St. Paul University Philippines Tuguegarao City, Cagayan 3500

St.
Paul University Philippines Tuguegarao City, Cagayan 3500 1
Financial Literacy Level of Smallholder Corn Farmers in
Tuguegarao City, Cagayan
__________________________
A Research
Presented to the Faculty of the
Graduate School
ST. PAUL UNIVERSITY PHILIPPINES
Tuguegarao City
__________________________
In Partial Fulfillment
Of the Requirements in MBA 202 – Advanced Financial
Management
________________________
by
Christian King S. Ilarde, CPA
January 2023
MBA Financial Literacy Level of Smallholder Corn Farmers in Tuguegarao City, Cagayan
St. Paul University Philippines Tuguegarao City, Cagayan 3500 2
Introduction
Farmers confront a distinct set of issues than their
bigger counterparts due to their inability to take advantage of
the same market benefits, such as customers giving them a low
price. The majority of these issues arise due to a lack of
support, training, and motivation. Due to a lack of innovative
production technology and improved farming skills, it is more
critical for our Filipino smallholder farmers to understand how
to manage their wealth and master the habit of taking out and
repaying loans. Therefore, farm management necessitates the
farmer to act as an entrepreneur. Farm finance is a crucial
input for agriculture; thus, financial literacy becomes
extremely important in ensuring the sustainability and
resiliency of their livelihoods (Ravikumar et al., 2013).
In 2020, Cagayan Valley Region consistently ranked first
among corn producers in the Philippines, providing roughly 23.39
percent of total corn production. Tuguegarao City, the regional
center of Cagayan Valley, is also a corn-producer area. Based on
the data of the City Agricultural Office of Tuguegarao, corn is
the top 1 agricultural product in the city, with a total corn
land area of 2,919.25 hectares. Philippine Crop Insurance
Corporation’s Registry System for Basic Sectors in Agriculture
in 2019 provided that the majority of the corn farmers are
smallholders with less than 2 hectares of operated land area.
Smallholdings may vary from country to country, but the Food and
Agricultural Organization (FAO) and Thapa and Gaiha (2011)
categorized farms under 2 hectares as small. Hence, corn farmers
need to be financially literate in order to efficiently,
harmlessly, and cost-effectively supply corn commodities
locally, regionally, and the whole country. Boekhold (2016)
highlighted that financial literacy is a critical component for
farmers to achieve significant increases in productivity,
revenue, profitability, and improved lifestyles. Zakic et al.
(2017) emphasized the continual training of farmers in the
fields of finances and records on holdings by state authorities,
in which scientific institutes and universities would be
engaged, and constant training of agricultural advisors is
essential.
According to The Organisation for Economic Co-Operation
and Development, financial literacy is “the combination of
awareness, knowledge, skill, attitude, and behavior required to
make financial decisions and ultimately achieve individual
financial well-being” (OECD, 2013, p.14). In the Philippines,
the majority of financial literacy assessments focused on the
general public, regardless of occupation. The respondents of
Financial Inclusion Survey in 2019 by Bangko Sentral ng
Pilipinas (BSP) were Filipinos fifteen-years-old and above while
the survey by World Bank in 2015 focused on adult financial
literacy. Few studies have focused on investigating local
farmers' financial literacy and respondents were irrespective of
crops cultivated. Furthermore, there exist some uncertainty and
conflicts on some factors affecting financial literacy. Safitri
(2021) concluded that age and income have no significant effect
on financial literacy level of farmers. However, Widhiyanto et
al. (2018), claimed that age and annual income significantly
influence financial literacy index. Tuguegarao City’s number one
agricultural commodity is corn. Hence, the corn farmers are the
best representative of the farmers’ population and the suitable
respondents in the study area. It is with these literature
findings that this paper measured the financial literacy of
smallholder corn farmers and investigated the factors affecting
their financial literacy in terms of socio-demographic profile.
Statement of the Problem:
This study attempted to assess the financial literacy
level of smallholder corn farmers in Tuguegarao City.
Specifically, the study aimed to answer the following research
questions:
1. What is the socio-demographic profile of the respondents
in terms of:
a. age
b. income per cropping
c. participation in financial trainings/programs
d. access to financial services
e. years in farming
2. What is the financial literacy level of the respondents
along:
a. financial knowledge
b. financial behavior
c. financial attitude
3. Is there a significant relationship between the overall
financial literacy level and socio-demographic profile?
Research Methodology
Research Design
