CHAPTER 4

OTHER SOURCES OF CREDIT

LEARNING OUTCOMES

1. List and identify other sources of credit;

2. Know the different international organizations and their extended assistance; and

3. Understand the filipinization of credit

As may be gleaned from the title of this chapter, there are sources of credit other than those
mentioned and discussed at great length in the preceding chapter. Such sources vary from one another
with respect to kinds granted, amounts involved, and volume transacted. For instance, individual money
lenders grant loans consisting of a few pesos to several thousands of pesos. So are pawnshop
establishments which grant loans, the amount of which depend upon the value of the pledges made by
the borrower which usually consist of pieces of jewelry and other articles of value.

Retail stores as well as department stores, on the other hand, grant merchandise credit. Operators
of gasoline filling stations at times sell oil and gasoline on credit to their regular customers. In the case of
public utilities, services are offered to their customers on the basis of credit. Examples of such public
utilities are: Manila Electric Company, Philippine Long Distance Telephone Company and Metropolitan
Waterworks and Sewerage System now Maynilad and Manila Waters.

INDIVIDUAL MONEY LENDERS

Primitive societies had no need and use for money. Their members produced what they consumed
and consumed what they produce. Later on, whatever they could not produce, they obtained through
barter. But as society became more complex, barter as a method of exchange became impractical. Instead,
the use of a common medium of exchange found favor among its growing number. Briefly then, the use
of money is a prominent characteristic of more developed economic societies.

History records that the early use of money was for consumption. Thus, loans that were available
then were for sumptuary purposes. Lending money at interest was frowned upon and forbidden.
Expressing the sentiments of the times, Aristotle, a leading philosopher, said that money is barren. Hence,
interest ought not to be charged on money. The demands of trade, if not to say, the oscillating forces of
capitalism, by and large, accounted for the practice of lending money at interest.\

Individual money lenders in this country fall under two types: Those who grant loans as a personal
accommodation to friends and relatives termed in Pilipino as pakikisama or to reciprocate a debt of
gratitude ow what is known as "utang na loob." As such, these individuals do not charge interest, for such
personal accommodations. The other type covers those who make the lending of money a profitable
business. For this reason, being unlicensed by the government, they generally charge and collect
exorbitant or usurious rates of interest a practice aptly pictured by Shakespeare in his book entitled the
"Merchant of Venice", wherein Shylock, for failure of Antonio to pay his obligations, wanted from the
latter a pound of flesh nearest the heart.

Doubtlessly, the practice of usury in this country is deeply rooted through the years. This has
literally resulted in the bleeding to death of the hapless borrowers. So common is this practice that in the
words of a member of a law-investigating body of the government, usury is "one of the commonest crimes
among our people" "Perhaps, it happens more often than does smuggling or even tax evasion," he adds.
It is so widespread that it does not choose nor discriminate the places and its victims. In fact, many a time
usury takes place in the homes, in the offices, in the business establishments and even in the streets
among neighbors or friends or "compadres."

Aware of its existence, the government has adopted various measures to minimize, if not totally
root out this evil and pernicious practice made at the expense of small retailers and consumers. This has
resulted in the in the formation of the Filipino Retailers Fund many years back, and the Small Market
Vendors' Loan recently. Other measures called for the establishment of more rural banks in the
countryside, as well as the Savings and Loan Association and others.

COMMERCIAL ESTABLISHMENTS

Of significance to the continued functioning of a credit economy are commercial establishment

of more rural banks in the countryside, as may be gauged by the kind and amount of credit that they grant.
To mention a few, we have retell stores, department stores, and supermarkets.

Retail Stores

The disappearance of barter as a method of exchange transaction has made retail stores very important.
They are known to have existed prior to the time of Christ. Retail Stores flourished in Ancient Rome, so
much so, that it was described as a "city of shops". Early shops were quite small and oftentimes were
located either inside or in front of the home of the owner, who had little, if any, help in operating them.
Indeed, it may be interesting to bring to mind that the word "shop" which means "to buy or to inspect"
was derived from scuppa meaning "room" or "booth". Oftentimes, manufacturing was carried at the rear
of the shop, such that the retailer often served both as manufacturer and shopkeeper. As town and
community life became well established, retailing became a necessity. Manufacturers began to specialize
and provided needed outlets in the more distant towns and communities. These retail outlets were
secured through wholesalers, who purchased in large quantities and sold them in small quantities to retail
merchants.

