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  THEEFFECTS OF 5-6 MONEY LENDING SYSTEM ANALYSIS TO THE PSYCHOLOGICAL DEMEANOR OFFRUITS AND MARKET SELLERS      A Research Proposal Presented to the Faculty of the Senior High SchoolDepartmentUNIVERSITY OF MINDANAODavao City  _______________    In Partial Fulfillmentof the Requirements for the Academic Strand inACCOUNTANCY BUSINESS AND MANAGEMENTResearch Adviser:Prof.Ronald A. Gica   _______________     CARLA MARIE RAMOSKLEIN ELISA PAULAARANAS  JANUARY2018       CHAPTER 1THE PROBLEM ANDITS SETTINGBackground of the Study     Thereare various microenterprises present in the Philippines. Since businesses inmicroenterprises operate on a very small scale through sole proprietorship withfewer than six or ten employees, they could only have less to provide for loanbanks. Aside from discerning the process of the five-six (5-6) money lending,people should also foresee the psychological effects to the borrowers of themoney lending system. InAmerica, according to Kuchar (2014) from her article, “The Emotional Effects ofDebt” that being in debt can lead to so much emotional and psychological issueswithin a person.

Financial debt in America has risen dramatically in recentyears. Applying for bank loans, car loans, house loans, student loans and otherobligations, and it is clear to state that most Americans carry different kindof debt. a leadingonline credit card marketplace, a place where consumers can shop and compare,credit offers from all the major card issuers.

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“The average American has$15,950 in credit card debt, and 39% of Americans carry credit card debt monthto month.”.            In the Philippines, according toKondo (2003) there is anumber of informal micro enterprise many of these aresmall vendors operating in public markets. Looking at the public market inSanta Rosa, Laguna 5-6 moneylenders collect payments on the daily basis eitherin the morning or in the afternoon.

The daily payment of the lender’s client isdetermined by the total of the principal borrowed adding 20% of its nominalinterest, divided by the term credit. A client’s daily payment is determine bythe sum of the principal borrowed plus its 20% nominalinterest divided by the credit term. The loan arrangement is flexible, meaningif the client haven’t paid on a day, he or she will still pay the time he orshe failed to return the money on some other day. In local setting, accordingto Arado (2017) Pag-ibig Fund recorded a total of P4.4 billion housing loantakeout from 4,951 borrowers in Mindanao as loans for countryside housing areincreasing in number. Pag-ibig Fund chief executive officer AcmadRizaldyMotisaid they reached a total of P57.3 billion loan takeout for the entirePhilippines last year.

“This has exceeded their 2016 loan takeout target of onlyP50.5 billion. Because of this, Moti said they also increased their 2017 loantakeout target from P55 billion to P65 billion. Out of this number, Mindanaotargets to reach a total takeout of P8.6 billion from 8,600 borrowers by theend of the year.            There have been numerous studiesabout the informal system loans and how it only affects the activities betweenthe lenders and borrowers, their mode of transactions, and terms and agreementsbut not about how it would greatly affect the psychological or emotionalaspects of the people.

This study will be conducted to know if borrowing moneyhas some effects to the psychological aspects of the person and in hypothesis,if they are related.         Hypothesis of the Study            The study will test the nullhypothesis at 0.05 level of significance, which states that there is nosignificant relationship between the level of borrowing money from 5-6 lendingsystem and psychological aspects of the market sellers in Bangkerohan, Davao City.Review of Related Literature5-6 Lending System            Money is the most essential thing abusiness owner should have. Money is thebeginningof everything in a business for it is like a water that keeps somethingflowing. But during this time it is like a natural resource that undergoesscarcity. Not all business owners have the capability to produce money fortheir capital. Due to this certain circumstance.

A lot of people would seekhelp to people engaged in money lending business. For this people provideabrupt response to money issues faced by business man. Borrowing money is a wayto help to help support their families, to support financial needs ofmicro-entrepreneurs and to ease poverty. Informal money lenders are moneylenders who are not licensed to do money lending business. They are also called”5-6 moneylenders” and are well known about this kind of informal lendingbusiness which is patronized by some micro-entrepreneurs and people who wantsto put-up a new business in urban areas. “5-6” is the term used in such areason that they lend money with 20%  interest.Like for example, if you borrow from them worth 500 pesos, you will bereturning it at the amount of 600 pesos or 20% interest rate within one monthor upon the agreed condition.

Micro-entrepreneurs are the most patronizingparty in this form of business because they are the ones who are in needs offinancial capital for the daily financing activities of their businesses. Market Competition.Market Shortage.Accordingto Hanza (2016), Market shortage is a result of hoarding products. But,hoarding is not only entitled to the suppliers alone. The study found out thatboth the traders and the consumers itself are hoarding too. The reason behindthe story is that, both of them expect that the price of the product (sugar)will increase in the near future.