This study used a quantitative research design employing a
descriptive research method.
Locale of the Study
The study was conducted among smallholder corn farmers in
Tuguegarao City, Cagayan.
Respondents of the Study
The study employed purposive sampling whereby corn farmers
with farm holdings devoted to corn production of 1-2 hectares
(smallholders) served as respondents of the study. A letter was
sent to the City Agricultural Office to request the list and
number of smallholder corn farmers in Tuguegarao City.
Among the 46 barangays in the city, 20 barangays are
agricultural areas. 136 farmers from the 12 barangays in the
said agricultural areas willingly participated in the study.
Research Instrument
A questionnaire comprising of two sections was used to
gather the data of the study. The first part consists of the
respondents' socio-demographic characteristics.
The second part consists of the core questions about
financial literacy, adapted from the standardized survey
instrument developed by the Organisation for Economic Co-
operation and Development- International Network on Financial
Education (OECD-INFE) in 2010. The financial literacy section
further consists of three subsections: financial knowledge,
behavior, and attitude.
The subsection for financial knowledge includes eight (8)
questions designed to test knowledge relating to finance, such
as calculating interest rates, compound interest rates, risk and
return evaluation and understanding of inflation and financial
diversification. The subsection for financial behavior captures
information about how respondents manage their money, including
household budgeting, saving, considered purchases, bill
payments, care about financial affairs, long-term financial
goals, and borrowing. Seven of the questions use a 5-point
Likert scale (1-never, 2-not often, 3-not very often, 4-often 5-
very often) and a question with multiple-choice, enabling people
to provide more information about the frequency of their
behavior.
Lastly, the subsection for financial attitude will gather
information on respondents' outlook toward financial matters. It
measured the respondent's perceptions about money, saving, and
spending using three-scaled attitudinal statements (1-strongly
agree, 2-agree, 3-uncertain, 4-disagree, 5-strongly disagree).
Data Gathering Procedures
Some of the questions in the research instrument were
modified, thus, it has undergone content validation from the
experts. Upon computation by the Statistician of the Content
Validation Index (CVI) of one (1), which means that the tool is
reliable, the Permission to Conduct the Study letter with the
revised paper was sent to the Office of the Vice President for
Academics for approval. Upon approval, the researchers went to
the identified barangays and oriented the respondents regarding
the study being conducted. The researchers assisted respondents
who were willing to participate in answering the questionnaire
through a structured interview. All responses in the
questionnaire were immediately checked, computed and tabulated.
Data Analysis
The data gathered was analyzed through descriptive and
inferential statistics. Descriptive statistics was used to
analyze the socio-demographic characteristics of the
respondents. For the financial literacy, the responses under
financial knowledge were scored with values of 1 for correct
answer and 0 for otherwise, under financial behavior, responses
was scored one if the respondents indicate high positive
behavior (scale of 4-5) towards financial well-being and zero
for otherwise, while the active saving question (multiple
choice) was scored 1 point for any type of active saving
(excluding letting money build up in a current account as this
is not active) and 0 in all other cases, under financial
attitude, responses were scored 1 point for respondents who put
themselves at 4 or 5 on the scale and 0 in all other cases.
Lastly, the overall financial literacy score was computed by
simply adding all the scores from the three core financial
literacy components. This study followed the interpretation of
the financial literacy level used by Ravikumar (2013), in which
the mean FL level - High (> 78.51), Medium (78.51 to 51.64), and
Low (< 51.64). For testing if there is a significant
relationship between the financial literacy and socio-
demographic profile, chi-square test was employed.
Results and Discussions:
Table 1: Socio-Demographic Profile of the Respondents
Socio-demographic Profile Variables Frequency Percentage
Age
30 years old and below 5 3.7
31-40 years old 23 16.9
41-50 years old 31 22.8
51-60 years old 39 28.7
61 years old and above 38 27.9
Total 136 100.0
Income Per Cropping
Below P10,000.00 13 9.6
P10,001.00-P20,000.00 34 25.0
P20,001.00-P40,000.00 50 36.8
More than P40,000.00 39 28.7
Total 136 100.0
Participation In Financial
Trainings/Programs
Yes 76 55.9
No 60 44.1
Total 136 100.0
Access To Financial Services
Savings account 9 6.6
Insurance 48 35.3
Existing Credit/Loan 0 0.00
More than 2 Financial Services 5 3.7
None 74 54.4