As to the birth of retail stores in this country, nobody is sure. However, it can only be presumed
that such outlets appeared when the more pioneering individuals bought goods from other merchants
and had them assembled at a particular plats for resale to consumers within the neighborhood. And since
Chinese aliens t place dominant force in the retail trade in this country until they were eased out through
the enactment by Congress of the Nationalization Retail Law in 1954, it could likewise be assumed that
some early Chinese traders transacting business in this country aboard sailing vessels must have decided
to stay behind in the country and engaged in this kind of trade. No wonder that Chinese shopkeepers or
retailers were found scattered all over the country, with the exception of Lemery and Taal, two towns in
Batangas where they were not welcome as merchants.
 Easily the biggest source of merchandise credit is the retail store, more popularly known as the
"sari-sari" store (the Pilipino word "sari-sari meaning variety). They cater to the everyday needs of the
Filipino family whose patronage makes them thrive and grow. Although it is quite possible that not all
sari-sari stores grant merchandise credit to their customers, however, in view of the competitive nature
of the retailing business, many of them do.

Grocery and Department Stores

More sophisticated, grocery and department stores are two examples of retailing establishments.
However, grocery stores are essentially food stores. As in department stores, goods in grocery stores are
displayed for the customers to inspect and pick out whatever they want to buy and have them checked
out through the cashier.

Grocery stores, as well as department stores, generally carry well-known brands of products they
sell to the consumers in efforts to enlist their patronage. Moreover, as an added inducement, the
customers are given the privilege of buying goods on credit which is generally facilitated by the use of
credit cards.

While department stores first came on the American scene in the 1860s, a decade after they
appeared in Europe, they are relatively of late development in this country. In fact, only a few of them
were observed for a fairly long period of time and the few that were in existence then were concentrated
only in the big cities of the country.

Supermarkets

The more than 10,000 miles which separate the Philippines from the United States, where a
retailing innovation took place in 1930 as well as the appearance of planned suburban shopping centers
in the late 1940s described as "suburbia” revolution", did not prevent witnessing the birth of
supermarkets in this country and the beneficial effects of their existence.

The one major benefit that supermarkets offer to shoppers is that they can buy almost everything
under a single roof. The reason is that they are like a big catalog where the shopper can inspect and study
any of the thousands of items on display and budget her buying as she goes through the store. She can
examine a brand without anybody watching her, place start her shopping basket or push can, return it to
the shelf, or, she can examine another brand, choose it or reject it to her heart's content.

While a supermarket is largely a brand new form of retailing, its chief features consist of
assembling all kinds of goods including non-food items, clothing shoes, hardware, and countless others.
Many goods are placed in neat packages which make them convenient and appeal to the esthetic sense
of the shoppers. Fundamentally, a supermarket sells good for their customers on credit who qualify for
the use of such privilege.

The increasing urbanization of many areas of the country and the presence of transportation
facilities have contributed to the mobility of shoppers. Thus, they have been induced to make their
purchases in supermarkets where they are afforded ample parking spaces and moreover, are located
away from traffic congestion that is characteristic of stores in downtown areas. Not infrequently,
customers from as far as Bulacan and Pampanga in the north and Laguna and Batangas in the south do
their shopping in supermarkets located in San Juan, Metro Manila, Makati and other suburban districts.

PAWNSHOP

In his book "Money and Credit in China", Lien Sheng Yang, a Harvard professor of Chinese history
has pointed out the observation that pawnshop is "the oldest credit institution in China". Its origin has
been traced to as early as the middle of the Six Dynasties practiced pawnbroking with the large amount
of donated wealth in their treasuries. Pledges involved not only precious metals and stones, but included
grains and livestock. All that the borrower had to do was bring with him something of value which he
pledged in support of the loan. Greece and Rome were familiar with its operation - countries which are
credited with having laid the foundations on which modern statutory regulation is built.

