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LOAN SERVICING OF GOVERNMENT SERVICE INSURANCE SYSTEM AND

THE PERCEIVED SATISFACTION OF THE SELECTED PUBLIC SCHOOL

TEACHERS AND EMPLOYEES

Ilagan, Jhenny Ros A.


Ong, Elaiza Camille S.
Salanda, Haile G.

Southern Luzon State University


College of Business Administration
Lucban, Quezon
Chapter 1
INTRODUCTION

The importance of money has become so significant for live, that you

could not survive without it. It has become an essential commodity that helps

you run your life. Without money you will not be able to buy food, clothes and

shelter which happen to be the basic need of every individual. Money plays a

vital role especially in the business world for such reason that it serve as a

medium of exchange and standard of material. Exchanging goods for goods is an

older practice and without any money, you cannot buy anything you wish. Money

has gained its value because people are trying to save wealth for their future

needs.

But with the way our economy is performing right now it will be hard for the

community to save even a single penny, especially those whose earnings is just

enough to reimburse their daily needs. So if ever the time comes that they

encounter misfortunes they will be left with no other choice but to borrow money.

This kind of circumstances gives birth to the establishment of lending institutions

were an individual borrows money to be compensated for a long period of time

with n agreed rate of interest.

And to respond with that condition the government launched a publicly

owned lending institution named Government Service Insurance System where

public employees and teachers were given loan options in case of calamities with

favorable rate of interest.


The researchers are aware of the importance of an effective loan servicing

to the satisfaction of every loan holder. Effective and efficient loan servicing can

lead to a strong borrower-lender relationship. Furthermore, it helps the

researchers to be familiarized with different loan services of lending institution.

The researchers were driven to choose the selected members of the

Government Service Insurance System-Lucena as their main subject so that they

will have insights about their perceived satisfaction on the loan servicing of GSIS-

Lucena. By performing this study, the researchers will be able to discover and

convey awareness and information to be accomplished in the near future.

Statement of the Problem

This study is conducted to evaluate the loan servicing of GSIS as

perceived by their members.

Specifically, it sought to answer the following questions:

1. What is the profile of GSIS – Lucena in terms of:


a. Historical Background
b. Organizational Structure
c. Technical Structure

2. What is the respondent’s profile in terms of:


a. Age
b. Civil Status
c. Loan availment history

3. What is the perception of members on the loan servicing of GSIS-Lucena

in terms of:
a. Receiving requirements
b. Terms and conditions
c. Processing
4. What are the problems encountered by the respondents on GSIS-Lucena
loans servicing?

Significance of the Study

A survey test conducted in the public schools’ employees reveals findings

that will be beneficial in different group of people.

Company- This study discloses new ideas and findings for the company

for the essence of understanding their members’ perception on their loans

management practices. Furthermore, it helps GISG to innovate existing

policies/practices to accomplish loan portfolio. It will also help GSIS achieve

social awareness by giving satisfaction to the members.

Members- This study helps the members present their feedback on GSIS

efficiency by responding the questions provided by the researchers. It will also

specify frequently encountered by the members.

Financial Market- This will help strengthen the financial market by

providing guidelines on financial institutions to develop their loan management

practices and sustain a total quality management considering customers point of

view. Lastly, it can help them reach more their financial awareness on the

importance of customers in their operations.

Students- This will be beneficial to those students who are in need of

preferences regarding the evaluation on loan management practices of a

company. It can add knowledge on the study they’re conducting with.


Researchers- More importantly, it will allow the researchers relate and

perform their awareness and insights on the study. Also, this study tests the

cooperation and prospective of the researchers. It will also add additional

knowledge on their major subject, financial management.

Scope and Limitation

This study primarily concerns with the perceived satisfaction of the

selected members of the GSIS-Lucena by evaluating the members’ perception

on the loan servicing of GSIS-Lucena.

It is restricted to GSIS Lucena members of the employees and teachers

on selected public schools in Lucena. The data used in the study is collected by

using a planned survey schedule guided by structural questionnaires. The

treatment of the problems presented in the study was able to be completed with

the answers at the best ability of the researchers.

This study is limited only on the loan servicing that were provided

Government Services and Insurances System-Lucena. Similarly, the loan

servicing would be limited on the different loans offered by GSIS-Lucena. Lastly it

is also limited by the frequent problems that are encountered by the members of

the Government Service Insurance System-Lucena.

Definition of Terms

To make certain of the better understanding of the study, the following

words are defined as they are used in the study.


Commodity- A basic good used in commerce that is interchangeable with other

commodities of the same type.

Community- usually refers to a social unit larger than a small village that shares

common values.

GSIS- Government Service Insurance System

Lending Institutions- Organization such as a bank, credit union, or finance

company that makes loans.

