A COMPARATIVE STUDY ON FINANCIAL LITERACY LEVEL OF THE DEBT
AND NON – DEBTOR IN THE MUNICIPALITY OF BANISILAN
BALDELOVAR, BENJIE B.
CAPAJO, EFRIL BOY P.
CAMARISTA, MARIEL JANE A.
CORDERO, SHERYN P.
LAGAIT, LYENNIEL JAMES D.
PAGDATO, RALF GLENN A.
PANGONILO, GLYZIL MAE B.
A RESEARCH PAPER SUBMITTED TO THE FACULTY OF MALINAO SENIOR
HIGH SCHOOL IN PARTIAL FULFILMENT OF THE REQUIREMENTS IN
PRACTICAL RESEARCH 1
ACAD_HUMANITIES AND SOCIAL SCIENCES
S.Y. 2023-2024
CHAPTER I
INTRODUCTION
Background of the Study
Financial literacy has been our bases for to be able to know how does debtors
and non-debtors literate when it comes to their financial, in this study we would be able
to know how does debtors and non-debtors manage their money. In general,
affirmations that shows how does debtors and non-debtors handle their financial
expenses and income. In some cases, financial literacy will allow us to determine how
financially literate was the debtors and non-debtors. According to Klapper, Lusardi, etc.
(2015) without an understanding of basic financial concepts, people are not well
equipped to make decisions related to financial management. People who are
financially literate have the ability to make informed financial choices regarding to
saving, investing, borrowing, and more. Financial knowledge is especially important in
times where increasingly complex financial products are easily available to a wide
range of the population.
However, here in our nation financial literacy has been crucial to every citizens
sine they would just keep on grabbing the opportunity to borrow once they get a chance
but not minding all of the loans and debt they have since they don’t have enough money
to pay it back. Debtors and non-debtors are one of the common people in our nation
since we have a shortage when it comes to our financial, that’s why through this study
we would be able to know what level does debtors and non-debtors being financially
literate. The 2008 financial crisis, characterized in part by mounting losses for
individuals, has generated interest in better understanding how to promote saver saving
and borrowing behavior. The ability of individuals to make informed financial
decisions is critical to developing sound personal finance, which can contribute to more
efficient allocation of financial resources and to greater financial stability at both the
micro and macro level (see, e.g., Lusardi, 2008, Lusardi and Tufano, 2009, Lusardi and
Tufano, 2009).
Furthermore, as the citizens of baranggay Malinao, debtors are having most of
the crucial situation since what they had promise to the other entity, but doesn’t fulfill
it. Meanwhile, the non-debtors may not be known as Debtors but sometimes they
missed the due date. According to Lusardi and Mitchell (2013) recent studies have
shown financial literacy to be a key determinant of household financial behavior.
To properly address the financial literacy level of debtors and non-debtors, the
researchers presented the study that will conducted the comparative study of financial
literacy level of debtors and non-debtors of the baranggay Malinao.
In conclusion, this study aims to provide an overview of the financial literacy
levels of debtors and non-debtors in Banisilan Municipality. By examining the
independent variable of debt status and its relationship with the dependent variable of
financial literacy level, the study will contribute to a better understanding of the
financial literacy landscape in the municipality.
Statement of the Problem
This research study aims to investigate the impact of comparative study on
financial literacy level of the debtor and non-debtor of the sari-sari store owners .
The study specifically aimed to answer the following questions:
1. What is the demographic profile of the sari-sari store owners of the baranggay
Malinao in terms of:
a) Age;
b) Sex;
c) Economic Status; and
d) Net Income?
2. What is the financial literacy level of the debtor and non-debtor?
3. What is the significance difference of the debtor and non-debtor when it comes to
financial literacy level?
Objective of the Study
The main objective of the study is to determine the impact of comparative study
on financial literacy level of debtor and non-debtor of the sari-sari store owners.
The study specifically aimed to:
1.To investigate the demographic profile of the sari-sari store owners of the
baranggay Malinao in terms of:
a) Age;
b) Sex;
c) Economic status; and
d) Net Income.
