the factors that influence the performance of micro enterprise in Hosanna town.

All 174 micro enterprises from three sub towns of Hosanna were included in the study and key

informants from relevant government office were interviewed to collect necessary data on

enterprises performance and determinant factors. Descriptive analyses of the data were computed

to assess various characteristics of micro enterprises in the study area. According to the result

obtained from benefit cost ratio analysis 71.8% of enterprises found in the study area survived

whereas 28.2% failed. In addition, a regression model was used to identify the determinant

factors that affected the performance of the enterprises. The results of the regression analysis

showed that age of enterprises, age of operators, education level, number of employees, amount

of initial capital, entrepreneurial skill, experience of manager, access to training and access to

market were statistically significant at less than 1% significance level and had positive

relationship with the performance of enterprises.

Microenterprise development is one of the most discussed antipoverty strategies in

contemporary development discourses. Many developing countries have adopted this strategy to

fight against poverty. In Nepal also, a micro-enterprise development program with the objectives

of increasing income and employment, and thereby reducing poverty, has been implemented

since 1998. Micro-enterprise development is particularly targeted to the households living below

the poverty line. Among the people living below that line, the program is more focused on rural

women, unemployed youth, and people from socially-excluded communities, besides confirming

the hypothesized association of many factors, also nullified several other hypotheses and

findings of previous studies, and explored the interesting association of some of the factors with

25
the performance of the microenterprise. The study observed an increase in the level and growth

of the measures of the microenterprise’s performance, such as employment, profit, and sales and

assets between BS 2068 (April 2011 - March 2012) and 2069 (April 2012 - March 2013).

However, a noticeable variation in the level and growth of employment, profit, sales and asset

growth among microenterprises was also observed. The study further revealed that entrepreneur-

related factors, particularly gender, educational attainment, managerial skills, the need for

achievement, the need for autonomy, creative tendency, internal locus of control, and managerial

foresight; enterprise related factors, particularly enterprise age, enterprise size and initial

financial constraints; and environment-related factors, particularly environment hostility and

social network, were among the key factors determining microenterprise performance in Nepal.

On the other hand, the age of the micro-entrepreneur, previous experience, calculated risk taking

traits, the enterprise sector, family environment, environmental dynamism, and environmental

heterogeneity did not appear to have significant effects on microenterprise performance. The

study also revealed the significant mediating effect of managerial foresight on microenterprise

performance. Managerial foresight appears to mediate the effects of educational attainment, need

for achievement, need for autonomy, enterprise size, initial financial constraint, environmental

hostility and social network on the performance of the microenterprise (Thapa, 2013).

Microfinance Industry

Frohberg (2016) state that microfinance has become very important in global poverty

reduction debates. The popular assumption is that enabling poor households access to credit

helps households begin micro entrepreneurship which would enable them improve their incomes

and eventually escape poverty. Evidence from research so far has been scanty, and many results

26
have been highly contested. The main objective of the thesis was to analyze the impact of

microfinance on household income as well as measure household vulnerability to poverty after

access to microfinance. The study is an experimental case of Makueni district where participants

in microfinance programmes and non participant households were studied over time; thus

yielding a rich pooled data for analysis. On integrating time dynamics in the analysis, the results

indicate a positive and significant impact of microfinance on household income. To this end the

thesis argues that there is a role of microfinance on the improvement of household incomes. The

thesis also re-asserts that providing affordable financial services to the rural population still

remains to be an important component of development strategy.

In the study of (Chester, 2014) analyzed and examined in an attempt to determine if loan

borrowers believed these programs were beneficial and provided a valuable service. Results from

this analysis reveal several concerns facing microfinance institutions and borrowers stemming

from issues of high interest rates, loans used for consumption spending, and multiple borrowing.

Findings from this study can be used to guide further policy decisions and regulations regarding

the microfinance industry.

In the study of Berberg (2011) strives to examine how microfinance activities can be

successfully applied in the developed world. This is done through a field study in New York

City. Throughout interviews and observations with three of the largest actors in New York:

Acción USA, Grameen America and Project Enterprise, as well as interviews with their clients,

the lending processes and key characteristics of the organizations have been mapped.

Furthermore, the Federal Reserve Bank of New York has been interviewed on the general

opinion of microfinance in the US. Previous theory elaborates on some of the major challenges

27
with implementing microfinance activities in the developed world, such as lack of funding and

cultural differences hindering the lending processes to be carried out as they are in the

developing world. Henceforth, problems regarding regulation, awareness and outreach are

discussed. Throughout the observation of the institutions we can confirm that some of the

challenges brought up in theory actually are apparent. We do, however, question the criticism

towards the use of group based lending programs in the developed world. Our study does, in

contrast to previous research, imply that the concept does work as well in the US as it does in

developing countries.

On the other hand the thesis emphasizes that there is need to come up with innovative

microfinance institutions that are supportive of their own role in assets accumulation and wealth

creation for their clients. This will involve innovative targeting of potential clients, as well as

streamlined microfinance regulations to protect their clients. In particular the study cautions that

the ability of households to begin informal sole micro entrepreneurships should not be assumed

to be adequate for the improvement of household income. There is need to create a policy

framework to spur growth not only in the micro enterprises but also in the overall rural economy

that would lead to the creation of employment opportunities and an increment in the agricultural

output. This is quite a big task to accomplish and may require more than one particular policy

intervention. In essence this calls for both private (microfinance) and public partnerships to

create the environment where such poverty reduction objectives could be realized.

Money Lending Business

According to the study of Martinez (2016), challenges are always present in the money

lending business, thus, a strategy been formulated to address those challenges. Many business

28
shut down because some could not overcome the challenges, but some succeeded because of

their key principles of success. It is in this light that the researcher desired to undertake this study

with a view of to lend or not to lend. The research questions occurred as to what is the lived

experience of money lenders and how did them apply the key principles of success to their

money lending business. The study employing psychological in seven themes (always work on

text, facing challenges head on, giving before receiving, ideas turned actions, value of collecting

knowledge, recognizes the instinct motivational factors, knowing the importance of extrinsic

motivational factor) categorized into textural (what) and structural (how) description of the

phenomenon.

In the study of Guliman (2015) showed that college education increases the likelihood of

having a higher level of financial literacy relative to high school education. Based on the mean

percentage ratings of financial knowledge, this study found out that most of the owners of these

enterprises have low levels of financial knowledge in taxation, time value of money, financial

institutions and investment securities. Also, the financial skills of the respondents displayed low

mean percentage ratings in savings and record keeping yet planning and budgeting skills posted a

fair mean percentage rating. Thus, results showed that in general, these entrepreneurs have low

levels of total financial literacy based on the measurements used. Furthermore, the correlation

between financial knowledge and skills is positive yet very low. The findings have practical

relevance to MSMEs and policy makers to be able to determine the interventions necessary to

help the MSME sector. It is recommended that future studies be made to substantiate the results

of this study considering other municipalities and cities in the Philippines.

