OTHER SOURCES OF CREDIT

Credit and collection

OTHER SOURCES OF CREDIT

 Individual Money Lenders

 Commercial Establishments
 Retail Store
 Grocery and Department Stores
 Supermarkets
 Pawnshop
 Under the New society
 Redemption and Disposition
 Supervisory/ Regulatory Body
 Insurance Companies
 Savings and Loan Association
 Principles Governing Credit Operation
 Government Financing Institutions
 Social Security System
 Government Service Insurance System
 The Philippine National Bank
 The Development bank of the Philippines
 International Organizations
 Filipinization of credit
Individual Money Lenders
 Primitive societies had no need and use for money. “Their members produced what they consumed and
consumed what they produced”. 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.

 HISTORY RECORDS
-Loans that were available then were for sumptuary purposes.

 INDIVIDUAL MONEY LENDERS

-Those who grant loans as a personal accommodation to friends and relatives termed in Pilipino as “Pakikisama or
to reciprocate a debt of gratitude or what is known as “Utang na loob”.

 DOUBTLESSLY
-The practice of usury in these country is deeply rooted through the years.

 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

 What Is a Lender?
-A lender is an individual, a public or private group, or a that makes funds available to a person or business with
the expectation that the funds will be repaid. Repayment will include the payment of any interest or fees. May
occur in increments, as in a monthly mortgage payment (one of the largest loans consumers take out is a
mortgage) or as a lump sum.

 KEY TAKEAWAYS
-A lender is an individual, a public or private group, or a financial institution that makes funds available to a person
or business with the expectation that the funds will be repaid.

 Repayment will include the payment of any interest or fees.

 Repayment may occur in increments (as in a monthly mortgage payment) or as a lump sum.
 Disadvantages of individual lending increased information asymmetry; absence of group-based guarantees;
comparatively higher-value loans; and the resulting higher credit risk.
COMMERCIAL ESTABLISHMENT
 Significance to the continued functioning of a credit economy are commercial establishment, as may be gauged by the kind
and amount of credit that they grant.

 The term “Commercial establishment” means an establishment used for commercial purposes, such as a bar, restaurant,
private office, fitness club, oil rig, retail store, bank or other financial institution, super market, automobile or boat dealership
or any other establishment with a common business.

This property classification system can help in two significant ways:

A. The planners for an area can ensure that an area doesn’t include specific property types to reduce the number of
complaints for instance, no pubs.
B. It identifies what type of business they are allowed to move into the premises.

>Different types of commercial properties

These five categories include
 Offices
 Retail store – ( shopping centers, shops)
 Industrial
 Leisure – ( hotel, pubs, restaurants, Cafés, shops)
 Healthcare – ( medical centers, hospital, nursing homes)

 Difference between commercial establishment and non commercial establishment

 Commercial establishments include fast food and full service restaurants, catering, and night clubs and recreational outlets.
All these are focused primarily on providing food and earning profit. Non commercial outlets exist inside of organizations
such as hospitals, schools, nursing homes, and military bases.

 The main goal of commercial establishment – The most basic objective of this act is to “protect the rights of every
employers and employees”
RETAIL STORE
 The disappearance of barter as a method of exchange transactions has made retail store very important.

 What is retail stores?

 A retail store is a business enterprise that sells good directly to ultimate consumers for non-business use. The goods are
generally sold at marked-up prices. These are different types of retail stores that cater to different consumer types and
employ different sales techniques

 RETAIL MECHANISM
 The manufacturers produce goods from raw materials with the help of tools, processes, and labor.

 Types of retail store

 Department stores
 Specialty stores
 Super market
 Convenience stores
 Discount store
 Hyper market
 Warehouse stores
 E- commerce stores
 Dollar store
 Drug store.

 Four major of retailers

 Hard-line
 Soft goods or consumables
 Food
 Art
GROCERY AND DEPARTMENT STORE
 Sophisticated grocery and department store 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 through the casher.

 Grocery stores, as well as department stores, generally carry well-known brands of product they sell to the consumers in
efforts to enlist their patronage.

 While department stores first came on the American scene in the 1860s, a decade after they appeared in Europe.