Total 136 100.0
Years In Farming
10 years and below 47 34.6
11-20 years 30 22.1
21-30 years 24 17.6
31-40 years 16 11.8
41-50 years 17 12.5
51 years and above 2 1.5
Total 136 100.0
Table 1 shows the distribution of smallholder corn farmers
in Tuguegarao City, Cagayan, based on their socio-demographic
profile. In terms of age, most respondents were 51-60 years old
(28.7%), while the least was 30 years old and below (3.7%). Most
of the farmers earn an income between P20,001.00-P40,000.00
(36.8%), and 27.8% of them earn more than P40, 000.00 per
cropping. Meanwhile, more than half (55.9%) of the corn farmers
participated in any financial training or programs. The majority
of the respondents have no access to financial services, with a
percentage of 54.4%. It also shows that the corn farmers have no
access to existing credit/loan and has only access either to
Insurance (35.3%), Savings Account (6.6%), or both (3.7%). About
34.6% of respondents have farming experience of 10 years and
below, while 30 out of 136 farmers (22.1%) are in the field
between the years of 11-20.
Table 2. Financial Literacy Level
Variables Mean Percentage Qualitative
Score Score Description
Financial Knowledge 4.51 56.43 Medium
Financial Behavior 5 62.59 Medium
Financial Attitude 1.95 64.95 Medium
Over-all Financial 11.47 60.37 Medium
Literacy
Table 2 presents the percentage score and qualitative
description of the financial literacy level of smallholder corn
farmers as well as its dimensions; financial knowledge,
financial behavior, and financial attitude in Tuguegarao City,
Cagayan. In general, corn farmers were found to have a medium
financial knowledge having a 56.43% percentage score. Similar to
financial behavior and attitude, respondents possessed an
average level with a percentage score of 62.59% and 64.95%,
respectively. Respondents of the study were also found to have a
medium overall measure of financial literacy level possessing
60.37%. Furthermore, the financial attitude component has the
largest share in the overall financial literacy.
Table 3. Test of Significant Relationship between Financial
Literacy Level and Socio-Demographic Profile
Socio-Demographic Profile x2 p- Description
Value value
Age 72.333 .132 Not
Significant
Income Per Cropping 69.867 .010 Significant
Participation In Financial 27.014 .028 Significant
Trainings/Programs
Access To Financial Services 41.655 .614 Not
Significant
Years In Farming 69.372 .662 Not
Significant
Contingency Table:
Financial Literacy Value p-value Remarks
Level
Income Per Cropping .583 .010 moderate positive
association between
income per cropping
and financial literacy
level
Participation In .407 .028 moderate positive
Financial association between
Trainings/Programs participation in
financial
trainings/programs and
financial literacy
level
Summarized in Table 3 is the test of relationship between
the financial literacy level and socio-demographic profile using
chi-square test. Among the five (5) independent variables
investigated in this study, only two were found to have
significant relationship with the overall financial literacy
level, namely, income per cropping and participation in
financial training/programs. The income per cropping showed a
moderate positive relationship with the overall financial
literacy level with a p-value of 0.010. Likewise, the
participation in financial training/programs, having a p-value
of 0.028, has a moderate positive relationship with the
financial literacy level of corn farmers. On the other hand,
age, access to financial services, and years in farming were not
significantly related to overall financial literacy level.
Summary of Findings:
Socio-Demographics Profile of Smallholder Farmers
The study measured the financial literacy of smallholder
corn farmers in Tuguegarao City, Cagayan.
Looking at the age of the farmers, results revealed that
the majority of respondents were aged 51-60 years old. This
shows that older farmers who are close to retirement age and
will soon join the ranks of senior citizens dominates corn
farming in Tuguegarao. This result was similar to the survey
conducted by the Philippine Statistics Authority (PSA) in 2014
entitled, Costs and Returns of Corn Production, wherein ages
belonging 51-60 years comprised the biggest proportions of corn
farmers. On the other hand, the least respondents were aged 30
years old and below (3.7%), which is also supported by the
survey of PSA in 2014, only 1.51 percent were aged less than 31
years old.
Corn farmers’ income are identified usually on a per
cropping/harvest basis. Most of the farmers earn a profit
between P20,001.00 - P40,000.00 This pattern is in line with the
average P36,101.00 gross returns per hectare of corn production
in the Philippines reported by PSA in 2015. Despite this
majority, farm income, particularly corn, can be both irregular
and unpredictable since Philippines is frequently hit by
typhoons and corn prices are unstable. In Tuguegarao, a day or
two of heavy rains instantly causes farmlands to be flooded. As