The present-day pawnshops evidently owe their origin from the Montes Pietatis which were
established by Franciscans (Friar Minor as they were invariably called then) in Italy. The term mons
referred to any form of capital accumulation and pretatis from the Latin "pietas" meaning pious. As such,
montes pietatis consisted of charitable funds from which loans come from, which were exempted from
interest but secured by pledges. Such loans were granted to the poor.

In the Philippines, pawnbroking is one of the oldest credit institution and believed to have been
introduced in this country by the Spanish friars when we were under the Crown of Spain. It may be
interesting to point out in this connection, that the oldest savings bank, the Monte de Piedad referred to
in an earlier discussion, was granted the privilege of lending money against pledges of jewelry.

Under the New Society

In accordance with Presidential Decree No. 114, otherwise known as the Pawnshop Regulation
Act, Bangko Sentral is charged with the task and responsibility of regulating the operation of pawnshops
in this country. All pawnshops, regardless of form of organization, whether individual, partnership and
corporation, are required to register with the Department of Financial Intermediaries of the Bangko
Sentral before they are allowed to engage in actual operations, the minimum paid-in capital of which shall
not be less than P100,000.00. Only Filipino citizens may establish and own a pawnshop organized in the
form of a single proprietorship upon the effectivity of the Decree. However, in the case of a partnership,
at least seventy per cent (70%) of its capital shall be owned by Filipino citizens. In the case of a corporation,
at least seventy per cent (70% of the voting capital stock shall be owned by citizens of the Philippines, or
if there be no capital stock, at least seventy per cent (70%) of the members entitled to vote, shall be
citizens of the Philippines.

The percentage of foreign-owned voting stock or non-citizens entitled to vote in any domestic
pawnshop existing prior to the effectivity of Presidential Decree No. 114, if such percentage is in excess
of thirty per cent (30% of the voting stock or members entitled to vote of the pawnshop shall not be
increased thereafter beyond thirty per cent (30%) of the voting stock, or number of members entitled to
vote, of the pawnshop.
 The percentage of foreign-owned voting stocks in any pawnshop shall be determined by the
citizenship of the individual stockholders in the pawnshop. In the case of corporations operating shares in
a pawnshop, the citizenship of the individual owners of voting stock in such corporation shall be the basis
of computing the percentage.

The amount of loans which pawnshops may grant is subject to the agreement of the parties.
However, in no instance, shall the amount of the loan be less than thirty per cent (30%) of the appraised
value of the security offered for the loan, unless the pawner manifests in writing the desire to borrow a
lesser amount.

The rate of interest that any pawnshop shall collect shall not be any higher or greater sum or value
for any loan or forbearance than the rate allowed by the Usury Law for such transactions. It shall be
unlawful for any pawnshop to divide the pawn offered by a pawner in order to collect greater interest
and/or to require the pawner to pay an additional charge as insurance premium for the safekeeping and
conservation of the article pawned.

In addition to interest charges done her semi Y impose a maximum service charge of P5.00, but in
no case to exceed one per cent (1%) of the principal loan.

Every pawnbroker shall, at the time of every such loan or pledge, deliver to each person pawning
or pledging any article or thing a memorandum or ticker signed by the pawnbroker. À record of every
transaction shall be kept in the books of the pawnshop pertaining to the article subject of the pledge but
not to include the description of the person pawning or pledging the article.

Redemption and Disposition

The pawner who fails to pay his obligation on the date it falls due may, within ninety days from
the date of maturity of the obligation, redeem the pawn by paying the principal as well as the interest
corresponding to the obligation. For the purpose of computing the interest due after maturity of the
obligation, the basis shall be the sum of the principal of the obligation and interest earned from the time
the obligation matured.

In the event the pawner fails to redeem the pawn within ninety days from the date of maturity of
the obligation in accordance with the preceding paragraph, the pawnbroker may sell or otherwise dispose
of any article taken or received by him in pawn; Provided, however, That the pawner shall be duly notified
of such sale on or before the termination of the ninety-day period, the notice particularly stating the date,
hour, and place of sale.