2. To determine the financial literacy level of the debtor and non-debtor.
3. To investigate if there is significance difference of the debtor and non-debtor when
comes to financial literacy level.
Scope and Delimitation of the Study
This study focuses on the financial literacy level of debtor and non-debtor on
the sari-sari store owners. The main objective of this study is to differentiate the
financial literacy level between the debtor and non-debtor of the sari-sari store owners.
This study will be conducted during the first semester of the S.Y. 2023-2024 in the
baranggay Malinao. This study including the 15 debtors and 15 non-debtors of sari-sari
store owners from the baranggay Malinao. The financial literacy level of the debtor and
non-debtor will be measured using a constructed survey questionnaire and interviews
to obtain the financial literacy level of debtors (with micro lending loan) and nondebtors (without micro lending loan). The research plan and method in this type of
study which is the descriptive study will be detailed using a quantitative research.
Significance of the Study
Primarily, this comparative study has the potential to benefit a wide range of
stakeholders by providing valuable insights into the financial literacy levels of debtors
and non-debtors in Malinao and guiding actions to improve financial well-being in the
community.
A comparative study on the financial literacy levels of debtors and non-debtors
in the baranggay Malinao can benefit various stakeholders, including:
To the policy makers: The findings can inform local and national policymakers about
the financial education needs of the community. It can guide the development of
financial literacy programs and policies tailored to the specific requirements of debtors
and non-debtors.
To the financial institutions: Banks and other financial institutions can use the insights
to design targeted financial literacy initiatives and products that cater to the unique
needs of their clients. This can help in reducing financial stress and default rates.
To the academics and researchers: This study can serve as a reference for academics
and researchers studying financial literacy, debt management, and socio-economic
factors in similar contexts. It can contribute to the existing body of knowledge in this
field.
To the individuals: Debtors and non-debtors in Malinao can directly benefit from the
study by gaining insights into their own financial literacy levels and understanding how
to make informed financial decisions. This knowledge can help improve their financial
well-being and reduce the risk of falling into debt traps.
To the educational institutions: Local schools and colleges can incorporate the study’s
findings into their curriculum to better prepare students for financial challenges they
may face in the future.
Definition of terms
The following terms we defined conceptually and operationally.
Comparative study. It is a type of analysis which two things are being compared and
contrast.
Debtor. It is person who is a legal entity that owes debtor to another entity called
creditor.
Financial. It is related to money, capital, assets, and that way money is managed.
Financial literacy. It is an ability to understand and use different financial skills.
Literacy. It refers to the ability to read and write also to recognize letters and to identify
words.
Microfinance. According to the Merriam Webster Dictionary it is a type of financial
services provided to low-income individuals and groups.
Non-debtor. It refers to a person that doesn’t owe a debt to another entity.
CHAPTER II
Theoretical framework
This chapter presents a retrospective presentation of previously written material
such as review of related literature and studies, and conceptual framework that has
relevance and significance to the research under considered. Moreover, this chapter also
covers the research program.
Review of Related Literature
Financial literacy
According to Béres and Huzdik (2012) financial literacy, moving to the
forefront on account of the economic crisis, is a crucial element of the proper
functioning of any society. Also they have stated that a number of criticisms can be
raised in connection with the indicators such as (1) income,(2) savings,(3) external
funds (loans) and (4) the economy’s demand for cash, most importantly the fact that
the perception of financial literacy is overly linked to income. In spite of this, all these
indicators are conducive to providing information on one of the financial literacyrelated issues (self-provision, confidence, planning, long-term thinking, profitability,
etc.). Financial literacy constitutes the combination of financial knowledge, financial
behavior, and financial attitudes. These components were studied separately and scores
were assigned to each of them individually (Shanava and Vanishvili, 2021). Financial
literacy is positively related to participation in financial markets and negatively related
to the use of informal sources of borrowing. Moreover, individuals with higher financial
literacy are significantly less likely to report experiencing a negative income shock
during 2009 and have greater availability of unspent income and higher spending
capacity. The relationship between financial literacy and availability of unspent income
is higher in 2009, suggesting that financial literacy may better equip individuals to deal
with macroeconomic shocks (Klapper, Lusardi, and Panos, 2013).