29
 Microcredit is applicable only to the enterprising poor. The application of microcredit to

other poverty groups who actually need subsidies and social safety nets would be a mistake.

Thus, the EDC sub-component should be reformulated and revitalized following the program

design of the Bangladesh Rural Advancement Committee (BRAC). Its graduated strategy for

helping the poor should be applied to the poverty pyramid by categorizing the WMCIP

beneficiaries into four poverty groups: (1) micro-enterprise operators or the less poor, (2)

enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most

vulnerable or the ultra-poor. The results further reveal that based on the poverty pyramid, the

credit program designs of the Credit Assistance Program for Program Beneficiaries Development

(CAP-PBD) and Quedan Rural Credit and Finance Corporation (QUEDANCOR) are readily

applicable to the credit needs and financial capabilities of the enterprising poor. Beyond

QUEDANCOR’s microcredit facility, the no enterprising poor may actually opt for financial

assistance from cooperatives or CAPPBD to help finance their agriculture-and fishery-related

production activities. On the other hand, the beneficiaries and their “not-so-strong” organizations

that could not readily comply with the minimum credit standards should be provided with farm

production subsidies, capability-building services and social safety nets under a special poverty

alleviation project. This will enable them to pass minimum credit standards within a transition

period of six months to one year (Moreno, 2011).

In the study of Gamlanga (2011), the respondents status before the availment of micro –

financing was moderate level along all three aspect; Financial, Socio- economic and marketing.

On the other hand the status of the respondents after availment of the micro financing along with

the three aspect such as financial, socio-economic and marketing is average or satisfactory. They

also tested that there is a significant difference on the respondents before and after the availment

30
of micro financing. The problem encountered by the CCT- Binan clientele were high cost

financing and short credit terms. While the less serious problems were bureaucratic

requirements, insufficient of amount loan, loan installment default, lack of information on

government financing program, and collateral requirements. On the whole the problems

encountered by the CCT-Binan clientele were less serious.

According to Alzate (2013) the respondents of hybrid rice, hybrid corn, and eggplant

production. Were more knowledgeable in terms of the policies implemented in availing of micro-

financing than the respondents of ampalaya production. The micro financing program increased

the beneficiaries’ annual average income, income per cropping season, and amount spent for

food by 55%, 43%, 45% respectively.

Likewise, their crop productivity improved with improved with 29.4 % increase in their

yield per cropping cycle. Policies imposed in availing of micro-financing catalyzed the

respondents’ adoption of technologies in producing hybrid rice, hybrid corn and eggplant.

However, these policies did not influence the respondents’ adoption of ampalaya production

technologies.

Small-Scale Business Enterprises

The paper of Ruane (2016) is a two-part study of small-scale business enterprises

in the Philippines: survey and empirical analysis, both of which are combined in an attempt to

understand what determines entrepreneurial motivations and success in the Philippines. The

survey was conducted in order to study entrepreneurship development and motivations in the

Philippines and also to understand the challenges and sacrifices faced by Filipino entrepreneurs.

31
In particular, this survey is quite comprehensive in scope and comprised 202 questions. Aside

from data on the general characteristics of the business enterprise and the entrepreneur, the

survey also asks questions about important issues in the study of entrepreneurship such as

entrepreneurial intensity, sacrifice, motivation, business plans, the business' effect on the

entrepreneur's quality of life, the entrepreneur's personal beliefs and attitudes, and difficulties

and problems that the entrepreneur encountered at different stages of operating the business

enterprise. This study also presents an empirical analysis of the determinants of success by

Filipino small businesses. This analysis made use of the survey data and is based on the

estimation of a regression model using Ordinary Least Squares technique. Since the 1990s, there

has been a resurgence of interest on the role of small-scaled business enterprises or small and

medium enterprises (both will be referred to as "SMEs" hereafter) in national and international

economic and social development. This is consistent with the overall shift of development

strategies in many countries toward a more decentralized, even localized, approach. As such,

many scholars, practitioners, and institutions involved in economic development have begun to

recognize the important roles that smaller-scale business entities play in the economy and

society. More and more people are becoming convinced that these entities can be a very effective

means of achieving, not only economic progress, but social goals (e.g., a more equal income and

a greater appreciation for diversity in gender and race) as well. All of these suggest a greater

need to increase our understanding of the nature and capabilities of family businesses and SMEs

and the kinds of policies and incentive systems that would be appropriate, necessary, and

effective in encouraging and strengthening them.

32
Small Medium Enterprises

Like those in other countries, SMEs in the Philippines make significant contributions to

the overall economy and the country's pursuit of economic development. Data show Filipino

SMEs to make up more than 99% of all businesses in the country, provide more than two-thirds

of the country's employment, and is responsible for almost one-third of the country's income

(Philippine Department of Trade and Industry, 2015). Given their economic importance (others

also highlight their social significance), Filipino SMEs are an interesting subject of study.

Consequently, one would expect to find numerous studies on them. This, however, is not the

case, most probably because of a number of issues that complicate their study. One of these

issues has to do with the different perspectives on different aspects related to SMEs. Depending

on which perspective the researcher uses as the primary source of insight and information, one

gets a very different picture. In the study of Filipino SMEs, at least 3 different perspectives could

be identified: that of policymakers, SME owners, academician and scholars.

BMBE Law, RA 9178 Act of 2002

In Philippines, government support to SME looks very good. The Barangay Micro

Business Enterprise (BMBE) under BMBE law of RA 9178 Act of 2002 was signed by President

Gloria Macapagal Arroyo on November 13, 2002, to encourage the formation and growth of

BMBE’s by granting them incentives and other benefits. The country recognizes that small

businesses are essential to the economic development of the country. Supporting the growth of

BMBEs will increase jobs, provide livelihood and a better quality of life for Filipinos. The Act

then aims to “integrate micro-enterprises in the informal sector into the mainstream of the

economy (Phil. Department of Trade & Industry, 2015). Registered BMBE’s may availed the

33
following incentives, Income tax exemption from income arising from the operations of the

enterprise; Exemption from the coverage of Minimum Wage Law (BMBE employees will still

receive the same social security and health care benefits as other employees); priority to special

credit window set up for the financing BMBEs and Technology transfer, production and

management training and marketingassistance programs for BMBE beneficiaries; reduce the

amount of local taxes, fees and charges imposed or exempt the BMBEs from local taxes, fees

and charges. Based on the BMBE law, business or activity is eligible to apply as BMBE if the

following were meet: The business is engaged in production, processing or manufacturing of

products, including agro-processing, as well as trading and services. It has a total assets of not

more than P3 million, including those arising from loans but not the land on which the plant and

equipment are located. The business or service provider, in connection with the exercise of his or

her profession, is not a professional duly licensed by the government after having passed a

government licensure examination, such as accountants, lawyers, doctors and the like. It is not a

branch, division or office of a large-scale enterprise and its policies and business modus operandi

are not determined by such enterprise or by persons who are not owners or employees of said

enterprise, as mandated by the Department of Finance Order No. 17-04.