a result, it causes damage to crops, decreasing productivity
(Israel, 2013) and causing income loss.
The results showed that the majority of the smallholder
corn farmers participated in the financial training or programs
of the government. This indicates that most farmers have access
to financial training in the study area and want to have better
financial management. Similarly, Ntakyo et al. (2021) find that
farmers believed that financial training was beneficial since it
motivated them to increase savings and access to credit; they
gained knowledge and skills in financial planning, budgeting,
and management. Moreover, Mian (2014) showed that training aims
at helping them become more aware of financial risks and
opportunities, to make informed decisions, and improve their
financial well-being.
Most of the respondents have no access to financial
services and have no access to existing bank credit/loans. Due
to the complexity of obtaining financial services and lack of
understanding of many financial terminologies, such as interest
rate, treasury bills, fixed deposit, and many others (Andoh et
al., 2015), a person with limited financial literacy may find it
burdensome to use financial services like holding savings
accounts, using credit, and trading stocks (Twumasi et al.,
2019). This is in line with the findings of Demirgüç-Kunt et al.
(2017), where around two-billion adults remain excluded from the
financial system. The result also showed that the respondents
have only access to either Insurance, Savings accounts, or both.
Relative to Safitri's (2021) study, farmers already know and
have or are currently using savings financial products. However,
the use of other financial service products is still relatively
small. Furthermore, he asserts that in managing finances, such
as borrowing, farmers tend to rely more on loans from friends
and family. Meanwhile, the farmers still can't comprehend other
financial products and services such as time deposits, current
accounts, and mobile banking products. Most of them still need
more information about these financial products.
According to the findings, most of the corn farmers are
new in the field having an experience of 10 years and below or
11-20 years. This demonstrates that relatively new farmers are
leading corn farming in Tuguegarao. While older farmers dominate
corn farming in Tuguegarao, it’s uncommon to see that majority’s
farming experience is less than 10 years. This can show that
adults see farming as a retirement business. A similar
conclusion was reached by Mabiza (2013) where she stated that
smallholder farming sustained the lives of the elderly.
Meanwhile, PSA in 2014 highlighted that the biggest proportions
of corn farmers have also 11 to 20 years of experience. On the
contrary, the findings of Hashemi et al. (2011) stated that old
farmers have an average of 37 years in farming.
Financial Literacy Level of Smallholder Corn Farmers
The results showed that corn farmers have a medium
financial knowledge which implies that they have an average key
financial concepts and the ability to apply numeracy skills in
financial situations. Same also with financial behavior and
financial attitude, respondents possessed a medium level of
managing their money, including whether they consider carefully
if they can afford something, whether they typically pay bills
on time, if they report that they keep a close watch over their
finances and attitudes towards money, particularly towards
planning for the future.
It was also revealed that the corn farmers, in overall,
have a medium measure of financial literacy level. It is in line
with the result that smallholder corn farmers in the study area
possessed an average level of awareness, knowledge, skill,
attitude, and behavior required to make financial decisions and
ultimately achieve individual financial well-being. A similar
pattern of results was found in the studies of Santoso et al.
(2020) and Safitri (2021), in which they measured farmers'
financial literacy in Indonesia and discovered that farmers have
moderate financial literacy levels. Additionally, Ravikumar et
al. (2013) concluded that jasmine farmers in India have a medium
financial literacy index. On the contrary, Akoto et al. (2017)
found out that cocoa farmers in Ghana have low levels of
financial knowledge.
Results showed that financial attitude takes the largest
share in the overall financial literacy level. It shows that
most farmers indicated a higher positive attitude than positive
behaviors and financial knowledge scores. This result ties to
the findings Safitri (2021) which concluded that financial
attitude index is the largest contributor to the farmers'
financial literacy. However, this contradicts with the study of
Atkinson and Messy (2012) where financial behavior makes up a
large percentage in the financial literacy score. Furthermore,
they claimed knowledge and behavior should be weighted more
heavily than attitudes because these are key components in
financial literacy.
Meanwhile, according to the report presented by World Bank