Supervisory/ Regulatory Body

Before the promulgation of Presidential Decree No. 114, there was no specific law which governed
pawnshops, particularly providing definite and uniform standards for their operation. In fact, whatever
regulations that were existing then were scattered in various existing statutes. Numerous ordinances were
promulgated by different cities and municipalities tailored to their own ideas and needs.

The recommendations of the Joint IMF-CBP Banking Survey Commission on the Philippine
Financial System with respect to the enactment of a special law "to regulate the operation of pawnshops,
and all existing laws, rules and regulation affecting their operations to be consolidated into a law is very
important. Thus, in accordance with such recommendations, Presidential Decree No. 114 was
promulgated covering all aspects of the establishment and operation of pawnshop in line with the
declared policy of the government to place the operation of pawnshops "on a sound and stable basis to
derive the optimum advantages from them as an additional source of credit and to prevent and mitigate
practices prejudicial to public interest. In the discharge of its supervisory and regulatory powers, the
Bangko Sentral has issued a number of circulars designed to implement the provisions of Presidential
Decree No. 114 which are being distributed among the many pawnshops operating in this country.

INSURANCE COMPANIES

In the Philippines today, insurance is gaining national importance. Practically unknown during the
early part of the Spanish regime, life insurance was first introduced in this country when the Sun Life
Assurance Company of Canada established a local branch in Manila in October 1898.

The growth of the insurance business in the Philippines may be attributed, during its early ears,
to the participation of foreign insurance companies and of course to the increase in the number of local
insurance companies. Insurance is not only limited to underwriting and protection. It also deals with
investment of the funds held by them in trust for their policyholders.

A life insurance may lend to any of its policyholders upon the security of the value of its policy
such sum as may be determined pursuant to the provision of the policy.

Loans granted upon the security of real estate for a period longer than five years shall be
amortized in monthly, quarterly, semi-annual or annual installments. However, no such loans shall have
a maturity in excess of twenty years.

No loan by any insurance company on the security of real estate shall be made unless the title to
such real estate shall have first been registered in accordance with the existing Land Registration Act, or
shall be a titulo real duly registered, or have been previously registered under the provisions of existing
Mortgage Law.

SAVINGS AND LOAN ASSOCIATION

As the term indicates, a savings and loan association is any corporation engaged in the business
of accumulating the savings of its members or stockholders, and using such accumulations, together with
its capital in the case of a stock corporation, for loans and/or for investment in the securities of productive
enterprises or in the securities of the government, or any of its political subdivisions, instrumentalities or
corporations.

A savings and loan association organized as a non-stock corporation shall confine its membership
to a well-defined group of persons and shall not transact business with the general public. It shall accept
deposits from, and grant loans to only its member-depositors.
Principles Governing Credit Operations

The following principles govern credit operations of savings and loan associations.

1. Stocks savings and loan association shall provide the normal credit needs of the consuming public
and of industry, commerce, and agriculture.

2. Savings and loan association loans shall be for and amount not greater than what is deserve so as
not to impose repayment burden on the borrower and a collection problem to the association.

3. Repayment periods should be short. Savings and loan association should confine business to
meeting short-term credit needs which shall be repayable within and not allowed to go beyond
twelve (12) months, except real estate loans. Extensions of renewals of loans may be allowed
under the following conditions.

a.) For productive loans, the extension shall not exceed one-half of the original period:
Provided, that fifty per cent (50%) of the loan shall have been paid. A second extension may
be allowed. The same however shall not exceed one-half of the period of the first extension.

b.) For consumer loans, the extension shall not exceed one-half of the original period: Provided,
that fifty per cent (50%) of the loan shall have been paid.

c.) For loans for medical purposes, the extension may be for the same duration as the original
period: Provided, that thirty per cent (30%) of the loan shall have been paid.

4. The size of the loan should be measured by the borrower's earning capacity, character and ability to
repay the obligations, or the fair value of the property offered as collateral. The term "fair value" shall
mean fair market value of the property offered as collateral.

