The Manufacturing Sector and the Informal Credit Markets: The Case of Trade Credits in the Footwear Industry

In its attempt to characterize the existing financing schemes of the footwear manufacturing industry in Marikina, this paper investigates and documents the existing formal and informal credit arrangements in the footwear manufacturing industry. It also describes the mechanisms and arrangements used by creditors and debtors and analyzes the lending behavior of input suppliers. It then estimates the effective cost of borrowing and derives/estimates a model for trade credit by footwear manufacturers.