Problem and Its Background

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The government envisions that MSMEs and their proprietors would continue to expand in order to be able to contribute further to the growth of the economy, as well as the procreation of employment in the process. In the advancement of this purpose, it must be able to maintain the availability of the option of choosing microfinance institutions as these are more convenient and affordable for entrepreneurs in able to utilize these to raise financial capital for their businesses. Through this, the growth of the SME sector would be sustained and bolstered further because there will be a higher quantity of participant firms that would be able to contribute to the economy.

This can be supported by the existing theory of microfinance as an effective tool for poverty alleviation in Development Economics. With the proper policies, and its implementation, the government cannot be far off in achieving its number one goal of lowering the poverty incidence and uplifting living conditions of every single family in the Philippines by means of unlocking the full potential of the large numbers of MSME present in the country.

This study would like to contribute to this goal by examining which among the factors of microfinancing has the greatest impact on the success of the present MSMEs. These factors include the amount of loan available, interest rates charged, the frequency of paying or the repayment method, duration of the loan or the given time for the repayment of the loan, the collateral requirement of the microfinance institutions and the presence of trainings/seminars in availing the loan. Success would be based on the generated net annual income. Results would dictate which factor must be focused upon in amending policies or in the generation of new ones to support the contribution of microfinancing in MSME growth.

Statement of the Problem

This study aimed to find out the impact of micro financing to the growth of micro, small, and medium enterprises. For this research, variables associated to microfinancing were used to measure the relationship and impact of it to MSMEs. The factors included are loan size, loan duration, repayment period, collateral security, interest rates and presence of trainings/seminars. The researchers wanted to know the relevance of the factors to the growth of the Micro, Small, and Medium Enterprises.

- Is there any relationship between the growth and success of MSMEs and the following factors incorporated in micro financing?

- Loan size

- Loan duration

- Repayment period

- Interest rate

- Collateral security

- Trainings and seminars

- Which among the factors had the biggest impact on the growth of these MSMEs?

- What are the recommendations that can be formulated to improve the services offered by these micro financing institutions?

Objectives of the study

The general objectives of the study are as follows:

- To establish the relationship between the success of the MSMEs and the factors previously cited in micro financing for SME growth

- To establish which factor had the biggest impact on the growth of these MSMEs.

- To be able to formulate certain recommendations for the improvement of the micro- financing institutions

Hypotheses

The data gathered by the researchers would then be examined in order to assess the validity of the claims of the study. The following hypotheses are then formulated as an instrument to be used as a guide in the decision-making regarding their relationship:

H0: Loan Size, Loan Duration, Loan Repayment, Interest Rates, Collateral Requirement and Presence of Trainings/Seminars have no significant effect towards the growth of MSMEs.

H1: Loan Size, Loan Duration, Loan Repayment, Interest Rates, Collateral Requirement and Presence of Trainings/Seminars have significant effect towards the growth of MSMEs.

Significance of the Study

This study encompasses the impact of the factors involved in microfinancing loans to the overall growth of Micro, Small and Medium Enterprises (MSMEs) in the City of Manila. Consequently, the researchers desire to introduce its implication to the following stakeholders:

Microfinancing Industry

- A supporting tool in finding methods of operations and techniques in the improvement of microfinancing services

- A source of information or literature regarding the subject

- A support for evaluating the adequacy of microfinancing projects

- Additional help in understanding current difficulties and uncover variables that are of big help to the MSMEs

Philippine Government

- Gain insights in the existing conditions of the microfinancing industry in terms of the factors and how it affects MSMEs

- Provide analysis that can help in improving current policies and regulations in relation to the used variables

Students

- Spark academic and professional interest on unexplored areas and aspects of microfinancing

- Provide informations for future researchers

- Increase awareness about the condition of microfinancing in the Philippines

Scope and Limitation

With the goal of suggesting policy implications for the betterment of the microfinance industry, this study will focus on investigating the relationship of microfinancing loan factors namely: Loan Size, Interest Rates, Loan Repayment, Loan Duration, Collateral Requirements and presence of Trainings/Seminars to the growth of Micro, Small, and Medium Enterprises (MSMEs). For this to be known, correlation analysis will be done in order to uncover the impact of each. This will in turn provide specific areas to be focused upon in attaining a more business-friendly microfinance environment for the growing MSMEs.

The study