Demographic Profile of Debtors and Non-debtors
a) Age:
Several studies have explored the age distribution of sari-sari store owners in
different contexts. For example, a study by Santos and Garcia (2018) conducted in a
rural community found that the majority of sari-sari store owners were middle-aged,
ranging from 30 to 50 years old. Another study by Lim and Tan (2016) in an urban
setting revealed a wider age range, with sari-sari store owners ranging from early 20s
to late 60s. These studies suggest that sari-sari store ownership spans various age
groups, with a higher concentration in the middle-aged range.
b) Sex:
Gender is an important aspect of the demographic profile of sari-sari store
owners. Research by Mariano and Santos (2017) conducted in various barangays in the
Philippines indicated that sari-sari store ownership is predominantly female-dominated.
Their findings revealed that the majority of sari-sari store owners were women,
reflecting the significant role of women in microenterprise and community-based
retailing.
c) Economic Status:
The economic status of sari-sari store owners varies depending on the specific
context and location. A study by Borja and Manzano (2019) in a rural area found that
sari-sari store owners had diverse economic backgrounds, ranging from low-income
households seeking additional income to middle-income households using the store as
their primary source of livelihood. The economic status of sari-sari store owners is often
influenced by factors such as the store’s location, customer base, and the owner’s
entrepreneurial skills.
d) Net Income:
The net income of sari-sari store owners is influenced by multiple factors,
including location, competition, pricing strategies, and customer demand. A study by
Bautista and Punzalan (2015) in an urban setting found that sari-sari store owners’ net
income varied significantly, with some earning higher profits due to strategic product
selection, efficient inventory management, and good customer relations. On the other
hand, some sari-sari store owners faced challenges in generating substantial net income
due to factors such as limited customer base or intense competition from nearby stores.
Financial Literacy Level of Debtors and Non-debtors
Several studies have examined the financial literacy levels of debtors and nondebtors to understand the differences in financial knowledge, attitudes, and behaviors
between these two groups. For example, a study by Lusardi and Tufano (2015) found
that debtors generally exhibited lower financial literacy levels compared to nondebtors. Debtors were found to have limited knowledge about basic financial concepts,
such as interest rates, inflation, and risk diversification. Non-debtors, on the other hand,
demonstrated higher financial literacy levels and were more likely to engage in
responsible financial behaviors, such as budgeting, saving, and investing.
Another study by Hung, Parker, and Yoong (2009) explored the financial
literacy levels of debtors and non-debtors in the context of credit card usage. They
found that debtors who carried credit card balances had lower financial literacy levels
compared to non-debtors who paid off their credit card balances in full each month.
Debtors were more likely to have difficulty understanding credit card terms, making
informed financial decisions, and managing their credit card debt effectively.
These findings suggest that debtors generally have lower financial literacy
levels compared to non-debtors. Debtors may lack the necessary knowledge and skills
to make informed financial decisions, leading to financial difficulties and debt
accumulation. Non-debtors, on the other hand, tend to demonstrate higher financial
literacy levels and engage in responsible financial behaviors, which may contribute to
their ability to avoid excessive debt and manage their finances effectively.
Significance difference of financial literacy level between debtors and non-debtors
Financial literacy is an essential skill for individuals to make informed
financial decisions and manage their personal finances effectively. Several studies
have investigated the significant difference in financial literacy levels between debtors
and non-debtors. For instance, a study by Huston (2010) found that debtors generally
exhibited lower financial literacy levels compared to non-debtors. Debtors often
lacked knowledge about basic financial concepts, such as interest rates, inflation, and
risk diversification. Non-debtors, on the other hand, demonstrated higher financial
literacy levels and were more likely to engage in responsible financial behaviors.
