Building Economic Empowerment through Cooperative Trust: A Model Based Analysis in Siquijor

Abstract

Cooperatives play a critical role in promoting economic empowerment among micro, small, and medium enterprises (MSMEs) in underserved and geographically isolated areas by improving access to finance, enhancing financial literacy, and supporting income generation through trust-based and contractual mechanisms. Anchored on Agency Theory and Social Capital Theory, this study examines how cooperative surety bonds can reduce lending risks, address structural and financial constraints, and strengthen the credibility and growth potential of MSMEs in island economies such as Siquijor. The study employed descriptive and inferential statistical methods, including weighted mean and Pearson Product–Moment Correlation, with significance testing using p-values. Results were further presented through a correlation-based path diagram to analyze relationships among variables without implying causality. Data were collected from 187 respondents across registered cooperatives in Siquijor through voluntary participation, ensuring informed consent, anonymity, confidentiality, and the right to withdraw at any stage. Findings reveal that cooperatives significantly contribute to economic empowerment across multiple dimensions, with access to finance emerging as the most prominent factor, alongside positive outcomes in income generation, financial literacy, ownership, market participation, control over resources, and risk mitigation. Furthermore, cooperative trust influences these outcomes through both risk reduction and collective trust pathways, with incentive-based mechanisms demonstrating stronger relationships compared to governance and risk-related factors. The study concludes that economic empowerment is more effectively driven by aligned incentives and shared economic benefits. It recommends that cooperative federations institutionalize incentive alignment systems, expand financial inclusion programs, standardize capacity-building initiatives, strengthen governance through monitoring and incentives, and develop collective risk management mechanisms to support sustainable and inclusive development.