ST.

FRANCIS XAVIER COLLEGER

COLECTA: “EFFECTIVE COLLECTION MANAGEMENT OF

SELECTED LENDING COOPERATIVES IN SAN FRANCISCO

AGUSAN DEL SUR DURING PANDEMIC”

A Research Proposal Presented to the Faculty of College of Business

by

Araiz, Jolina
Ocat, Girlie
Juatas, Justeen Jay

to

Jay T. Punayan
 CHAPTER 1

The Problem and its Background

This chapter discusses the Introduction, Theoretical Framework,

Statement of the Problem, Significance of the Study, Scope, and

Limitations, and the Definition of Terms used.

INTRODUCTION

Rationale

It’s now been a year since the beginning of the COVID-19

pandemic, which has claimed many lives and altered the ways in which

each of us relates to and navigates the world.

COVID-19 has affected day-to-day life and is slowing down the

worldwide economy. This pandemic has affected thousands of

individuals.

COVID-19 has rapidly affected our day-to-day life, businesses,

disrupted world trade and movements. Most of the countries have

slowed down their manufacturing of the products. The varied industries,

cooperatives, and sectors are suffering from the explanation for this

disease.

During the COVID 19 outbreak, cooperatives were generally

affected, however, they have exhibited strong resiliency in dealing with

disruptions in business operation. They remained focused in seeking to

make ensure that they shall still maintain the supply of service to their
members. The pandemic outbreak has shown the cooperatives’

preparedness, readiness, and ability to respond to the needs of the

members, their communities, including other cooperatives. Despite the

difficulties, cooperatives are demonstrating their ability to reorganize

themselves, reinvent themselves, and cooperate. 

Cooperatives share a specific organizational design and a strong

organizational identity based on an internationally agreed‐upon set of

values and principles (Nelson et al., 2016). In particular, cooperatives

are value‐driven, member‐owned, and democratically controlled

enterprises that seek to fulfill the economic, social, and cultural needs

of their members by their production of goods and services (Battilana,

2018; Levi & Davis, 2008; Shantz et al., 2020) rather than provide them

with financial gains through the distribution of dividends.

Cooperatives represent a significant share of economic life

(Shantz, Kistruck, Pacheco, & Webb, 2020). Globally, around 1 billion

people are involved in a cooperative and 10% of the global population

works in a cooperative (Kaswan, 2014). 

The International Cooperative Alliance (ICA) defines cooperative

as “people-centered enterprises jointly owned and democratically

controlled by and for their members to realize their own common socio-

economic needs and aspirations,” (ICA, 2018), and today, they provide

a variety of roles and services within their communities. Cooperatives

put people at the center of all they do. They prioritize more on the

people and not just the capital. They commit to a different set of
standards than those linked just with profit. Because cooperatives are

democratically governed and owned by their members, the

cooperatives were able to address the need for profit with the demands

of their members and the broader community's interests.

Cooperatives are vital to the social and economic structure of a

nation. They use local initiatives to enhance economic strength while

also increasing savings and financing. When they are able to establish

their own operations, they can utilize the benefits of local activities with

the regional and national interaction within their system. If all this

process goes well, these multi-purpose cooperatives will undoubtedly

strengthen their shareholders as well as the local economic structure in

which they operate.

The primary objective of every cooperative is to help improve the

quality of life of its members. Since it plays a vital role in the

development of the society’s operation must be properly managed so

that the contribution from its members placed as capital together with

donations and grants will be expected to generate returns. And in the

case of Lending cooperatives, these are made available for credit. With

this, returns heavily depend on how collections of these receivables are

done.

In specific cases, these institutions improve mobilization of

savings and provide credit to their members and other non-member

customers. But of course, the credit system cannot be healthy if the

said cooperatives do not feel their responsibility for all transactions

responsibility is then very essential to economic affairs and the

business world. To achieve a successful national economy, one must

ponder that not only should credit enhance the quintessence of

business and enterprise but also to exercise the right methods and

regulations to enable the business to work in a socially relevant way.

It is therefore important for cooperatives to effectively manage

credit and collection systems through the use of strict and operative

methods and policies. Written policies are very relevant in a way that

they ensure consistent operations and decisions regarding the giving

and taking of credit. These policies and regulations are the key

documents to every business transaction.

The researchers wish to conduct a study to evaluate the

collecting policies and procedures used by the selected lending

cooperatives with a corresponding evaluation of the effectiveness of its

implementation during the pandemic.

THEORETICAL FRAMEWORK

The COVID-19 pandemic has been a large shock to economies

and financial systems around the world. In the beginning, as

governments introduced unprecedented measures to contain the

quickly spreading virus and households hunkered down to socially

distance from one another, output plummeted, unemployment

skyrocketed, and significant financial stress materialized. At the same

to support households to facilitate the provision of credit. Most

countries have now moved past the peaks of the COVID-19 driven

lockdowns and restrictions, but the challenges of debt collection in the

pandemic remain. 

Credit cooperatives have established themselves to be effective

in the environment of the social and economic conditions. By providing

the borrowers to access financial services including savings. As

defined by the Cooperative Development Authority in the Philippines

(CDA) (2015), a cooperative is an autonomous and duly registered

association with a bond of interest, who have voluntarily joined together

to achieve their social, economic, and cultural needs and aspirations by

making equitable contributions to the capital required, patronizing their

products and services, and accepting a fair share of risk and benefits of

the undertaking by the universally accepted cooperative principles.