Loan serving- is the process by which a mortgage bank or subservicing firm

collects the timely payment of interest and principal from borrowers.

Money- is any object or record that is generally accepted as payment for goods

and services and repayment of debts in a given socio-economic context

or country.

CHAPTER II

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter discusses the related literature and the studies for better

understanding of the study. The researchers were able to gather significant

information from internet, books, unpbulished thesis and other reading materals,
which served as basis for the study. It also includes the research paradigm and

conceptual framework.

Finance- According to InvestionWord, finance is a branch

of economics concerned with resource allocation as well

as resource management, acquisition and investment.Simply, finance deals with

matters related to money and the markets.

Financial Institution- According to Wikipedia, financial institution is

an institution that provides financial services for its clients or members. Probably

the most important financial service provided by financial institutions is acting

as financial intermediaries. Most financial institutions areregulated by

the government.

Broadly speaking, there are three major types of financial institutions: Depositary

Institutions : Deposit-taking institutions that accept and manage deposits and

make loans, including banks, building societies, credit unions, trust companies,

and mortgage loan companies

1. Contractual Institutions : Insurance companies and pension funds; and

2. Investment Institutes : Investment Banks, underwriters, brokerage firms.

Credit– Burrow (2010), stated that credit is the privilege of using someone else

money for a period of time. That privilege is based on the belief that the person

receiving credit will honor a promise to repay the amount owed at a future date.

The credit transaction creates a debtor and a creditor. Anyone who buys a credit
or receives a loan is known as a debtor. The one who sells on credit or makes a

loan is called the creditor.

Although the credit system uses forms and legal documents, it also

depends on trust between the debtor and creditor. Trust means that the creditor

believes that the debtor will honor the promise to pay later for goods and services

that have been received and used.

Bases of credit – According to Hubpages, The word "credit" has been derived

from a Latin word creditum. It meanstrust. Credit refers to the ability to acquire

something of value like goods, services, money, or securities at the present time

in return for a promise to pay at a certain future time. It involves risks. The

possibility that the borrower can not fulfill his promise due to circumstances

beyond his control always exists.

In granting credit to borrowers, there are bases in evaluating their ability to pay

and willingness to pay:

Character. This refers to the personal integrity of the borrower. His determination

to pay can be evaluated by his past business record. Character also includes

personal habits, attitudes, or vices of the borrower.

Capacity. This has something to do with the managerial ability of the borrower.

Could he use wisely and efficiently his loan? Factors like responsibility, maturity

and business competence of the borrower determine his capacity to pay.


Capital. This refers to the resources owned by the borrower such as priorities.

With such properties, the ability of the borrower to obtain credit has become

greater.

Collateral. Usually, the title of the land is required as a security of the loan. This is

a safety measure for the payment of the loan. Buildings, machines and other

valuable properties are used as collaterals.

Condition. Conditions in the community, industry, or the whole economy affect the

ability of borrowers to pay their loans.

Loans- According to Wikipedia, a loan is a debt evidenced by a note which

specifies, among other things, the principal amount, interest rate, and date of

repayment. A loan entails the reallocation of the subject asset(s) for a period of

time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows an amount of money, called

the principal, from the lender, and is obligated to pay back or repay an equal

amount of money to the lender at a later time. Typically, the money is paid back

in regular installments, or partial repayments; in anannuity, each installment is

the same amount.

The loan is generally provided at a cost, referred to as interest on the debt, which

provides an incentive for the lender to engage in the loan. In a legal loan, each of

these obligations and restrictions is enforced by contract, which can also place

the borrower under additional restrictions known as loan covenants. Although this

article focuses on monetary loans, in practice any material object might be lent.
Loan Agreement- According to Outlaw, A loan agreement is the document in

which a lender – usually a bank or other financial institution – sets out the terms

and conditions under which it is prepared to make a loan available to a borrower.

Loan agreements are often referred to by their more technical name, "facilities

agreements" - a loan is a banking "facility" offered by the lender to its customer.

This guide concentrates on the most common terms of a facilities agreement.

A facilities agreement can be divided into four sections:

 The interpretation/definitions section – defines some of the terms which

will be used elsewhere in the document;

 The mechanical section – sets out the operational terms of the agreement

such as the amount being borrowed, repayment schedule and interest. This is

the section which the finance director or treasury team of the borrower will pay

considerable attention to;

 The transaction-specific section – contains the terms and conditions of the

agreement including what each party must provide, their responsibilities to each

other, what happens if the borrower defaults on the loan and the extent to which

the parties to the agreement may change. This is the section which the lender

and borrower will spend most time negotiating;

 The boilerplate section – relatively standard clauses setting out the

contract details of the parties, the relationship between the finance parties if there

is more than one tender and law which governs the agreement.
Obligation- According to Wikipedia, An obligation is a course of action that

someone is required to take, whether legal or moral. There are also obligations in

other normative contexts, such as obligations of etiquette, social obligations, and

possibly in terms of politics, where obligations are requirements which must be

fulfilled. These are generally legal obligations, which can incur a penalty for non-

fulfilment, although certain people are obliged to carry out certain actions for

other reasons as well, whether as a tradition or for social reasons.

