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Original Article | Open Access | Int. J. Manag. Account. 2024; 6(4), 85-98 | doi: 10.34104/ijma.024.085098

Reasons, Effects, and Challenges of Loans: Input to Financial Literacy Enhancement

Nelvie Grace P. Flamiano* Mail Img Orcid Img

Abstract

Teachers shape societys future by educating next generation despite countless challenges, especially in finances. This study explored the reasons why teachers apply for loans, the effects of obtaining multiple loans on financial management practices, challenges associated with teachers experiences in accessing and utilizing loans, and proposed input for financial literacy enhancement. Snowballing sampling technique was used in identifying 20 elementary school teachers as participants in the District of Cuartero. Inclusion and exclusion criteria were used a basis for identifying participants. This was a basic qualitative study with a researcher-made interview guide as main research instrument in gathering data. Thematic analysis was used to analyze the data. Among the reasons why teachers applied for loans were financial obligations, household and personal expenses, and filial obligations. They used borrowed amount to pay previous loans, start a business, pay for education and medical expenses, build houses and repay their parents sacrifices. Obtaining multiple loans had negative and positive effects on individuals financial management practices. Positive effects identified were the improvement in credit score and financial flexibility. Negative effects included low net pay and falling into the debt trap. Identified challenges in accessing and utilizing loans were complex terms and conditions, repaying loans, processing loans, low net pay, and stress over financial problems.  Financial literacy denotes understanding and competence in managing money effectively. A financial literacy program was proposed as output by enhancing various financial concepts, facilitating implementation of effective debt management strategies, promotion entrepreneurship and turning into sustainable businesses and building institutional financial literacy workshops.

INTRODUCTION

Teachers shape societys future by dedicating themselves to educating the next generation despite the countless challenges that occur in their lives, especially when it comes to finances. Teachers stand as pillars of education and moral guidance. Beyond imparting knowledge, they served as mentors, caregivers and advocates for their students well-being. However, amidst their noble mission, a concerning trend has emerged, the burden of financial strain weighs heavily upon teachers. Indeed, Loandon loans among teachers are a trend, particularly here in the Philippines, where the availability of lending facilities proves them susceptible to borrowing money one after the other (Al Rahahleh, 2022).

In the Philippine context, multiple factors contributed to the problematic situation. The absence of comprehensive financial education in the national curriculum hinders teachers ability to effectively address the intricacies of personal finance (Egwuasi et al., 2020). Filipino public school teachers were considered second-class citizens among Philippine government workers, and are weighed down by huge debts, a fact acknowledged by the education department. Data showed that Filipino teachers now owe a total debt of at least PhP319 billion ($6.38 billion) to both public and private lenders, a huge jump from just PhP163 billion in 2017 (Gulf News Web Result, 2019).

As observed by the researcher, even with the implementation of the Salary Standardization Law, an increasing number of teachers are constantly searching for financial assistance and side hustles to meet their personal and professional needs, especially in times of emergency involving both their families and their schools, and particularly in light of the increasing cost of living. Due to this situation, more public school teachers have obtained multiple loans from various lending institutions as well as from private individuals. They often say, “Mapa-Loandon/ London naman ta!” without fully understanding the risks, terms, and implications, which result in undying loans, financial hardships, decreased quality of life, and increased stress. Financial strain can also negatively affect job satisfaction and potentially impair teachers overall performance. The phenomenon of "Loandon (Loan Dito, Loan Doon)" within the teaching community in Cuartero District is an intriguing, yet under-researched aspect of financial management among educators. Despite anecdotal evidence suggesting that teachers often resort to informal loans to navigate their financial challenges, a comprehensive examination of this trend is notably absent from scholarly discourse.

Likewise, the researcher looked into how the teachers perceive the implications of juggling multiple loans in the District of Cuartero, which is crucial for several reasons. Firstly, it sheds light on the intricate financial pressures faced by educators, which may extend beyond their salaries and benefits. Secondly, it underscores the necessity of tailored financial literacy initiatives to empower teachers with the knowledge and skills to manage their finances effectively. 

Moreover, the dearth of research on the challenges encountered by teachers in accessing and utilizing loans, specifically tailored to the districts unique context is a notable research gap. Delving into these challenges can unearth invaluable insights into the barriers that hinder teachers from accessing formal financial resources and may highlight areas where policy interventions or support mechanisms are needed. It is also essential to recognize that the impact of the "Loandon" trend transcends the active service phase of teachers careers. Retired educators in the District of Cuartero continue to grapple with financial a difficulty, which was also experienced by active teachers, especially the researcher, suggesting that the roots of this issue run deep and persist even beyond the tenure of individual teachers. By addressing these research gaps in financial management within the teaching community in the District of Cuartero, policymakers and stakeholders can develop targeted interventions and support systems to alleviate the financial burdens faced by educators. 

Anchored to the aforesaid condition, the researcher decided to explore the reasons why the Department of Education (DepEd) teachers in the District of Cuartero apply for loans. This also examined the effects of loans on their financial management practices, as well as the challenges in accessing and utilizing loans that could become the basis for input to the financial literacy enhancement of teachers.

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Article Info:

Academic Editor

Dr. Doaa Wafik Nada, Associate Professor, School of Business and Economics, Badr University in Cairo (BUC), Cairo, Egypt.

Received

July 1, 2024

Accepted

August 1, 2024

Published

August 10, 2024

Article DOI: 10.34104/ijma.024.085098

Coresponding author

Nelvie Grace P. Flamiano*

Teacher I, Maindang Elementary School, District of Cuartero, Capiz, Philippines.

Cite this article

Flamiano NGP. (2024). Reasons, effects, and challenges of loans: input to financial literacy enhancement, Int. J. Manag. Account. 6(4), 85-98. https://doi.org/10.34104/ijma.024.085098

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