DETERMINANTS OF CREDIT MARKET CHOICES FOR URBAN LOW-INCOME HOUSEHOLDS, SAMPALOC MANILA

This study investigates the determinants influencing credit market choices among low-income urban households in Barangay 571, Sampaloc, Manila. Despite efforts to expand financial inclusion in the Philippines, many low-income households remain dependent on informal credit providers due to persistent structural and socioeconomic barriers. Using a cross-sectional primary data gathered through surveys from August to October 2025, this research analyzes three critical dimensions of household credit behavior: credit participation, access to formal credit, and the likelihood of facing credit constraints. Utilizing the theories of financial dualism, credit rationing, and social capital, the study employs probit regression to estimate how income, employment status, financial literacy, and asset ownership shape household borrowing decisions. Results show that low-income households exhibit high participation in the credit market, driven largely by insufficient income and vulnerability to financial shocks. However, access to formal credit remains limited, with many respondents reporting difficulties. Findings further indicate that informal lenders continue to fulfill essential credit needs, functioning as substitutes or complements to formal institutions depending on borrower characteristics. The study concludes that district-level financial inclusion initiatives improve the responsiveness of formal financial institutions to the needs of low-income borrowers.