Contract- According to Wikipedia, A contract is an agreement having a lawful

object entered into voluntarily by two or more parties, each of whom intends to

create one or more legal obligations between or among them. The elements of a

contract are "offer" and "acceptance" by "competent persons" having legal

capacity who exchange "consideration" to create "mutuality of obligation.

Proof of some or all of these elements may be done in writing, though contracts

may be made entirely orally or by conduct. The remedy for breach of contract

can be "damages" in the form of compensation of money or specific

performance enforced through an injunction. Both of these remedies award the

party at loss the "benefit of the bargain" or expectation damages, which are

greater than mere reliance damages, as in promissory estoppel. The parties may

be natural persons or juristic persons. A contract is a legally enforceable promise

or undertaking that something will or will not occur. The word promise can be

used as a legal synonym for contract, although care is required as a promise

may not have the full standing of a contract, as when it is an agreement

without consideration.
Requirement of a Valid Contract- According to Jentz (2010), There are

generally six requirements of a valid contract:

1. Agreement- which requires offer and acceptance.

2. Considerations- money.

3. Capacity to contract- Must not be minor, insane or intoxicated.

4. Genuineness of Assent- intention of both parties when contract was

entered into.

5. Lawful purpose- must be for legal use in order to be a valid contract or

enforceable contract.

6. Lawful Form- if the law requires it to be in writing it must be. Statue of

Frauds requires that all Real Estate contracts with the exception of a

residential lease lasting less then 3 years must be in writing.

Only after all these requirements have been met can a contract be

deemed valid and legally enforceable.

A meeting of the minds is the most important aspect.

In some cases the court can infer contract terms if they determine that

there was a contract. The two key items are the Who and What.

Who - The names of the parties.

What - The obligations of the parties. How much, when and what is the

price.
Interest Rates- Mejorada (2001) stated that, interst rate is a rate which

is charged or paid for the use of money. An interest rate is often expressed as

an annual percentage of the principal. It is calculated by dividing the amount of

interest by the amount of principal. Interest rates often change as

a result of inflation and Federal Reserve Board policies.

From a consumer's perspective, the interest rate is expressed as annual

percentage yield (APY) when the interested is earned, for example, from

a savings account or a certificate of deposit. When the interest is paid, for

example, for a credit card, a mortgage, or a loan, the interest rate is expressed

as annual percentage rate (APR).

Perception- According to Wikipedia, perception is the organization, identification

and interpretation of sensory information in order to represent and understand

the environment. All perception involves signals in the nervous system, which in

turn result from physical stimulation of the sense organs.Perception is not the

passive receipt of these signals, but can be shaped

by learning, memory and expectation. Perception involves these "top-down"

effects as well as the "bottom-up" process of processing sensory input. [4]The

"bottom-up" processing is basically low-level information that's used to build up

higher-level information (i.e. - shapes for object recognition). The "top-down"

processing refers to a person's concept and expectations (knowledge) that

influence perception. Perception depends on complex functions of the nervous

system, but subjectively seems mostly effortless because this processing

happens outside conscious awareness


Public Schools- According to Wikipedia, public schools generally refer to

primary or secondary schoolsmandated for or offered to all children by

the government, whether national, regional, or local, provided by an institution of

civil government, and paid for, in whole or in part, by public funding from taxation.

The term may also refer to institutions of post-secondary education funded, in

whole or in part, and overseen by government.

Members- According to Wikipedia, A member is a person who belongs to

a social group or an entity such as a company or nation. By extension it can refer

to any part of a whole.

Independent Variable

I. Company Profile

a. Historical
Background

b. Organizational
Structure
Research Paradigm

c. Technical Structure

II. Respondent’s Profile

III. Loan Servicing in terms


of:

a. Receiving Dependent Variable


Documents
Members perception on the
b. Terms and Loan Servicing of GSIS-
Conditions Lucena

c. Processing
Intervening Variable

Problems encountered by GSIS-


Lucena members

Conceptual Framework:

The researchers were able to divide the research paradigm into

independent and dependent variables.

The independent variable used in the study are the company profile, loan

servicing, and the respondent’s profile. Company profile touched the historical
background, organizational structure and technical structure. Loan servicing

comprises the receiving of documents, terms and conditions and processsing.

The model considers the members perception on the loan servicing of GSIS-

Lucena as dependent variable. This is a total evaluation on the loan servicing

implemented by GSIS-Lucena considering their previous experiences. In

addition, problems encountered are considered to be the intervening variable.

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