Cash Management

Ahmad (2015) emphasized in his paper that cash management including cash flow, sales,

and return of investment are important for all businesses to strengthen their financial

management and financial survival. Each business needs to have high level of cash management

practices to meet the business expectation. Therefore, this study explores the extent of cash

management practices applied in the micro and small businesses in four main states in Peninsular

34
Malaysia. Overall findings of this study showed that cash management practices in these states

are high. However, the results show that the internal control on cash management has very low

implementation level. Thus, the capital providers need to re-educate the entrepreneurs on the

importance of having good internal control on cash management in order to avoid any

manipulation, cash shortage and other financial issues. Besides that, the result of this study is

important to ensure the effectiveness of cash management in order to be able to support the

financial sustainability of the business. Small Medium Enterprises (SMEs) play an important role

in the economic growth, especially in the developed and developing countries (Ahmad, 2015).

However, despite the contributions of small businesses to the local economy, including fostering

the Gross Domestic Product (GDP), alleviating poverty, and creating jobs, SMEs worldwide are

highly prone to failure. This problem happened when the entrepreneurs have limitation in

handling the business from the financial aspect and the nonfinancial aspect. According to Abdul

and Ahmad (2013), the financial limitations in SMEs are that the business is unable to manage

the cash flow and unable to generate enough sales and revenue. In terms of the non-financial

aspect, the failed business has issue with service quality, owner experience, customer satisfaction

and competitors. Besides that, Aren and Sibindi (2013) revealed that the majority of SMEs failed

due to poor cash management. It is because there are inevitable links between small business

failures and poor or careless financial management (Drever & Hartcher, 2003). Moreover, only

certain SMEs prepare good cash flow, as others are unaware or unconvinced of the benefits of

accounting and financial reporting requirement for the purpose of control and also for decision-

making (UNCTD, 2000). The study is able to fill the gaps since there are limited literatures on

cash management in Malaysia. The issue of cash management practices only arises in other

countries for examples, a study by Alala, Deya and Busaka (2013) in Kenya and Uganda, a study

35
by Aren and Sibindi (2013) done in South African Retail Sector and a study by Gilbert, Nellson

and Nicholas (2013) in Northern Uganda. Therefore, the study aims to explore the current cash

management practices in micro and small businesses in Malaysia for the service sector. The

contribution of the study is at least twofold. First, the study provides some insights on cash

management practices in micro and small businesses. Second, the study could assist the

regulators in governing the policy on financial management specifically on cash management.

The paper proceeds as follows: section 2 reviews the literature review on cash management

practices. Section 3 describes the research method including the sample selection and instrument

used. Section 4 presents the results of the study, and the final section concludes the study and

addresses its limitations and suggestions for future research.

Cash Flow

Cash management is the business strategy in managing cash for the purpose of

optimizing liquidity (Linert, 2009). Deb, Dey and Shil (2015) specifically defined cash

management as the managing of (i) cash flows into and out of the firm, (ii) cash flows within the

firm, and (iii) cash balances held by the firm at a point of time. Each business needs to have

proper cash management to achieve the targeted goals and objectives by enhancing their

allocation and planning in the cash. From that, a good cash management will ensure that the

business can achieve their main objectives in the long term period and plan for a good strategy.

Although cash management is a good and important practice, many of micro and small

businesses do not practice it (Jayabalan, Dorasamy, Roman & Ching; 2009; Sunday, 2011; Alala,

Deya & Busaha, 2013). According to Abanis, Sunday, Burani and Eliabu (2013), among the

serious issue in cash management practices is that some of the businesses do not have bank

account to track and control their business income and expenses. If they have the bank account,

36
the business would be able to reduce the tendency of cash shortage, set minimum cash balance

and have monthly reconciliation of cash book with the bank to monitor their cash. The business

also needs to have internal controls for cash management for example, sell their goods and

provide their services using cash. Good internal control also requires the separation of duties in

managing cash including the separation of the cashier personnel from the accounting duties.

Besides that, the business needs to appoint the person that has the skill and ability to do the

budgeting. Some businesses give the responsibility to do the budgeting to the owner or manager

who has self interest in the business. Nonetheless, the persons are that involved with the

budgeting need to avoid conflict of interest to ensure that they review the cash budget to identify

if the budget is prepared based on business needs. The cash management practices are essential

for every business to increase profitability, sustainability, and future planning. Cash management

practices also include cash budgets and cash flows. Cash management is important in describing

the inflow and the outflow of cash, which refers to the movement of cash in the receiving to

payment cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari,

2014) in order to maintain the profitability and sustainability of their businesses. Besides that,

poor cash management can also become challenging when it is employed to maintain the skill

and knowledge among employees. In addition, according to Evans (2012), cash flow

management helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor

in deficit. It can minimize the positive items and maximize the negative items that affect the cash

cycle. Besides that, cash management also helps in spotting potential cash flow gaps. In

particular, cash management serves as a reference tool for seeking funds from bankers, and in

enhancing effectiveness. Furthermore, cash flow is an important measurement used by investors

for evaluating business because cash management focuses on the actual operation, eliminates

37
one-time expenses and non-cash charges, and indirectly, it will give a clear picture of what the

company is truly doing. Hence, efficient cash flow management system plays a vital role and

helps to demonstrate if an SME is profitable (Minnery, 2006). Moreover, proper cash flow

management can prevent a business from bankruptcy, and therefore, profitability and

sustainability of the business are ensured (Inc., 2013). In fact, proper and efficient management

of cash is imperative towards the growth of small businesses. Usually, the cash flow of a small

business could become a problem when the business deals with a number of customers who are

difficult to be tracked and when the business sells products due to higher demand compared to

the competitors (Inc., 2013). These problems can be avoided if cash flow is managed properly.

Internal Control

Muinde (2015) contended that the Small and Medium Enterprises (SMEs) play a vital

role in economic contribution, property alleviation and employment. However, SMEs faced a

number of constraints especially in practicing cash management. According to Abanis, Sunday,

Burani and Eliabu (2013), among the weaknesses that occur in micro enterprises in terms of cash

management is that, most owners do not have bank account to record their sales. This problem

occurred because they do not have experience in managing enterprise. This may cause the owner

to be incapable in managing their cash if there is any shortage of money. In addition,

unavailability of book account can minimize the ability of owner to monitor their cash flow and

manage the usage of their cash (“The importance of keeping on top of your business accounting

records”, 2015). Besides that, monthly reconciliation of cash book with the bank to monitor their

cash is important to each enterprise. From that, the owner may be aware if there is any cash

problem and would be able to improve their cash practices. In addition, internal control plays a

38
vital role in cash management practices. However, only some owners practice internal control

and are aware of its importance. Those enterprises that sell their goods or services by cash must

have proper internal control. In order to improve internal control, owner of enterprise may have

separation of duties in managing cash. Besides that, the other element of cash management

practices in the enterprise is the ability of the person that is responsible to prepare the budget.