Group entitled “Enhancing Financial Capability and Inclusion in
the Philippines - A Demand-side Assessment in 2015” stated that
on average, adult Filipinos were only able to answer 3.2 out of
7 financial literacy-related questions correctly while 77% were
able to perform simple divisions and about 50% knew how to
calculate simple interest and inflation, and understood the
purpose of insurance. Furthermore, adults Filipinos scored low
in behaviors related to budgeting but showed strengths in
planning for unexpected expenses.
Significant Relationship with Financial Literacy Level
The chi-square test revealed that income per cropping and
participation in financial training/programs have significant
relationship the financial literacy of corn farmers. Income per
cropping was found to have moderate positive association with
the overall financial literacy. This implies that farmers with
higher income tend to have higher financial literacy levels.
This is in line with the study of Agarwal et al. (2014) which
concluded that annual income has a strong association with
financial literacy. Furthermore, people with higher income were
more likely to show an interest in financial products including
bonds, credit, pensions, insurance, and those seen from a
business perspective (Firli, 2017).
Participation in financial training/programs were also
found to have moderate positive association with financial
literacy of farmers. This infers that farmers who participated
in trainings/programs had higher financial literacy levels. This
result was consistent with the findings of Ravikumar et al.
(2013), where farmers who participated in trainings tend to
schedule agricultural spending for the following season,
including input needs, land development costs, and irrigation
infrastructure construction. Additionally, Firli (2017) claimed
that people who have undergone financial training have greater
financial understanding and will make better decisions, making
them more financially literate.
On the other hand, inequality in opportunity may be
keeping people from becoming more financially literate.
Particularly low-income levels and a lack of financial training
involvement are linked to lower levels of financial literacy,
showing that some groups may already be excluded from
possibilities for learning and participation in activities that
might enhance their financial well-being (Atkinson & Messy,
2012).
The results of the test of significant relationship on the
financial literacy level when grouped according to socio-
demographic profile was also in line with conceptual framework
used in this study developed by Firli (2017) in which he came up
with several factors associated with financial literacy, such as
socio-demographic characteristics, particularly income per
cropping in this study as well as financial training.
CONCLUSION
The study concludes that corn farmers possessed a medium
financial literacy level. Furthermore, a significant positive
relationship exists between income per cropping, participation
in financial training/programs, and overall financial literacy.
Smallholder corn farmers with higher incomes and those who
participate in financial training tended to have higher
financial literacy.
RECOMMENDATION
In line with the results of the study, the researchers
would like to recommend the continuous implementation and
expansion of financial literacy training and programs. If
possible, make it more accessible to the corn farmers, like
conducting per barangay or cluster basis. The training may
include basic financial behaviors such as budgeting and money
management skills, debt reduction, credit management, and
financial goal setting such as increasing savings. Monitoring
and effectively implementing existing programs concerning
farmers' financial literacy and conducting ocular visits to
small-medium agricultural enterprises, forums, cooperatives, and
buying stations that will develop the literacy of the farmers is
also highly suggested. Additionally, we recommend making the
bank credit or loan accessible to the farmers. This can be done
through seminars or orientation explaining the opportunities
that the bank can offer awaiting them to maximize.
This study has a limited overview since respondents only
came from the northern part of Tuguegarao. Future research may
increase the sample size by including corn farmers up to the
southern portion of Tuguegarao, particularly until Nammabbalan
Sur. The researchers also suggest exploring other types of
farmers or include all kinds of farmers to obtain a more
holistic measure of financial literacy. It is also highly
recommended that future research identifies other variables that
may affect financial literacy, which may help in its further
improvement. The researchers recommend investigating the
relationship of financial literacy dimensions to examine how it
affects the overall measure of financial literacy. Likewise,
future researchers may examine the factors affecting the
farmers’ accessibility to bank credit and other financial
services.

