&ldquo;Bombay&rdquo; High Interest Loan Rates and the Trapping of Micro-Entrepreneurs to the Debt Cycle: A Case in Selected Barangays in Zamboanga City

Hennessy  Alcaire,; Aprileen Mae  Canoy,

“Bombay” High Interest Loan Rates and the Trapping of Micro-Entrepreneurs to the Debt Cycle: A Case in Selected Barangays in Zamboanga City

Discipline: social sciences (non-specific)

Abstract:

Bombay loaning has been one of the solutions on how microentrepreneurs can fund their business when they are faced with financial conflicts such as insufficient capital for their business operation, investment for business expansion or even for their own daily household expenses. However, Bombay loans are also known for their implemented high-interest rate loans that can possibly make micro-entrepreneurs be trapped into a debt cycle, where these people pay their loans by acquiring debts from their other financial sources. This study examined the Bombay highinterest rate loans and the trapping of micro-entrepreneurs in the cycle of debt in selected different Barangays in Zamboanga City namely Baliwasan, San Jose Gusu, Talon-talon and Mampang. The researchers utilized survey questionnaire. Regarding the reasons micro-entrepreneurs borrow from “Bombay” lenders, the study found that they primarily use these loans as working capital for business operations. The respondents also indicated a strong reliance on Bombay loans, citing the convenience of loan transactions as a key factor. However, the study further revealed that micro-entrepreneurs who already have other outstanding debts tend to depend more heavily on Bombay loans as a source of financial capital. The findings show a significant relationship between availing Bombay loans and the number of debts incurred by micro-entrepreneurs, suggesting that their level of indebtedness may be associated with their use of these loans. Overall, the results of the study suggest that borrowing from Bombay lenders may contribute to trapping micro-entrepreneurs in a cycle of debt.

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