Some enterprises give the responsibility to do the budgeting to the owner or the manager. Then,

the owner or manager needs to review the cash budget and identify if the budget is prepared

based on their needs. In addition, the internal control can help the owner to identify their

opportunities and strength of the enterprise (Jim, 2015). Moreover, Abanis et al. (2013)

concluded that the person that is responsible in preparing the budget is important because good

budget preparation may influence the practices of cash management in the enterprise. The

researches done in South Africa and Uganda proved that cash management practices in SMEs are

poor (Avika & Hari, 2014; Abanis et al., 2013). A number of small businesses are being

managed without appropriate strategy and with poor skills in cash management. The efficiency

of a business in managing cash may influence the growth of business operations. Failure to do so

can affect business operations, as sustenance of business operations can come to a halt. Marion

(2011) proved that out of five, three businesses failed within a short period of time - three years.

It shows that in order to be successful in business, entrepreneurs must possess good strategies

and ensure that they can achieve their targets. Besides that, according to Guptaa, Wilsonb,

Gregorioua and Healya (2014), evidences pertaining to SME financing strongly indicate that

firms which are unable to generate sufficient operating cash flow (OCF) are more susceptible to

bankruptcy. According to Gilbert, Nelson and Nicholas (2013), problems in cash management

practices occur when the management takes for granted the importance of managing cash. This

39
happens when the entrepreneur does not focus on cash management. This will directly affect

business operation. When businesses do not prepare cash management, they will be unaware if

there is any loss in the business. Then, when the businesses realize the loss and the need to

recover, loan is obtained from the bank. This will cause the winding up of the businesses as they

fail in improving their cash to cover the losses, and are unable to pay their loans.

Financial Performance of SMEs

According to Simon Wakaba (2013) Financial performace is a subjective measure of how

well a firm can use assets from its primary mode of business to generate revenues. The term is

also used as a general measure of a firms overall financial health over a given period of time, and

can be used to compare similar firms across the same industry or compare industries or sectors in

aggregation. The most common measure of financial performance is ratios. A ratio is simply a

mathematical expression of an amount or amounts in terms of another or others. A ratio can be

expressed as a percentage, as a fraction, or a stated comparison between two amounts. The

recommended measures for financial analysis that determine a firms financial performance are

grouped into five broad categories: liquidity, solvency, profitability, repayment capacity and

financial efficiency (Maria, florica and Catalina, 2002).

Liquidity refers to an enterprise ability to meet its short term ability to meet it’s short

term obligations as and when they fall due. They are used to assess the adequacy of a firm’s

working capital. The three basic measures are net working capital, current assets that are

financed from long term capital resources that do not require repayment in the short term,

implying that the portion is still available for repayment of short term debt. Current ratio

measures the dept paying ability of an enterprise. A high current ratio is assumed to indicate a

40
strong liquidity position while a low current ratio is assumed to indicate weak liquidity position.

Quick ratio on the other hand tests the dept paying ability of an enterprise without having to rely

on inventory and repayments (ormiston, 2007). The ratios is important to creditors, shareholders,

suppliers, employees and other stakeholders.

Synthesis of the Reviewed Literature

The review of related literature and studies has an implication on the present study. All

reviews cited were substantial because it were focused mainly on the impact and performance of

micro-finance in some selected local and international rural communities. In the literature, the

terms microcredit and microfinance are often used interchangeably, but it is important to

highlight the difference between them because both terms are often confused.

The aim of microfinance as cited byMilagrosa (2014) and Aldaba (2012) is not just about

providing capital to the poor to combat poverty on an individual level, it also has a role at an

institutional level. It seeks to create institutions that deliver financial services to the poor, who

are continuously ignored by the formal banking sector. Some literature states that the poor are

generally excluded from the financial services sector of the economy so MFIs have emerged to

address this market failure. By addressing this gap in the market in a financially sustainable

manner, an MFI can become part of the formal financial system of a country and so can access

capital markets to fund their lending portfolios, allowing them to dramatically increase the

number of poor people they can reach.

Ahmad (2015), Frohberg (2016), Martinez (2016),Chester (2014),Ababiya (2013),

Medina (2012) andBerberg (2011), cited that one of the most important aspects of microfinance

41
is savings mobilization, which is discussed in the theory part. Besides these, microfinance

methodology, solidarity, human development and liquidity are also discussed in the theoretical

framework.

Simon Wakaba (2013), Maria, florica and Catalina (2002), Ormiston, 2007 cited that in

financial performance, assets can be considered as primary source used to generater funds. Their

researches adhere to the concerns of the success criteria inlcuiding liquidity, solvency,

profitability, repayment capacity and financial efficiency as part of the successful business.

Moreover, inventory and repayments can or cannot be relied to the extent of a scuess business

micro-enterprises.

Ruane (2016), Dey and Shil (2015), Guliman (2015), (Moreno, 2011), Gamlanga (2011)

and Alzate (2013) cited that these are important to the present study because it talks about

microfinance and its contribution to the improvement and poverty alleviation for millions of the

poorest people of Bangladesh. Microfinance has a huge impact on the lives of millions of poor

people particularly women. Numerous scholars and NGOs have been working to take

microfinance within the reach of poor people, who are still not benefited by the conventional

financial system.

Gap/s Bridged by the Present Study

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

determined:

1. There were no studies yet conducted on performance of micro-enterprises considering

micro-enterprises owners as the respondents of the study.

42
 2. There were no studies yet conducted on performance of micro-enterprises considering

Balatan Camarines Sur as the place of investigation.

In view of the gaps identified, the researcher focused on the performance of the micro-

enterprisesin Tuguegarao City.

43
 Chapter 3

RESEARCH METHODOLOGY

This chapter presents the procedures adapted by the researchers to explain in details the

research design, sources of data, population of the study, instrumentation, and validation, data

gathering procedure and statistical treatment of data applied in order to come up with this study.

Research Design

The researcher utilized the descriptive method of research that describes the nature of the

situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al.,

2010). The descriptive method was used in this study. According to Calderon and Gonzales

(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process

of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices,

beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate

interpretation about such data with or without the aid of statistical methods. As they stated,

correlational research investigates a range of factors, including the nature of the relationship

between two or more variables.

Source of Data

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

Population of the Study

44
 The targetpopulation of this study was the micro-enterprises in BalatanCamarines Sur.
There were fifty five (55) respondents were used by the researcher to provide accurate and valid
solutions to those mentioned problems. The targeted population relied on the owners of different
micro-enterprises. The researcher personally went to the locale of the study for the precise
conduct of the investigation. Total complete enumeration was used in the study.

