CHAPTER 1 (under revision wahahaha)

THE PROBLEM AND ITS BACKGROUND

Introduction

This chapter presents the Background, Theoretical Framework,

Research Framework, Statement of the Problem, Significance of the

Study, Scope and Limitation and Definition of Terms of the study.

Background of the Study

Lending (also known as "financing") in its most general

sense is the temporary giving of money or property to another

person with the expectation that it will be repaid. In a business

and financial context, lending includes many different types of

commercial loans but under Republic Act No. 9474 of the

Philippines or also known as the Lending Company Regulation Act

of 2007, lending company is synonymous to lending investors and

refer to a corporation engaged in granting loans from its own

capital or funds sourced from not more than nineteen (19)

persons.

Nowadays many individuals such as businessmen wants to start

up their own business to generate and earn income but they are

lacking in financial aspect, so it is the part where they are

looking for lending institutions to borrow some money. Most of

San Antonio. These institutions preferred to establish in this

area because it is known as the business or profit center in

Pasig City.

Theoretical Framework

Credit management is one of the most essential activities in

any company and cannot be neglected by any entity involved in the

supply of credit lines no matter the nature of its business.

Myers and Brealey (2003) consider it to be made up of techniques

and strategies used by an enterprise to ensure that an optimal

level of credit and its effective management are kept. This is

one aspect of monetary administration including credit

examination, credit assessment, and credit scoring and credit

reports.

According to Asiedu-Mante (2011) credit management involves

the setting up of legal and formal systems and policies that will

guarantee that the appropriately designated staff are well-

positioned to grant credit, the facility goes to the people with

the right credit history, the loan is given out for profitable

activities or for businesses which have a strong financial and

technical viability, the correct amount of credit is disbursed,

the credit can be recovered and the flow of management

effective monitoring of credit activity. He therefore viewed it

as the putting in place of systems that act as a check right from

the credit granting process to the point of collection.

Credit Management likewise alludes to the proficient mix of

four noteworthy credit approach parameters to ensure convenient

collection of advances conceded to clients and in the meantime

build their trust in and devotion to the financial organization

(Van Horne, 2007). The main variable is an evaluation of the

nature of the client's record operation in the establishment.

This takes into consideration the correct examination of the

capacity of the clients to meet installments promptly. The second

strategy variable is that of setting up the right credit period.

In this manner, the microfinance institution should give

sufficient time to permit loyal customers the chance of deriving

the full advantages of the credit. Such period should not be too

long to put the financial institution in a distraught position.

The third parameter is the rebate given to clients as a way of

inspiring them to reimburse their credit facilities on time. Such

rebates must be sufficiently appealing before the goal can be

accomplished. The last variable looks at the level of expenditure

that can be permitted in the recovering of debts. The inference

here is that the microfinance institution should not give out

credit where the cost to be spent on retrieving the obligation

variables into a proficient workable framework obliges the

establishment of a watchful arrangement, controlling and

coordination of all accessible human and material assets Van

Horne (2007).

Research Framework

Statement of the Problem

Significance of the Study

To the Future Researchers

To the Academe

To the Businessmen

To the Stakeholders/Community

To the Accountancy Students

Scope and Limitation

(Our study intends to focus the 37 lending institutions in

Barangay San Antonio, Pasig City. Thus, the banks and other types of
_________ institutions will not be included in our study.) Besides,

large banks could have mixed activities from commercial banking and

investment banking, e.g. the main risks faced by commercial banks and

investment banks are not usually identical. For instance, from our

academic experience, credit risk is the largest risk for 6 commercial

banks while market risk and credit risk are important to investment

banks. The difference between concentrations of risks might make our

study biased. Secondly, in order to collect enough data to make

generalization, we have chosen the time horizon from January to

December 2019. In this case, we do not take into account the impact of

financial crisis could have on the result of our studies, which might

cause bias to the estimates.

The study was conducted to determine and assess the effectiveness

of credit management practices in the profitability of lending

institutions in Barangay San Antonio, Pasig City. The sample units or

Respondents are the business owners or managers of the lending

institutions. The limitation of the research was based on the

compliance and cooperation of the respondents to the researchers.

Our study also limits its coverage on the problems faced by the

institutions regarding the status of their profits in relation with

their credit management practices during the year of 2019 and to

propose possible solutions for those problems.

Definition of Terms of the study

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