SDCA Asia-Pacific Multidisciplinary Research Journal

Abstract

This study focused on the Credit Risk Management Practices of Microfinance Institutions in Batangas Province and their implications for the financial inclusivity of the MFIs. Specifically, this paper determined the profile of the subject MFIs, the level of Financial Inclusion, the Extent of Practice of MFIs in each phase of CRM, the significant relationship between the dependent and independent variables, the considerable difference between FI and CRM when grouped according to profile variables, and to propose a strategy based on the findings where improvements can still be made. The study utilized the descriptive-quantitative research design. A researcher-made questionnaire was used to gather data from 51 out of 72 sample MFIs in Batangas Province that were chosen using Convenient-Non-Probability Sampling. The study used frequency and percentages, weighted mean and composite mean, Spearman Rho method, compare means, and a 4-point scale, as statistical treatment. It is revealed that most MFIs in Batangas Province have already established their operations. Further, the findings showed that the majority of the MFIs in Batangas Province approved only less than 5,000 clients with less than 1 million loans outstanding as of 2021, which indicates that they approved small loans to a small number of clients and thus small loans outstanding for the year. The study concluded that MFIs in Batangas Province are financially inclusive, as evidenced by the high level of each financial inclusion component; quality has the highest composite mean, while usage has the lowest composite mean. The findings showed that MFIs are practicing MFI CRM "to a great extent", as evidenced by high composite means in each phase of the CRM Process - having Communication and Consultation and the Scope, Context, and Criteria as the highest composite mean, and assessment as the lowest composite mean. This research also revealed a significant relationship between Financial Inclusion and CRM Practices, but no significant difference between Financial Inclusion and CRM when grouped according to profile variables was also depicted. Finally, proposed strategies for improving CRM Practices of MFIs have been constructed.

Keywords: Microfinance institutions; credit risk management practices; financial inclusion; Batangas Province.

To cite this article:

Arca, R. D., Arellano, A. S., De Guzman, E. M., Tolentino, J. A., & Perez, R. J. R. (2023). The credit risk management practices of microfinance institutions in Batangas province: Basis for improvement. SDCA Asia-Pacific Multidisciplinary Research Journal, 5(2), 22-33. doi: 10.5281/zenodo.8253868