Instrumentation and Validation

The researcher utilized self-made questionnaire consisting of three parts. Part 1 focused

on the profile of micro-enterprises, part 2 was about the performance of micro-enterprises in

BalatanCamarines Sur and part 3 covers the problems encountered by micro-enterprises in

BalatanCamarines Sur.

Since the questionnaire was self-made, it was subjected to the face and content validity. It

was shown to the panel of experts in the field of specialization, in statistics and in research for

their comments and suggestions. After some modifications, it was showned to the adviser for

final approval and then distributed to the target respondents.

Data Gathering Procedure

The researcher wrote a letter to the owners of micro enterprises. A letter to the

respondents was likewise composed. Both letters informed the addressees of the purpose of the

study and solicited their support to the undertaking while assuring them that all data generated

were kept in strict confidentiality. The researcher explained to the respondents the manner of

answering the survey questionnaire before the actual distribution was done.

45
Statistical Treatment of Data

The following statistical toolswere utilized in the gathered data:

1. Percentage, used to describe the profile of the micro-enterprises.

2. Mean, used to determine the performance of the micro-enterprises that availed micro-
financing.

3. Mann-Whitney U test, used to determine if there is significant difference in the

performance of the micro-enterprises that availed micro-financing when they are
grouped according to form and type of business.

4. Kruskal-Wallis test, used to determine if there is significant difference in the

performance of the micro- enterprises that availed micro-financing when they are
grouped according to years of operation.

46
 Chapter 4

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter deals with the gathered data that will analyzed and interpreted for the better

understanding of the study. The framework of the analysis and interpretation is guided by the

problems stated in Chapter 1.

1. Profile of the Micro-enterprises

Table 1
Profile of the Micro-Enterprises
Profile Frequency Percentage
Form of Business
Single or Sole Proprietorship 37 67.3
Partnership 18 32.7
Corporation 0 0
Type of Business
Retail 43 78.2
Services 12 21.8
Manufacturing 0 0
Years of Operation
1-5 years 21 38.2
6-10 years 28 50.9
10 years above 6 10.9
Total Number of Respondents = 55

As shown in Table 1, Profile of Micro-enterprises. As to the Forms of Business out of 55

respondents, 37 or 67.3 percent had Single or Sole Proprietorship and 18 or 32.7 percent had

Partnership. As to the Type of Business out of 55 respondents, 43 or 78.2 percent had Retail and

12 or 21.8 percent had Services, and as to the Years of Operation out of 55 respondents, 28 or

50.9 percent had 6-10 years, 21 or 38.2 percent had 1-5 years and 6 or 10.9 percent had 10 years

abovein operations.The result shows that majority of the respondents were Single or Sole

Proprietorship, Retail and 6-10 years of Operations.

47
 The findings of the study support the claims and theory of Fauster (2014) which

emphasized that the impact of micro-finance institutions (MFIs) on small and medium scale

enterprises (SMEs) is still fraught with inconsistent results, with some concluding on positive

impacts while others reporting negative impacts. This paper therefore sets out to assess the

impact that the study-MFIs are making on their SMEs-client based on the forms of business,

types of business and the number of years in operations. The with and without approach, coupled

with a quasi-longitudinal approach was employed for the study.Data were gathered from the

study-MFIs’ documents and questionnaire administration. Simple percentage change was used as

a measure of growth of mean sales revenue. Analysis of variance(ANOVA), Spearman’s

correlation coefficient (r) and coefficient of determination were also used in the analyses, with

various hypotheses tests. It is concluded that the study-MFIs make positive impacts on the mean

sales revenues of their client – SMEs, with great differences between those of SAT and MTA

clients on the one hand and those of the control group on the other. A slight difference that exists

between the two study-MFIs was accounted for by differences in their management approaches.

A strong positive correlation exists between average sales revenue on one hand and micro loans,

level of education and training on the other affecting the types of business, forms of business and

the years of operation.

48
 2. Performance of the Micro-enterprise that Availed of Micro-financing

Table 2

Performance of the Micro-enterprise that Availed of Micro-financing

Performance Frequency Percentage

Sales
100,000 and below 10 18.2
100,001 – 500,000 39 70.9
500,001 – 1,000,000 3 5.5
1,000,001 and above 3 5.5
Cash Flow
50,000 and below 15 27.3
50,001 – 100,000 26 47.3
100,001 – 150,000 9 16.4
150,001 and above 5 9.1
Liquidity
1.50:1 and below 20 36.4
1.51:1 – 3.00:1 24 43.6
3.01:1 and above 11 20
Return of Investment
20 and below 9 16.4
21 – 40 35 63.6
41 and above 11 20
Total Number of Respondents = 55

As shown in Table 2,performance of the Micro-enterprises that availed of micro-

financing.As to Sales out of 55 respondents,39 or 70.9 percent had100,001-500,000, 10 or 18.2

had100,000 below and 3 or 5.5 percent had 500,001 – 1,000,000 and 1,000,000 above Annual

Sales respectively. As to Cash Flow out of 55 respondents,26 or 47.3 percent had 50,001-

100,000, 15 or 27.3 percent had 50,000 below, 9 or 16.4 percent had 100,001-150,000 and 5 or

9.1 percent had 150,001 above Annual Cash Flow. As to Liquidity out of 55 respondents, 24 or

43.6 percent had 1.51:1-3.0:1, 20 or 36.4 percent had 1.50:1 below and 11 or 20 percent had

49
3.01:1 above Annual Liquidity Ratio. As to the Return of Investment, 35 or 63.6 percent had 21

– 40, 11 or 20 percent had 41 above and 9 or 16.4 percent had 20 below Annual Return of

Investment (ROI). The results shows that majority of the respondents had Sales of 100,001 –

500,000 and Return of Investment of 21-40, and nearly half of the respondents had Cash Flow of

50,001 -100,000 and Liquidity of 1.51:1 – 3.00:1.

The findings support the theory of Cash Management by Ahmad (2015) which emphasized

that cash management including cash flow, sales, and return of investment are important for all

businesses to strengthen their financial management and financial survival. Each business needs

to have high level of cash management practices to meet the business expectation. Therefore, this

study explores the extent of cash management practices applied in the micro and small

businesses in four main states in Peninsular Malaysia. Overall findings of this study showed that

cash management practices in these states are high. However, the results show that the internal

control on cash management has very low implementation level. Thus, the capital providers need

to re-educate the entrepreneurs on the importance of having good internal control on cash

management in order to avoid any manipulation, cash shortage and other financial issues. Each

business needs to have proper cash management to achieve the targeted goals and objectives by

enhancing their allocation and planning in the cash. From that, a good cash management will

ensure that the business can achieve their main objectives in the long term period and plan for a

good strategy.