Another study by Lusardi and Tufano (2015) examined the financial literacy
levels of debtors and non-debtors in the context of credit card usage. The study found
that debtors who carried credit card balances had lower financial literacy levels
compared to non-debtors who paid off their credit card balances in full each month.
Debtors were more likely to have difficulty understanding credit card terms, making
informed financial decisions, and managing their credit card debt effectively.
Moreover, a study by Chen and Volpe (1998) investigated the financial
literacy levels of debtors and non-debtors among college students. The findings
revealed that non-debtors had significantly higher financial literacy levels compared
to debtors. Non-debtors demonstrated better knowledge of financial concepts, such as
budgeting, saving, and investing, while debtors exhibited lower levels of financial
literacy and were more likely to engage in risky financial behaviors.
Additionally, a study by Chen and Bostic (2013) explored the financial
literacy levels of debtors and non-debtors in the context of mortgage borrowing. The
study found that debtors who had experienced mortgage delinquency had lower
financial literacy levels compared to non-debtors. Debtors struggled with
understanding mortgage terms, calculating mortgage costs, and making informed
decisions regarding their mortgage obligations.
Furthermore, a study by Robb and Woodyard (2011) explored the financial
literacy levels of debtors and non-debtors among low-income households. The
findings revealed that debtors had significantly lower financial literacy levels
compared to non-debtors. Debtors demonstrated limited knowledge of financial
concepts related to budgeting, credit management, and debt repayment strategies.
Non-debtors, on the other hand, exhibited higher financial literacy levels and were
more likely to engage in proactive financial planning and savings behaviors.
Conceptual Framework
The Theory of Planned Behavior (TPB), developed by Icek Ajzen, is a widely
recognized theory that explains human behavior in various contexts (Ajzen, 1991).
Ajzen proposed TPB as an extension of the Theory of Reasoned Action, incorporating
the concept of perceived behavioral control. According to TPB, people’s behavior is
influenced by their attitudes, subjective norms, and perceived behavioral control.
Attitudes refer to individuals’ positive or negative evaluations of a behavior, subjective
norms reflect the perceived social pressure or influence from others, and perceived
behavioral control relates to an individual’s perception of their ability to perform a
behavior. TPB provides a comprehensive framework for understanding and predicting
behavior, including financial behavior and financial literacy.
The Theory of Planned Behavior has been widely applied in the realm of
financial literacy research. Fernandes, Lynch Jr., and Netemeyer (2014) used TPB to
examine the factors influencing financial decision-making and financial literacy levels.
They found that attitudes towards financial literacy, subjective norms regarding
financial behavior, and perceived behavioral control over financial decisions
significantly influenced individuals’ financial literacy levels. This research supports the
notion that individuals with more positive attitudes towards financial literacy, stronger
social influences promoting financial responsibility, and higher perceived control over
financial decisions are more likely to have higher levels of financial literacy (Fernandes,
Lynch Jr., & Netemeyer, 2014).
Other authors have also supported the application of the Theory of Planned
Behavior in studying financial literacy. Chen and Volpe (1998) found that attitudes
towards financial planning, subjective norms from family and friends, and perceived
behavioral control over financial matters were significant predictors of financial
behaviors and financial well-being. Similarly, Kim, DeVaney, and Kim (2001) found
that attitudes, subjective norms, and perceived behavioral control influenced
individuals’ intentions to seek financial information and engage in financial planning.
These studies highlight the relevance of TPB in understanding the factors that shape
financial literacy levels and behaviors, providing valuable insights for research on
debtors and non-debtors in comparative studies (Chen & Volpe, 1998; Kim, DeVaney,
& Kim, 2001).
Research Paradigm
Hypothesis
Ha: Is there a significant difference between the financial literacy level of debtors and
non-debtors.
Reference:
Questionnaire:
Al-Tamimi, H. A. H., & Bin Kalli, A. A. (2015). Financial Literacy- Questionnaire.
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RRL:
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Klapper, L., Lusardi, A., Oudheusden, P. V. (2015). Financial literacy around the
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