Dynamics of moneylending/borrowing in a rural community in Leyte [Philippines]
1995
Fernandez, A.A.
The preference of moneylenders rather than the bank by the borrowers as source of credit was mainly due to the absence of collateral. The idea of moneylending/borrowing was self-initiated and the majority of moneylenders had 20 or less borrowers while majority of the borrowers obtained credit from only one moneylender. Most moneylenders required fixed maturity dates and used a simple credit instrument. The usual amount lent to a borrower was P2,000 and below with an interest rate of 5-10 percent per month at P20-50 per day for 37-90 days to be paid on installment basis. Character/willingness to pay/credibility were the basis for granting credit, the borrower specifying the amount of credit. The loans were used mostly for capital in business and children's education. The moneylenders perceived that their moneylending fostered closer relationship with the borrowers and to some extent helped the latter financially. Majority of the moneylenders had an unfavorable attitude towards informal lending. As a consequence many moneylenders wanted to quit in this business. Most borrowers had a favorable attitude towards borrowing and had no default in their payment of loan. Moneylenders' educational attainment was significantly related to their attitude towards informal lending while household size and attitude towards informal lending affect their lending behavior. Borrowers' organizations affiliation and household size were significantly related to their attitude towards borrowing while their annual family income and number of years in borrowing significantly affect their borrowing behavior
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