3. Difference in the Performance of Micro-enterprises When They Are Grouped

According to Profile Variables

Table 3.1
Difference in the Performance of Micro-enterprises

50
 When They Are Grouped According to Form of Business

Performance Mean Statistical Test p- Interpretation

Mann-Whitney value
U Test

Sales X1 (Single or Sole) = 312524.30 U = 304.500

X2 (Partnership) = 287542.94 Z = 0.511 0.609 Not Significant

Cash Flow X1 (Single or Sole) = 130496.43 U = 227.000

X2 (Partnership) = 92577.47 Z = 1.901 0.057 Not Significant

Liquidity X1 (Single or Sole) = 2.1316 U = 239.000

X2 (Partnership) = 2.4506 Z = 1.687 0.092 Not Significant

Return of X1 (Single or Sole) = 33.54 U = 291.000

Investment X2 (Partnership) = 33.89 Z = 0.754 0.451 Not Significant

0.05 level of significance

As shown in the Table 3.1, for the difference in the micro-enterprises’ performance in

terms of sales, cash flow, liquidity and return of investment when the respondents are grouped

according to form of business, p values of 0.609, 0.057, 0.092 and 0.451 respectively were

obtained which were higher than the 0.05 level of significance. This shows that there is no

significant difference in the micro-enterprises’ performance in terms of sales, cash flow, liquidity

and return of investment when the respondents are grouped according to form of business. The

micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of investment is

the same regardless of form of business.

Table 3.2
Difference in the Performance of Micro-enterprises
When They Are Grouped According to Type of Business

Performance Mean Statistical Test p- Interpretation

Mann-Whitney value
U Test

51
 Sales X1 (Retail) = 229770.79 U = 140.500
X2 (Services) = 571585.67 Z = 2.395 0.017 Significant

Cash Flow X1 (Retail) = 75230.97 U = 219.000

X2 (Services) = 271652.58 Z = 0.795 0.427 Not Significant

Liquidity X1 (Retail) = 2.3395 U = 196.000

X2 (Services) = 1.8650 Z = 1.264 0.206 Not Significant

Return of X1 (Retail) = 33.12 U = 213.000

Investment X2 (Services) = 35.58 Z = 0.918 0.359 Not Significant

0.05 level of significance

As shown in table 3.2 , for the difference in the micro-enterprises’ performance in terms

of cash flow, liquidity and return of investment when the respondents are grouped according to

type of business, p values of 0.427, 0.206 and 0.359 respectively were obtained which were

higher than the 0.05 level of significance. This shows that there is no significant difference in

the micro-enterprises’ performance in terms of cash flow, liquidity and return of investment

when the respondents are grouped according to type of business. The micro-enterprises’

performance in terms of cash flow, liquidity and return of investment is the same regardless of

type of business.

For the difference in the micro-enterprises’ performance in terms of sales when the

respondents are grouped according to type of business, a p value of 0.017 was obtained which

was lower than the 0.05 level of significance. This shows that there is significant difference in

the micro-enterprises’ performance in terms of sales when the respondents are grouped according

to type of business. The micro-enterprises in the services business has sales than those in the

retail business.

Table 3.3
Difference in the Performance of Micro-enterprises

52
 When They Are Grouped According to Years of Operation

Performance Mean Statistical Test p- Interpretation

Kruskal-Wallis value
Test

Sales X1 (1-5 years) = 194631.14

X2 (6-10 years) = 299630.71 X2 = 5.705 0.058 Not Significant
X3( 11 years and above) = 710376.33

Cash Flow X1 (1-5 years) = 65719.33

X2 (6-10 years) = 110704.16 X2 = 3.893 0.143 Not Significant
X3( 11 years and above) = 335823.33

Liquidity X1 (1-5 years) = 2.1352

X2 (6-10 years) = 2.3546 X2 = 2.136 0.344 Not Significant
X3( 11 years and above) = 2.0350

Return of X1 (1-5 years) = 28.29

Investment X2 (6-10 years) = 34.96 X2 = 2.943 0.230 Not Significant
X3( 11 years and above) = 46.33
0.05 level of significance

As shown in the Table 3.3, for the difference in the micro-enterprises’ performance in

terms of “sales”, “cash flow”, “liquidity” and “return of investment” when the respondents are

grouped according to years of operation, p values of 0.058, 0.143, 0.344 and 0.230 respectively

were obtained which were higher than the 0.05 level of significance. This shows that there is no

significant difference in the micro-enterprises’ performance in terms of “sales”, “cash flow”,

“liquidity” and “return of investment” when the respondents are grouped according to years of

operation. The micro-enterprises’ performance in terms of “sales”, “cash flow”, “liquidity” and

“return of investment” is the same regardless of their years of operation.

The findings of the study support also the theory of Cash management by Ahmad (2015)

in which the difference in the performance of micro-enterprises is important in describing the

inflow and the outflow of cash, which refers to the movement of cash in the receiving to payment

cycle. Cash management also is the most crucial task for entrepreneurs (Avika & Hari, 2014) in

order to maintain the profitability and sustainability of their businesses. Besides that, poor cash

53
management can also become challenging when it is employed to maintain the skill and

knowledge among employees. In addition, according to Evans (2012), cash flow management

helps SMEs to maintain an optimal cash balance, that is, it is neither in excess nor in deficit. It

can minimize the positive items and maximize the negative items that affect the cash cycle.

Besides that, cash management also helps in spotting potential cash flow gaps. In particular, cash

management serves as a reference tool for seeking funds from bankers, and in enhancing

effectiveness. Furthermore, cash flow is an important measurement used by investors for

evaluating business because cash management focuses on the actual operation, eliminates one-

time expenses and non-cash charges, and indirectly, it will give a clear picture of what the

company is truly doing.

4. Problems Encountered by Micro-enterprises

Table 4
Problems Encounted by Micro-enterprises
Problems Encountered Frequency Percentage Rank
Financial
Not enough cash to purchase raw materials,merchandise &
33 60 1
Supplies
Financial problem in procuring new equipment 6 10.91 2.5
Poor cash management that resulted to a multiple cash loan 6 10.91 2.5
No savings 4 7.27 4.5
Negative ROI 4 7.27 4.5
Profit was used for personal expenses 2 3.64 6
Marketing
There are months that we don’t have income due to calamities
1 1.82 5.5
like typhoon and even we are affected by mayon volcano eruption
None at the moment, theres only few barbershop here in Balatan 1 1.82 5.5

