As being observed in the Philippine situation the common problem and also not a new issue in agriculture sector is the low productivity and low income of farmers which can be attributed to their lack of capital. Many farmers have no enough savings or cash on hand to purchase new inputs including machineries, chemicals, pesticides and high yielding varieties of seeds which will help them to improve their earnings because these inputs are usually expensive. As an answer to this dilemma they rely on credit and the proliferation of different credit institutions is a great help to them.
The credit need of the farmers were being experienced especially those who are engage in rice production because it needs a large amount of money for investment. These credit needs of the rice farmers were being provided by the two types of institutions namely the formal and informal lending institutions. The formal sources of credit include the banking and non-banking institutions. The mere examples of it are the rural bank, commercial bank, and cooperatives (Duran 2001) while the informal sources are the private moneylenders, relatives, friends, traders and millers.
With the availability of the credit institutions in rural areas, it allows the farmers to maintain and sustain their productivity since income in this country is generally low (Cacho, 1995). Credit can be defined as a means of entrusting and believing from and since trust is an important ingredient in providing it, the lenders rely on a promise of the borrower to pay in the future (Guevarra, 1995). But it is a problem encountered by these formal and informal lending institutions that the farmer-borrowers were not able to pay their obligation at the expected time.
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Statement of the Problem With a total farm area of more or less 23,036 hectares almost 2,182 hectares in Ragay, Camarines Sur is being planted with rice and the need for credit can be observed in its production. It is therefore important that the credit institutions proliferate in this area to help and assist the rice farmers. The government intervenes through the promotion and development of the organization that will provide agricultural loan so as to improve the income of rice farmers, which include the development of the rural bank and cooperatives in the area.
Together with the expansion of the formal institutions the informal lenders also expand and gave a significant role in alleviating the lack of capital by the rice farmers. With this expansion of credit sources the problem, which cannot be avoided by these institutions is the high percentage of loan delinquency by the borrowers. Though the high collection performance or high repayment rate would not necessarily mean the ultimate measure of successful operation of the institutions, a low repayment rate adversely affects the operation and stability of the different lending agencies.
Also through loan default, credit institutions in Ragay were not able to improve and expand their services and sometimes lead to failure in providing efficient services. Significance of the Study Lack of capital or inadequate fund of the rice farmers in Ragay, Camarines Sur hinders their increase in production and income. They are not able to purchase production inputs and adopt new technologies to produce more output for sale and a credit as a source of capital is a big help to them but repayment of their loan is a pressing problem to the lending institutions in this area.
This study will focus in increasing the repayment rate or increasing the non-repayment if not totally eliminating it to help the lending institutions in improving their services for the rice farmers. This study will also provide data that will help them to improve their loan collection and supervision for their sustainability though improving strict rules and regulation regarding borrowing. For the farmer borrowers, this study will help them to realize the factor which affect their repayment so as they will able to look for ways that will minimize their low or no-repayment of loans.
It will also help them to understand that certain factor/factors of repayment decrease their capability of repaying the loan and therefore there is a need for them to do something to minimize those factors, which can be controlled. Objectives of the Study The general objective of the study is to analyze the factors affecting the loan repayment of rice farmers in Ragay, Camarines Sur. The specific objectives are the following: 1. o identify the common credit sources of rice farmers in Ragay, Camarines Sur; 2. to identify the factors affecting the rice farmers’ choice of credit source; 3. to determine the loan purpose of the rice farmer-borrowers; 4. to determine the relationship of the factors affecting the repayment performance of the rice farmer borrowers; 5. to determine the problems encountered by rice farmers in loan repayment; and 6. to compare the repayment performance of rice farmers by source of credit.
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