In addition, hoarding of the consumers in thestudy means buying bulk amount of products (sugar) in the market, resulting todrastic shortage in the country of Egypt.            According to Cui and Shin (2016),suppliers are more knowledgeable to the consumers, in terms of overallinventory of the product. Now, given this idea, if ever the suppliers sensethat the product will have potential increase on its price some of them ormostly of them will surely hold or hoard their products for greater profit.

But, it will really result to unbalanced equilibrium of a specific supply anddemand.            According to Li (2016), Small andmedium-size enterprises (SME) are vital to the market or economic world.However, due to the discrimination that is happening, large number of them iseither bankrupt or stop continuing their own business that results tounbalanced market that also ends to the point of shortage.            According to Lewis (2017), inEurope, “small and early-growing businesses” have a shortage to their riskcapital that resulted to a major step back to the high economic growth of theirbusinesses, specifically the aspect of technology. Moreover, given the factthat Europe has increases their sources of capital and become more accessibleto the “small and early-growing businesses”.

Still, Europe’s globalcompetitiveness in comparison to the United States of America is still weak.Now, the study indicated that teaching entrepreneurs about the effects andbenefits of risk capital and how to govern it leads to a pleasant start up tothe “small and early-growing businesses”.            According to Murphy (2012), smallscale producers are sometimes deprived to accessibility in the land, inputs andtechnology that is vital in producing crops, and the main the reason behindthis, is the lack in information, capital and growing conditions thatdrastically affect the small scale businesses. For small scale producers andsmall scale businesses have a relationship. For example, if small scaleproducers have this low accessibility to the factors needed to grow theircrops, then the small scale businesses will also have shortage to their rawproducts that can result to a much bigger problem to the economy of a specificmarket.             According to Dawson (2014), in orderto avoid shortage, market participants must have obtained enough reserves interms of operations, supplies and stacks.

Hence, these reserves have to be inthe market time to time in case of sudden problems in the market place.Moreover, unexpected challenges might arise in the market place. But if youhave these reserves, then your business can show flexibility and maintain thereliability to your customers. Yet, a lot of small enterprises and businessesfailed to obtained such reserves, that’s why shortage in the market place areoften seen as common matter.            According to Fender and Lewrick(2013), regular reform is a factor that is needed to assess your collateralassets of your company or enterprises. Yet, regular reforms are hard to makeespecially to the small and medium-size enterprises and businesses.

For it cancause great expense to their small businesses, that will result to simplyneglect the reform, and one of the aftermaths of neglecting such reform is shortage. Money Borrowed.Market Demand. Accordingto Heineke and Ormerod (2012), the standard consumer choice theory states thatindividuals showcase choice to utilize ultimately the limited budget that theyhave in their lives. Moreover, Stingler as cited at Heineke and Ormerod (2012)study, showed the conventional theory as one of the concept that can explainthe market demand or consumer’s choice behavior. Specifically, the conventionaltheory states that external factors such as cost of gathering information canmatter to the consumer’s choice. Hence, wrong information about the product’squality and price can brought confusion to the consumer’s wants or demands.             According to Liu and Lopez (2013),consumers do not mainly focus their demands and wants to the nutrition of aspecific product, but rather on their taste preferences and popularity of theproduct itself.

Best example is the beverage that is labeled as Coca-cola orCoke, consumers that avail this kind of product don’t really care or aware onthe sugar content that this product has. Yet, they buy it and drink it.Meaning, this shows the effect of popularity or fame to a product, it doesreally have to be nutritious in order to be sold on the market, other factorslike exposure and recognition will simply do.            According to Lappo (2015), aproduct’s value on the eyes of the customers or consumers will depend on theirideology, an ideology that which the consumers assume that it can reach andfulfill their goals. Moreover, consumer’s attention is essential factor in acompetitive market for the retailer.

For by getting consumer’s attention, thereis a big chance that you can also get their loyalty to continuously buy to youand that other retailers will be held as not an option for them.            According Tigan (2016), publicmarket is one of the essential units of a specific municipality or city before,not until supermarkets and online orders are created and build. This gives thepublic market less popularity and less priority to the consumers. However, publicmarkets is one the markets that can give suffice needs of citizens of aspecific land or territory in terms of commodities.  Hence, gives great economic benefit andcommunity development.

Lastly, public market is considered as the greatestfactor in term of demand of the consumers near its vicinity.            According to McCluskey (2015),consumers in general are becoming knowledgeable in the aspects of quality oftheir demand products. Moreover, consumer’s standard in quality become morechallenging than it used to be before. these things happened and keep onhappening mainly because of the education system that is given to our society.Due to education, people tend to dare to know the complexity of the informationwith regards to their food intake and how nutritious indeed it is. Hence,consumers are trying to taste various type of food in order to fit in to theirbudget. That leads to drastic increase of heterogeneous consumers. Still, ingeneral, there is still an income inequality.