St. Paul University Philippines Tuguegarao City, Cagayan 3500

Uploaded by

Copyright:

Available Formats

St. Paul University Philippines Tuguegarao City, Cagayan 3500

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

St. Paul University Philippines Tuguegarao City, Cagayan 3500

Uploaded by

Copyright:

Available Formats

St.

Paul University Philippines Tuguegarao City, Cagayan 3500 1

Financial Literacy Level of Smallholder Corn Farmers in

Tuguegarao City, Cagayan

Presented to the Faculty of the

ST. PAUL UNIVERSITY PHILIPPINES

Of the Requirements in MBA 202 – Advanced Financial

Christian King S. Ilarde, CPA

Farmers confront a distinct set of issues than their

bigger counterparts due to their inability to take advantage of

the same market benefits, such as customers giving them a low

price. The majority of these issues arise due to a lack of

support, training, and motivation. Due to a lack of innovative

production technology and improved farming skills, it is more

critical for our Filipino smallholder farmers to understand how

repaying loans. Therefore, farm management necessitates the

farmer to act as an entrepreneur. Farm finance is a crucial

input for agriculture; thus, financial literacy becomes

extremely important in ensuring the sustainability and

resiliency of their livelihoods (Ravikumar et al., 2013).

In 2020, Cagayan Valley Region consistently ranked first

among corn producers in the Philippines, providing roughly 23.39

percent of total corn production. Tuguegarao City, the regional

center of Cagayan Valley, is also a corn-producer area. Based on

the data of the City Agricultural Office of Tuguegarao, corn is

the top 1 agricultural product in the city, with a total corn

land area of 2,919.25 hectares. Philippine Crop Insurance

Corporation’s Registry System for Basic Sectors in Agriculture

in 2019 provided that the majority of the corn farmers are

smallholders with less than 2 hectares of operated land area.

Agricultural Organization (FAO) and Thapa and Gaiha (2011)

categorized farms under 2 hectares as small. Hence, corn farmers

need to be financially literate in order to efficiently,

harmlessly, and cost-effectively supply corn commodities

locally, regionally, and the whole country. Boekhold (2016)

highlighted that financial literacy is a critical component for

farmers to achieve significant increases in productivity,

revenue, profitability, and improved lifestyles. Zakic et al.

(2017) emphasized the continual training of farmers in the

fields of finances and records on holdings by state authorities,

in which scientific institutes and universities would be

engaged, and constant training of agricultural advisors is

According to The Organisation for Economic Co-Operation

and Development, financial literacy is “the combination of

awareness, knowledge, skill, attitude, and behavior required to

make financial decisions and ultimately achieve individual

financial well-being” (OECD, 2013, p.14). In the Philippines,

the majority of financial literacy assessments focused on the

general public, regardless of occupation. The respondents of

Financial Inclusion Survey in 2019 by Bangko Sentral ng

Pilipinas (BSP) were Filipinos fifteen-years-old and above while

the survey by World Bank in 2015 focused on adult financial

literacy. Few studies have focused on investigating local

farmers' financial literacy and respondents were irrespective of

crops cultivated. Furthermore, there exist some uncertainty and

conflicts on some factors affecting financial literacy. Safitri

(2021) concluded that age and income have no significant effect

on financial literacy level of farmers. However, Widhiyanto et

al. (2018), claimed that age and annual income significantly