GOVERNMENT FINANCING INSTITUTIONS

If the tempo of the nation's economic development is to be accelerated at a pace considered

satisfactory, it is essential for the government to provide the necessary bases for growth. Equally
important is that it must have the institutions which will give meaning and substance to the objectives of
the government and thus, make development a reality.

The progress that this country has attained, which increases in momentum with the passing of
the years, reflects the concerted and dedicated efforts of lie government on practically every aspect of
human life, such as on education, health housing, and a host of others.

Social Security System

The concept of social security which saw the fruition under the administration of President
Marcos has its beginnings in the Philippines as early as 1846 when many Western countries were still
groping on how to cope with the social problems of the community.
 Though the principle of social security started here during the mid-Spanish regime, it had already
the undertones of a compassionate social undertaking to rake care of those who have less in life. As first
conceived in this country, it had its beginnings designed to alleviate the dire situation of government
employees of the colonial era, in time of illness and of their families in case of death. Starting as a voluntary
organization founded on October 17, 1846 by the General "Intendent" Gervasio Geronilla, the social
security program today covers not only unemployment insurance, old-age insurance, accident and
permanent disability insurance, maternity, insurance, state relief, and labor opportunity, but affords those
covered to avail other services like salary loan, educational loan and housing loan. According to records
available, not a few businessmen have availed of its loan facilities like those granted to small and medium-
scale industries. Other types of loans also granted by the Social Security System are known under the
terms "community hospital loan" and "investment incentives loan.

Such loans are made possible through the contributions of its members which are employed in
productive activities to earn income as part of its investment operations.

It may not be amiss to state the fact that many houses and buildings have been constructed and
made possible through the loans granted by the Social Security _System, which makes the system also a
financial institution in the broad sense of the word.

Government Service Insurance System

Like the Social Security System, the Government Service Insurance System was the product of
need - the need to protect employees against unforeseen contingencies in the future. But unlike the Social
Security System, which affords protection to employees of private industry, that of the Government
Service Insurance System (termed as the GSIS for short, established by virtue of the enactment of
Commonwealth Act No. 186) membership in the GSIS shall be compulsory upon all appointive officers and
employees in the executive, legislative, and judicial branches of the government, including those whose
tenure of office is fixed or limited by the Constitution or by law; upon all regular employees of the
Philippine Tuberculosis Society and the Philippine National Red Cross, and other employees of the
government-owned or controlled corporations; upon all officers and enlisted men of the Armed Forces of
the Philippines; and upon all elective officials receiving compensation.

In accordance with its investment operations, the GSIS shall invest such portions of the moneys
as shall not be required to meet the current payments in the form of life annuities, death claims, or
otherwise, and expenses incidental to the carrying out of the provisions of the law which created the
System in any or all of the following ways:

1. In interest-bearing bonds or securities of the Government of the Philippines, or bonds or securities

of said countries for the payment of the interest and principal of which the faith and credit of said
countries are pledged.

2. In interest-bearing deposits in any bank doing business in the Philippines, having an unimpaired
paid-up capital and surplus equivalent to one million five hundred thousand pesos or over:
 Provided, That said bank shall first have been designated as a depository for this purpose by the
President of the Philippines, upon the recommendation of the Secretary of Finance.
unencumbered: not yet mortgaged properties
3. In first liens upon improved or unencumbered real estate situated in any chartered city,
municipality or municipal district title to which is duly registered under Act Numbered Four
hundred and ninety-six, as amended: Provided, That no loan shall be made upon the security of
real estate in excess of eighty per centum of the fair appraised value thereof to be determined in
such manner as the Board shall prescribe: And provided, further, That no more than 70% of the
total assets shall be invested in loans on the security of real estate. Loans granted under this
subsection shall be paid within a period of not exceeding fifteen years unless renewed for another
period of not exceeding fifteen years under such terms and conditions as the Board may prescribe.