Thus, given the fact that we arefully aware and educated to the subject matter. Still most people tend to pickproducts or services that is popular or simply because they are traditional andconventional inclined to it. Theoretical and ConceptualFramework             Thetheory of planned behavior (TPB) began with the theory of reasoned action.According to the TRA guidelines, behavior is predicted using attitudes toward aspecific behavior and subjective norms to form a behavioral intention thatdetermines the actual behavior.  Modifiedthe TRA to create the TPB. The TPB differs from the TRA in that a newbehavioral antecedent was added to the model. In addition to attitudes towardthe behavior and subjective norms, perceived behavioral control (PBC) wasincluded in order to contribute to the formation of behavioral intentions andactual behavior. The factor of PBC was added to the TRA in order to address theissue of personal control that the original model was lacking.

Researcherssuggest that the more favorable the attitude toward the behavior and subjectivenorm, and the greater the perceived behavioral control, the stronger thebehavioral intention (Hrubes, Ajzen, & Daigle, 2001). Furthermore, it isrecommended that the addition of any predictors should be empirically supportedand should also be applicable to other topics studied by social scientists. Inconsidering these factors, financial literacy meets all of Ajzen’s (2008)criteria for being added as a predictor. Financial literacy measures a specificconstruct that has been widely studied within the broad field of socialscience, including psychology, economics, and sociology. Quantitative Data Figure 1.0   Amount of Money Borrowed -Market Demand 5-6 Lending System -Market Competition -Market Shortage             Independent variable                                          Dependent Variable  Qualitative Data Psychological Aspects -Stress and Anxiety -Shame and Embarrassment                                                                                                                                                                 Significance of the Study              The results of the study could bebeneficial to the following: MarketSellers. This study has to do with alarming and making awareness to thosemarket sellers who are involved, to those who are planning to engage, and tothose market sellers who are practicing the 5-6 lending system. They are themain subject to the study and it will aid them to fathom and avoid unwantedcircumstances.

Lenders.They are another significant subject in the study; the results of this researchwill give a revelation for the matter of lenders having a little considerationon the side of the borrowers with the system’s psychological effects. Government.This study is significant to the government itself for it gives awareness and awider understanding for the situation the market sellers are going through.

Thegovernment will consider factors and conduct programs that will help the marketsellers. Definition of Terms            This section of the paper will giveyou clarity of the vague terms that is need to understand: 5-6 Lending System.This is also known as informal loan system. Originally, from the Indians whoinfluenced many of the Filipinos and is being used mostly within publicmarkets. Through this kind of lending there is usually no document involve topresent or even collaterals.

Transactions usually takes place within only daysunlike with loan banks that would take for about weeks. There is also a 20%interest added to the principal borrowed of the client. Psychological Aspects.

These are conditions make an impact to a person’s emotional and mental state ofhealth. This is the crucial part affected when 5-6 lending systems arepracticed by a certain individual. Market Sellers.The one who owns a certain stall and they are the one who sells products anduse 5-6 as a way of generating capital for them to have products to sell. Market Competition.

The rivalry among sellers trying to achieve a much more higher sale asincreasing in profits. This is an indicator for 5-6 lending system for it is agreat factor in arousing the urge of market sellers to borrow money. Shortage.Basically, it is lack of a certain product needed by the market sellers offruits and vegetables. This is also an indicator for 5-6 lending system for ittriggers the need of the sellers to borrow money because the basis of the priceincrease is when the supply gets low the price increases. Demand.

The willingness or the desire of the consumer to buy a certain product in themarket place. This is an indicator for our dependent variable considering thefactor that if it is pick season and the demand is high so the market sellerswill borrow a greater amount of money. Stress.The kind of response to a stimulus that triggers a surge of a hormone underpressure. This is the indicator for the qualitative variable of psychologicalaspects of a certain person. Stress can be developed due to huge financialproblems.

Anxiety.This refers to a disorder that somehow relates to the feeling of nervousness,fear, and worrying. Having any financial debt can lead to having anxiety to aperson. Shame and Embarrassment.

Shame is the term that is directly towards the person’s introspection becauseof something that he did, and embarrassment is directed towards the behaviordone that is the reaction caused by fear.                 Works Cited Hanza. (2016). Hanza a strategic manufacturing partner.   Alkhazaleh, A. M.(2017).

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org/issue-4/the-bombay-5-6-lastresource-informal-financiers-for-philippine-micro-enterprises/Kuchar, K. (2017). The Emotional Effects of Debt – The Simple Dollar. Retrievedfrom The Simple Dollar:


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