54
Competing with super malls and big grocery stores 12 1.82 3
Lots of competitors 22 40 1
Lack of marketing strategy 16 12.73 2
Lack of business ideas 3 5.45 4
Entrepreneural
Lackof training in handling people 13 23.64 2
Proper customer communication 5 9.09 5
Some farmers forget to pay their debts 2 3.64 6
Lack of idea & Strategy 10 18.18 3
Im not a risk taker; easily discourage 1 1.82 7.5
Lack of training in handling the business 14 25.45 1
Mahirap makipag sabayan sa malalaking kompanya 1 1.82 7.5
Limited knowledge on the new technology 9 16.36 4
Economic
High Tax rate 20 36.36 2
High price of fuel due to additional tax 3 5.45 3
High cost of sales that resulted to the increase in selling price 31 56.36 1
customers complain on our retail price 1 1.82 4
Social
Natural calamities 28 50.91 1
customers complian if you did not allow them to buy on credit 9 16.36 2
Customers that are hard to deal 5 9.09 4
Unsecured Facilities 4 7.27 5
None 1 1.82 6
Demanding clients/costumers 8 14.55 3
Total number of respondents = 55

As shown in Table 4, problems encountered by Micro-enterprises. As to financial

problems encountered out of 55 respondents, 33 or 60 percent says they “don’t have enough cash

to purchase raw materials, merchandise and supplies”, 6 or 10.91 percent says that they are

having “financial problem in procuring new equipment” and poor cash management that resulted

to a multiple cash loan” respectively, 4 or 7.27 percent says that they “don’t have savings” and

had a “negative ROI” respectively while the remaining 2 or 3.64 percent says that their “profit

was used for personal expenses”. As to the Marketing problems encountered out of 55

respondents, 22 or 40 percent says they had “lots of competitors”, 16 or 29.09 percent says that

they had “lack of marketing strategy”, 12 or 21.82 says that they’re “competing with super malls

and big grocery stores” , 3 or 5.45 percent says that they had “lack of business ideas” and 1 or

1.82 percent says “there are months that we don’t have income due to calamities like typhoon

55
and even we are affected by Mayon Volcano eruption” and none at the moment, there’s only few

barbershop here in Balatan, respectively. As to the Entrepreneural problems encountered out of

55 respondents, 14 or 25.45 percent says they had “lack of training in handling the business”, 13

or 23.64 percent says they had “lack of training in handling people” , 10 or 18.18 says that they

had “lack of idea and strategy” and Limited knowledge on the new technology respectively, 5 or

9.09 percent says that they had problems with “proper customer communication”, 2 or 3.64

percent says that “some farmers forgot to pay their debts” and 1 or 1.82 percent says that she’s

“not a risk taker as she got easily discouraged”. As to the Economic problems encountered out of

55 respondents, 31 or 56.36 percent says that “high cost of sales that resulted to the increase on

their selling price”, 20 or 36.36 percent says “high tax rate”, 3 or 5.45 percent says “high price of

fuel due to additional tax” and 1 or 1.82 percent says “customer complains on their retail price”.

As to Social problems encountered out of 55 respondents, 28 or 50.91 percent says “natural

calamities” , 9 or 16.36 percent says” customers complain if you did not allow them to buy on

credit”, 8 or 14.55 percent says” demanding clients/customers”, 5 or 9.09 percent says

“customers that are hard to deal”, 4 or 7.27 percent says “unsecured facilities” and 1 or 1.82

percent says “none”. The results shows the most common problems encounterd were,not enough

cash to purchase raw materials, merchandise and supplies, lots of competitors, lack of training in

handling business, high cost of sales that resulted to the increase in selling price and natural

calamities.

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

56
Activity Objectives Time Persons Expected Budget Sources of Success
Frame Involved Outcomes Allocatio Fund Indicators
n

Rationale:

57
Meeting To conduct a May Micro- The Micro- 1,000 Aid and 95% of
with the meeting 2018 finance finance and pesos Donation Micro-
Micro- regarding the Institutions, government from finance,
finance proposed plan to Local officials of the Micro- Local
Institution address micro- Governmen municipality finance, Governme
s, Local finance status in t and will be Local nt, NGO’s
Governme Balatan, NGO’s informed about Governme attended
nt and Camarines Sur the plan and nt, NGO’s the
NGO’s ideas meeting
Planning To plan May Micro- The letter of 500 Aid and 95% of the
for the regarding the 2018 finance request will be pesos Donation plans were
various activities to be Institutions, rendered from finalized
activities done in Local intended for Micro-
and addressing Governmen the activities of finance,
program micro-finance t and micro-finance Local
to be done activities in the NGO’s Governme
Municipality of nt, NGO’s
Balatan,
Camarines Sur
Financial Develop a May – Micro- Comprehensiv 1,000 Aid and 97% of the
Literacy comprehensive June finance e Internal pesos Donation comprehen
internal manual 2018 Institutions, Manual to from sive
with procedures Local support client’s Micro- internal
to better educate Governmen awareness finance, manual
and equip the t and Local were
target market NGO’s Governme drafted
with much- nt, NGO’s and ready
needed for
information and reviews
tools to reduce
over-
indebtedness.
Build Develop the May – Local Development 2,000 Donation 95% of
Capacity association’s June Micro- of the pesos from the building
of the internal policies 2018 finance association’s Associatio capacity
Local and procedures Association strategic and n were
Micro- to support its business plan strengthen
finance role as a self- covering its and
Associatio regulatory body activities over enabled.
n and participate the next 5
actively in the years to
activities and support the
meetings of the revised policy
Local Micro- framework.
finance
Association.
Microfina Establishment June Local Development 1,000 Aid from 95% of
nce of and 2018 Micro- of the proper pesos Local supervisor
Legislatio participation in finance legislation, Micro- y and
n a working group Association either in the finance internal
of sector form of a Associatio capacity
representatives specialized law n were
to inform the or regulations, established
process and to define and
ensure that the rationalize
resulting rules activities in the

58
 and regulations sector.
promote rather
than hinder the
development of
the
microfinance
sector.
Social Standardize and June Micro- Had 1,000 Aid from 95% of the
Performan increase the 2018 finance undertaken pesos Micro- survey
ce market Institutions, impact study finance were
Monitorin research/client Local on clients to Institution launched
g surveys to Governmen measure the s, Local and social
improve and t, NGO’s, sectors Governme performan
expand the Association capacity, nt, NGO’s, ce
disbursement of s, and success/ failure Associatio indicators
the industry clients reasons. ns, and were
services and clients introduced
resources that .
have the highest
beneficial
impact on the
standard of
living for the
poor and
unemployed
population.
Promote Develop new June - Micro- Development 500 Aid from 97% had
New products that July finance and hand out pesos Micro- applied a
Product will increase 2018 Institutions, customer finance market
Developm depth and Local satisfaction Institution survey
ent breadth of Governmen surveys s, Local covering
outreach (i.e. t, NGO’s, regarding Governme the
home Association current product nt, NGO’s, economica
improvement, s, and portfolio and Associatio l sectors
education, clients prospective ns, and and
environmental products and clients project
conservation, services. characters
etc.) and work in our
to apply the branches
necessary areas.
surveys and
market studies
in order to
provide our
clients with
various products
matching their
growing needs
Explore Adapt the latest June – Micro- Diversified 3,000 Aid from 95% had
Innovative technologies to July finance mode of client pesos Micro- established
Delivery serve the 2018 Institutions, contact and finance joint
Channels microfinance Local loan payment Institution programs
target market Governmen to include the s, Local with
(i.e. mobile t, NGO’s, more Governme reputable
banking, Association innovative nt, NGO’s, developme
computers and s, and services such Associatio nt entities.

