Background of the Study
As being observed in the Philippine situation the common problem and also not a new issue in agriculture sector is the low productivity and low income of farmers which can be attributed to their lack of capital. Many farmers have no enough savings or cash on hand to purchase new inputs including machineries, chemicals, pesticides and high yielding varieties of seeds which will help them to improve their earnings because these inputs are usually expensive. As an answer to this dilemma they rely on credit and the proliferation of different credit institutions is a great help to them.
The credit need of the farmers were being experienced especially those who are engage in rice production because it needs a large amount of money for investment. These credit needs of the rice farmers were being provided by the two types of institutions namely the formal and informal lending institutions.
The formal sources of credit include the banking and non-banking institutions. The mere examples of it are the rural bank, commercial bank, and cooperatives (Duran 2001) while the informal sources are the private moneylenders, relatives, friends, traders and millers.
With the availability of the credit institutions in rural areas, it allows the farmers to maintain and sustain their productivity since income in this country is generally low (Cacho, 1995).
Credit can be defined as a means of entrusting and believing from and since trust is an important ingredient in providing it, the lenders rely on a promise of the borrower to pay in the future (Guevarra, 1995). But it is a problem encountered by these formal and informal lending institutions that the farmer-borrowers were not able to pay their obligation at the expected time.
Statement of the Problem
With a total farm area of more or less 23,036 hectares almost 2,182 hectares in Ragay,...