A comparative analysis on the profitability and efficiency ratios of selected rural banks based on the security requirement for the microfinance loans from 1998-2003

Date of Publication

2006

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Rene B. Hapitan

Defense Panel Member


Junette A. Perez
Corazon C. Subido
Manrico T. Masagca

Abstract/Summary

This paper analyzes the profitability and efficiency of selected rural banks based on their security requirement for the microfinance loans. It has the following objectives: (a) to determine the impact of the security requirement (pure guarantee or combination of collateral and guarantee) for microfinance loans on the non-performing loans of the selected banks, (b) to determine the effect of the security requirement (pure guarantee or combination of collateral and guarantee) for microfinance loans on profitability and efficiency ratios for the selected banks, (c) to determine the effect of microfinance portfolio on the non-performing loans of the selected banks, and (d) to determine the effect of microfinance loan portfolio on the profitability and efficiency ratios of the selected banks. The paper will also address some recommendations on how to improve the profitability and efficiency and other areas of concern.

Borrowers belonging to the lower end of the society are having difficulty in obtaining loans due to high interest rates and the presence of collateral security thus resolving to borrowing from informal lenders. The establishment of micro-oriented rural banks paves the way for small borrowers to borrow once again from formal lenders. These micro oriented banks require collaterals that are not burdensome to the borrowers such as appliances and business equipment. Moreover, certain rural banks accept collateral substitutes like guarantors or co-makers. This will enable small borrowers to acquire loan without the presence of collateral.

The recommendations for other entities involved in this study are the following: For the Bangko Sentral ng Pilipinas, to build an integrated data warehouse that will store all data from the banks for end-user reporting and decision support. For the securities and Exchange Commission, strict implementation of rules such as the timely submission of financial statements and efficient gathering of financial reports are advised. In addition, the need for credit bureau or some entity similar to a credit bureau is strongly recommended to reduce a large extent or even eliminate multiplicity of loans released to single borrower."

Abstract Format

html

Language

English

Format

Print

Accession Number

TU13501

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

1 v. (various foliations) : ill. (some col.) 29 cm

Keywords

Loans--Philippines; Credit--Philippines-- Management; Banks and banking--Philippines; Microfinance--Philippines

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