Since lending companies offers credit to its members, it

necessitates the establishment of policies and procedures especially in

the provision and collection of loans to their clients. These regulations

are formed to influence and help in cautiously considering significant

business decisions and economic activities and, therefore, making sure

that all these transactions are performed within the boundaries imposed

by the entity.

Policies must then be devised strictly to ensure progress. In

drafting a policy, external and internal business factors must be

compliance with the law. Lending cooperative policy statements must

include the management's underlying philosophy as well as what the

policy hopes to achieve. This could contain a breakdown of the policy's

link to the institution's mission, vision, goals, and core values.

Procedures, on the other hand, must specify the actions that must be

taken in compliance with the association's policies. They must be used

consistently and in accordance with the rules.

Institutions like lending cooperatives extend their efforts in

providing loans or credit to their members, these should be followed

with collections. Once a person obtains a loan, an entirely different

scenario comes into play in the phase of collecting the loans. For some

of them, defaulting on a loan is imminent when fortuitous happenings,

like unemployment, medical emergencies, or some financial problems

which leaves them to suspend their payment, takes place (Stifler and

Parrish, 2014

As stated by Todd Zywicki (2015), the making of credit collection

policies represents a challenging activity from an economic

perspective. In concepts well established collection rules help both the

lender and borrower increase access to and reduce prices for

consumer credit. Jose Glenn Briones, Sr. (2005) further states that the

purpose of effective and efficient collection policies is the protection of

the resources of the creditor so they can still serve to the benefit of

those who need it.

encourage creditors for timely payment and to collect those past due

before considering it to be a bad debt and eventually be written off as

an account. The collection policy shall also draw the procedure on how

to approach debtors.

Within any financial institution with credit facilities, a good

collection system is essential since in its very nature. It is the ultimate

aim of each transaction. While a good collection record will not alone

ensure business success, good collections are one of the essentials of

success. According to Evans (2005), a collection development policy is

a library planning guide in developing and maintaining its collections,

Collection policies should also be up to date in support of mission and

goals.

According to the CDA (2015), cooperatives essentially focus on

the needy. Hence, the objective of cooperatives is to improve the

economic well-being, livelihood, and social status of every society.

Cooperatives are tasked to put the less fortunate in the socio-economic

mainstream to become active contributors in building the nation and

growing the economy. The future of our cooperative programs is driven

by the nature and quality of the behavior of every people as well as

their values, and ultimately on the attitude of the people managing

them. These are also considered the variables of improvements of any

cooperative that needs progress to assure that the goals of the

program would be achieved. Negative and regressive values should be

changed with more positive ones so that the environment has a

usually takes a long time to reject what we have been used to, but the

important thing to do is give our best if we want to succeed. Commonly,

challenges and problems are expected on the way, but these are

obstacles and difficulties that when properly analyzed and given the

right and appropriate solution should improve the services that it can

offer to its members in a cooperative.

Lending cooperatives need to establish policies and bylaws, and

loan terms and conditions considering both internal and external

factors. These internal factors include risks, the entity’s capital, local

economic condition, liquidity, needs, character, and financial

capabilities of the members or owners. Some external factors comprise

of appropriate statutory laws imposed by the government such as usury

law and commercial laws.

STATEMENT OF THE PROBLEM

This study focuses on evaluating the effectiveness of the

collection policies and management of selected lending cooperatives in

the area of San Francisco, Agusan del Sur.

Specifically, it will seek to answer the following questions;

1. What are the collection policies and management of each of the

selected lending cooperatives in SFADS in terms of:

a) Collection Process; and

b) Debt Recovery
2. What is the level of effectiveness of the collection performance in terms

of:

a) Collection Rate;

b) Collection Efficiency 

c) Past Due

d) Percentage of Collection before and during the pandemic.

SIGNIFICANCE OF THE STUDY

The findings of this study will provide extended help of the

following:

Participants; Lending Cooperatives. This study will help to

provide further assistance for the determination of the effectiveness of

their collection policies and management specifically on the percentage

of collection before and during the pandemic. This will also give them

additional information in improving their collection process or

performing corrective actions in case the results obtained from the data

gathered are unfavorable.

Borrowers. This is beneficial for the borrowers since it will give

them relevant data that will measure the capacity of the cooperative to

give them assurance despite of this current situation. Thus, this gives

affirmation to the borrowers that when they are in need of immediate

cash, the cooperative will be able to answer their needs.

future reference on the matters involving collection policies and its risk

management.

SCOPE AND LIMITATION OF THE STUDY

This study will be conducted to prescribe the Effective Collection

of Lending Cooperative before and during the pandemic.

The researcher, however, is limited to selected Lending

Cooperatives in San Francisco Agusan del Sur, the study will obtain

data and will be restricted to the study’s measure of effective collection

management before and during the pandemic, such as collection rate,

collection efficiency, percentage of collection

The evaluation of the Lending Companies with the particular

cooperative-based collection policies will be based only on the

information gathered from selected Cooperatives. The Participant's

only consisted of selected Lending Companies in San Francisco

Agusan del Sur.

DEFINITION OF TERMS

Lending- allowing a person the use of a sum of money under an

agreement to pay it back.

common goal.

Collection Policy- the set of procedures a company uses to

ensure payment of overdue accounts receivables.

Risk management- the practice of using processes, methods,

and tools for managing the risks.

Borrower- a person that receives money from a lender with the

agreement to pay it back within a specified period of time.