The impact of financial intermediation on the growth of urban and rural microenterprises in the Philippines

Imelda T. Angeles1,2,*, Ma. Socorro Calara1, Allan De Guzman3

Author Affliations

1The Graduate School, University of Santo Tomas
2College of Commerce and Business Administration, University of Santo Tomas
3College of Education, University of Santo Tomas
*imelda.angeles@ust.edu.ph

Abstract

The growth of microenterprises has long been a question of great interest in the study of the social economy. As an alternative to unemployment, microenterprises is initiated to overcome poverty and unemployment. However, the growth of microenterprises is evident only with start-ups, the sustainability and expansion remain a challenge among developing countries. The study is an attempt to measure the impact of financial intermediation on the growth of urban and rural microenterprises in the Philippines. Five hundred eighty microenterprises participated in the study. The use of Partial Least Squares examined the moderating effect of the community-location on the relationship between financial intermediation and growth of microenterprises. The study revealed an adverse effect of community location on the relationship of financial intermediation suggesting that the isolation of urban microenterprise from external financing results to sustainability, while the reliance of rural microenterprises from external financing leads to survival instead of growth. The study has documented an in-depth understanding of why the growth of microenterprises in the Philippines is not achieved.