Microfinance Loan: Impact of Micro-Lending to Urban Households

Abstract ―​

Micro-lending has expanded significantly in recent years and is now an unquestionable factor for urban families. Due to this reason, the purpose of this study is to ascertain whether microfinance loans have a significant relationship and positive impact on reducing poverty, increasing income, expenditures, and savings, and reducing the percentage of families that have experienced hunger incidence and insufficient food consumption regardless of their experiences of using micro-lending. To investigate the experiences and impact of micro-lending to urban households’ borrowers, a survey research design was employed. The data collected used in the study were selected urban households’ borrowers from four different barangay of Pasig City. The Mann-Whitney-U test and Kruskal Wallis H-test demonstrated the significant differences based on sex, age, monthly income, education, work organization, and family size for the statement of poverty alleviation, over-indebtedness, threats and excessive pressure in repaying loan. However, the Spearman rho Correlation relationship between the respondent’s experiences in micro-lending in terms of poverty alleviation, over-indebtedness, threats, excessive pressure in repaying loan and its impact to their households in terms of income and expenditures, other loans and savings, human capital investments, hunger incidence and food consumption. Recommendations include careful financial assessment, financial education, loan comparison, flexible loan terms, and borrower education. Future research may consider broader factors and employ mixed methods approaches for allowing a more comprehensive understanding of the study.