4. In loans to provincial, city and municipal governments for the construction or acquisition of
permanent public improvements, subject to the following conditions: That loans under this
subsection shall be on self-liquidating projects only and shall be repaid in installments within such
period as may be fixed by the Board not exceeding ten years. In case of default, the Commissioner
of Internal Revenue and the Provincial Treasurer are authorized and directed to withhold from
the revenues of the municipality, city or province concerned such amounts as may be needed to
pay the installments and interest due, and remit the same to the Board. No loan or the interest
thereon shall be remitted under any consideration, and that no loan shall be granted unless the
municipality, city or province concerned shall have first demonstrated its capacity to pay the same
within the time required for such payment.

Loans to local governments as provided herein may be renewed in the discretion of the Board for a
period not exceeding ten years, and in case of renewal, the amount due at the time of such renewal shall
be paid in not more than ten annual installments under the same conditions specified in the preceding
paragraph: Provided, that such loans shall be granted only under the conditions to be prescribed by the
Board.

5. In loans or advances to the Government of the Philippines or its political subdivisions for the
construction of permanent toll bridges or other permanent self-liquidating projects in accordance
with the conditions prescribed in the law in such cases made and provided.

6. In loans to members on the security of their policies, however, no loans on the security of a
membership policy shall be granted in excess of 50% of its cash value, except for the purpose of
continuing it in force, whenever necessary.

The Development Bank of the Philippines. In order to provide facilities for intermediate and long-term
credit, Republic Act No. 2081 which actually was an amendment of Republic Act No. 85 provided for the
conversion of the Rehabilitation Finance Corporation into the Development Bank of the Philippines and
authorizing said Bank to aid in the establishment of provincial and city private development banks.
 In the exercise of its corporate powers, the Development Bank of the Philippines known as DBP, for
short, is authorized

a. To grant loans for home building or home financing projects and for rehabilitation, the
establishment or development of any agricultural and/or industrial enterprise, including public
utilities, mining, livestock industry and fishing, whether offshore or inland;

b. To purchase preferred redeemable shares of stock, securities other than shares of stock, and
obligations of, and to grant loans to, any agricultural and industrial enterprises mentioned in
paragraph (a) to finance their fixed and operating capital requirements. All purchases of
preferred redeemable shares, securities and obligations and all loans shall be of such sound value
or so secured, as reasonably to assure retirement of such shares, securities, or obligations or
repayment of the loan; and shall be granted only under such terms, conditions and restrictions
as the bank may determine;

c. To grant loans to provincial, city, and municipal government for the rehabilitation, construction,
or reconstruction of public markets, irrigation, waterworks, toll bridges, slaughterhouses, for
cadastral surveys and other self-acquisition and machineries to agencies and corporations owned
and controlled by the Government of the Republic of the Philippines for the production and
distribution of electrical power, for the purchase and subdivision of rural and urban estates, for
housing projects, for irrigation and water works system, and for other essential industrial and
agricultural enterprises;

d. To grant loans to cooperative associations to facilitate production, the marketing of crops, and
the acquisition of essential commodities; and

e. To grant loans to individual employees in a government-owned or controlled corporation or

private corporation engaged in the development and/or private corporation engaged in the
development and/or Private Corporation engaged in the development and/or expansion of
agriculture or industry, for the purpose of buying shares of stock directly from such corporation
for the purpose of enabling them to participate in the ownership and the share in the profits
thereof. However, the amortization of such loans shall not exceed 10% of the total annual salary
and wages of the borrower. Such loans shall be payable in full within a period of not exceeding
ten years. If the borrower should sell the share of stock acquired by him from the proceeds of
such loans, the corporation that issued said share of stock shall have preference to purchase the
same.

INTERNATIONAL ORGANIZATIONS

As indicated earlier, one particular class of credit is known as public credit that is, one government
borrowing from another, as for instance, the municipal government obtaining loans from the national
government or from the Bangko Sentral to finance the construction of a public market or school building.
Whenever revenues of the national government are far from adequate to meet its needs, insofar as
prosecuting its projects with vigor and make them a reality, the national government, at times, either float
bonds or borrow from external sources. An example is when the Philippine Government sought and
obtained loans from the World Bank for its many economic development projects, like the harnessing of
the Ambuklao Dam for the generation of power, the construction of Pantabangan Dam in Nueva Ecija,
and others.