59
 the internet to clients as mobile ns, and
support banking; in clients
education, etc.). order to
promote time
and fiscal
efficiency for
both client and
company.
Support to Launch the July Micro- Well 1,000 Aid from 97% of the
MFI process of 2018 finance Transformed pesos Micro- MFI were
transforma transformation Institutions, Micro-finance finance transforme
tion into a for profit Local Institutions Institution d and
company. Governmen s, Local developed
t, NGO’s, Governme
Association nt, NGO’s,
s, and Associatio
clients ns, and
clients
Strengthen Monitor and August Micro- Strengthened 3,000 Aid from 95% of the
ing maintain 2018 finance program pesos Micro- operations
operations institutional best Institutions, governance finance and
and practices and Local with Institution governanc
governanc improve Governmen establishment s, Local e practices
e practices institutional t, NGO’s, of independent Governme were
efficiency and Association audit nt, NGO’s, adhered
productivity to s, and committees, Associatio and
reduce clients ALCO ns, and strengthen
operational committees, clients
costs Board meeting
structures etc.

Chapter 5

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

This chapter presents the summary of findings, conclusion drawn and the

recommendations made by the researcher.This study was based on the results of the data

gathered from the respondents’ questionnaires.

The researcher utilized the descriptive method of research that describes the nature of the

situation, as it exists at the time of the study and correlation method of research (Bermudo, et. al.,

2010). The descriptive method was used in this study. According to Calderon and Gonzales

60
(2003) as cited by Bermudo et al. ( 2010), descriptive method of research is a purposive process

of gathering, analyzing, classifying, and tabulating data about prevailing conditions, practices,

beliefs, processes, trends, and cause effect relationship and then making inadequate and accurate

interpretation about such data with or without the aid of statistical methods. As they stated,

correlational research investigates a range of factors, including the nature of the relationship

between two or more variables.

This study aimed at determining the performance of micro-enterprisesthatavailed micro-

financing in the municipality of Tuguegarao City.

Specifically, this study sought answers to the following questions:

1. What is the profile of the micro-enterprises in terms of:

1.1. Form of Business

1.2. Type of Business

1.3. Years in Operation

2. What is the performance ofthe micro-enterprisesthat availed of micro-financing in

Tuguegarao City in terms of:

2.1. Sales

2.2. Cash Flow

2.3. Liquidity

2.4. Return of Investment (ROI)

3. Is there a significant difference in the level of performance of micro-enterprises for the

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

4. What are the problems encountered by micro-enterprises in Tuguegarao City?

5. What action plans can be proposed to address micro-enterprises in Tuguegarao City?

61
Summary of Findings

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

1. Profile of Micro-enterprises

The findings shows the majority of the respondents were Single or Sole Proprietorship, Retail
and 6-10 years of Operations.

2. Performance of Micro-enterprises

The findings shows the majority of the respondents had sales of 100,001 – 500,000 and Return of

Investment (ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 –

100,000 and Liquidity of 1.51:1 – 3.00:1.

3. Difference in the Performance of the Micro-enterpriseswhen they are grouped

according to profile variable

The findings shows p values of 0.609, 0.057, 0.092 and 0.451 respectively were obtained which

were higher than the 0.05 level of significance. This shows that there is no significant difference

in the micro-enterprises’ performance in terms of sales, cash flow, liquidity and return of

investment when the respondents are grouped according to form of business.

4. Difference in the performance of Micro-enterprises when they are grouped

according to type of business

The findings shows p values of 0.427, 0.206 and 0.359 respectively were obtained which were

higher than the 0.05 level of significance. This shows that there is no significant difference in the

micro-enterprises’ performance in terms of cash flow, liquidity and return of investment when the

respondents are grouped according to type of business. Meanwhile, p value of 0.017 was obtained

which was lower than the 0.05 level of significance. This shows that there is significant

62
 difference in the micro-enterprises’ performance in terms of sales when the respondents are

grouped according to type of business.

5. Difference in the performance of Micro-enterprises when they are grouped according to

years of operations

The findings shows p values of 0.058, 0.143, 0.344 and 0.230 respectively were obtained

which were higher than the 0.05 level of significance. This shows that there is no

significant difference in the micro-enterprises’ performance in terms of sales, cash flow,

liquidity and return of investment when the respondents are grouped according to years

of operation.

6. Problems encountered by Micro-enterprises

The findings shows the most common problems encounterd were, not enough cash to

purchase raw materials, merchandise and supplies, lots of competitors, lack of training in

handling business, high cost of sales that resulted to the increase in selling price and

natural calamities.

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

Tuguegarao City.

Conclusion

In the light of the above findings of the study, the following conclusions were derived:

1. The majority of the respondents were Single or Sole Proprietorship, Retail and 6-10 years of

Operations.

63
 2. The majority of the respondents had sales of 100,001 – 500,000 and Return of Investment

(ROI) of 21-40, and nearly half of the respondents had Cash Flow of 50,001 – 100,000 and

Liquidity of 1.51:1 – 3.00:1.

3. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of
investment is the same regardless of form of business.

4. The micro-enterprises performance in terms of cash flow, liquidity and return of investment

is the same regardless of type of business. Meanwhile, the micro-enterprises in the services

business has sales than those in the retail business.

5. The micro-enterprises performance in terms of sales, cash flow, liquidity and return of

investment is the same regardless of their years of operation.

6. The most common problemsencountered were, not enough cash to purchase raw materials,
merchandise and supplies, lots of competitors, lack of training in handling business, high cost
of sales that resulted to the increase in selling price and natural calamities

7. There is a need to comprehensively implement the proposed action plan to enhance the

micro-enterprise in Tuguegarao City.

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

1. Training and knowledge dissemination is the need of the hour and microfinance

information exchange should be established by NGOs/Other stakeholders with the active

support of the government.

2. Absorption of Micro-entrepreneurship by Tuguegarao City, Cagayan and other entities.

64
 3. Implementing entrepreneurial ideas in microenterprise bring more profit and productive

result as their entrepreneurship is for their survival. Therefore, combination of

microfinance and entrepreneurship is a very effective developmental tool that can

alleviate poverty and empower people in a better way.

4. This research provides the future researchers an overview of micro-enterprises as to help

in sustainable rural development, marketing of products, training and its effectiveness in

group management and income generating activities, sustainable alternative livelihood

practices brought by microfinance, microfinance and role of microfinance in rural

development in the context of the emerging threats of globalization.

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