Mention may also be made briefly of the assistance extended by the International Monetary Fund
designed to promote exchange stability and assist in the establishment of multilateral system of payments
in respect to current transactions, among others; the loans extended also by the Asian Development Bank
intended purposely to generate growth and cooperation in Asia; and that of the Export-Import Bank of
the United States which acts as its principal lending arm with respect to its foreign trade. However, as may
be noted, such sources of funds while not intended for mercantile or business purposes have their
important contributions in the field of economics.

OTHERS

The picture depicting sources of funds would not be complete without mention of those relatively
smaller organizations engaged in supplying the credit needs of a varied group of borrowers. Though of
less importance by comparison with millions of pesos of credit extended by the larger institutions, they
nevertheless perform a vital role within their limited spheres.

This wide and varied group of lenders, not mentioned previously, include: credit, trust companies, and
savings and loan associations.

Credit unions extend credit only to its members out of the funds that have been accumulated by
them through their contributions. Such loans are intended to help the members and bail them out of their
predicament and may partake of sumptuary, providential, and productive types. Trust companies as may
be logical to expect invest and lend their funds for the benefit of the trustees, thus providing a source of
funds. Savings and loan associations extend loans to their members. And, of course, not to be overlooked,
is the poor and oftentimes hapless seller of food she rations among employees of the government and
private enterprises on credit which sad to say - cause her no little-problem, with respect to collections,
from people who have lost their proper sense of values.

FILIPINIZATION OF CREDIT

As far as Filipinization of credit is concerned, two schools of thought are at variance with one
another. One contends that, since businessmen irrespective of their nationality contribute in their own
way to the task of nation-building, they should be entitled to the use of whatever credits are available
locally. On the other hand, the other school of thought contends that foreigners should not contribute to
the already acute shortage of credit in the country, i.e. they should make use of their own resources.

As early as in 1966, the Manila Bulletin, in its editorial on the subject, had this to say, which is
quoted in part:
 "There are open moves, in and out of government circles, aimed at limiting the right to obtain
loans and other credit facilities from banking and financing institutions exclusively to Filipino citizens and
entities wholly owned by Filipinos."

"This is reported as part and parcel of the economic protectionism movement. It is being
presented as essential if we are to be true to our resurgent nationalism. It is held important if we are to
safeguard our own interests and those of our generations yet unborn, before pleasing foreigners and
foreign interests."

"Regulation of credit is held as proper under the police power of the state. It is supposed to be all
the more necessary in the light of the participation of government entities, like the Government Service
Insurance System, the Social Security System, and the Development Bank of the Philippines in banking
and financing operations servicing the private sector."

"It is now reported that the government financial institutions have been extending credit to
foreigners to the prejudice of Filipinos and the developments of our trade and industries by Filipinos. It is
suggested that, while such foreigners have been borrowing from our institutions, depriving our
countrymen of credit facilities, they have been remitting to their parent companies abroad."

Continuing further, the editorial stated:

"This presentation provides food for serious thought. It is well that it appears to have stirred
reaction in some sectors of Congress. As the policy making branch of our government, Congress is best
qualified to give this matter serious study and consideration before fixing guidelines for our banking and
financing institutions, government and private, to follow."

"This is necessary because there are some sectors who view Filipinization of credit in the light of
its effects on foreign investments and the creation of a favorable climate for further inflow of foreign
capital. These groups feel that Filipinism and nationalism could be viewed with misgivings abroad and
conceivably scare prospective investors away."

The observations made by Eugene R. Black, former President of the International Bank for
Reconstruction and Development, is indeed very significant. He said in part:

"No free country in history has been able to develop a healthy economy without the foreigner's
help. While perhaps no foreigner can, by himself, make business respectable in an alien culture, he can by
his actions and attitudes make it possible for others to do so."

Such a message should help illumine the path of those who, obsessed with nationalism,
oftentimes see only one side of the picture. In fact, it cannot be denied that this country needs external
sources of credit as it continues to avail of their facilities through the years.