 The key difference between departmental stores and supermarket lies in the type of products they stock; departmental
store stock a variety of product including clothing, jewelry, accessories, cosmetics, toy, stationary, etc. Whereas super
markets stock food items an other household items.
SUPERMARKETS

 More than 10,000 miles which separate the Philippines from united states, where a retailing innovation took place in 1930
and the appearance of planed suburban shopping centers in the late 1940s described as “suburban revolution”, didn't
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 to buy almost everything under a single roof, so they are like a big catalog.
She can examine a brand without anybody watcher her, choose it or reject it to her heart’s content. A Supermarket is largely
a brand-new form of retailing, its chief features consist of assembling all kinds of goods and many products are put in neat
packages to esthetic sense of the shoppers. Fundamentally, a supermarket sells good to their customers on credit who
qualify for the use of such privilege. The increasing urbanization of many areas of the 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. Customers from as far as Bulacan and Pampanga, Laguna and Batangas do their shopping in
supermarkets located in San Juan and other suburban districts.

 The example of Supermarket is the Robinsons Supermarket, Pure gold and Save more.

 Learning Objectives:
 We can define what supermarket is.
 Can determine what's in supermarket
PAWNSHOP
 In his book, “Money and Credit in china”. Lien Sheng Yang, a Harvard professor of Chinese history has the observation that
pawnshop is “the oldest credit institution in China”. Its origin has been traced to as early as middle of the Six Dynasties.
Pledges involved not only precious metals and stones, but included grains and livestock. All that the borrower had to do
was bring something to support of the loan. -The present pawnshops evidently originated in Montes Pieties founded by the
Franciscans. The terms mons referred to any form of capital accumulation and pieties from the Latin "pietas" meaning
pious. As such, montes pieties 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, pawn broking is one of the oldest
credit institution and believed to aver been introduced in this country by Spanish friars when we were under the Crown of
Spain. It may be interesting that the Monte de Pie dad referred to in an early discussion, was granted the privilege of
lending money against pledges of jewelry.

 The example of Pawnshop in the Philippines is Palawan Pawnshop, Cebuana Lhuillier and Mlhuillier.

 Learning Objectives:
 Can define Pawnshop
 Can determine the purpose of Pawnshop
UNDER THE NEW SOCIETY
 In accordance with Presidential Decree No. 114, otherwise known as the Pawnshop Regulation Act, the Central Bank of the
Philippines is charged with the task and responsibility of regulation the operation of pawnshop in this country. All pawnshop,
regardless of form of organization are required to register with Department of Financial Intermediaries of central bank. Only
Filipino citizens may establish and own a pawnshop organized in the form of a single proprietorship. In Partnership and
Corporation, 70% of capital and voting capital shall be owned by the Filipino citizens. And 70% of the members entitled to
vote if there be no Capital stock.

 The percentage of foreign-owned voting stocks in any pawnshop shall be determined by the citizenship of the individual
stockholders in the Pawnshop. The amount of loans which pawnshop may grant is subject to the agreement of the parties,
in no instance shall the amount of loan be less than 30% of tha appraised value of the security offered. The rate of interest
in pawnshop shall collect not any higher or greater sum or value for any loan than the rate allowed by the Usury Law.

 A 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 pledging the article.

 The example of Under the New Society are BDO UNIBANK INC, LAND BANK OF THE PHILIPPINES and PHILIPPINE
NATIONAL BANK.

 Learning Objective
 Can determine what's in Under the New Society

REDEMPTION AND DISPOSITION

 The pawned who fails to pay his obligation on the date it fails due may, within 90 days from the date of maturity of 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. The pawned shall be duly notified of
such sale on or before the termination of the 90 days period, the notice particularly stating the date, hour and placed of
sale.

 An example of redemption is someone working hard for new clients to improve his reputation. Something that redeems.
The definition of redemption is the act of exchanging something for money or goods. An example of redemption is using a
coupon at the grocery store.

 Learning objectives
 Can determine what's in Redemption and disposition and their examples
Supervisory/Regulatory Body

 Presidential Decree No. 114 was promulgated covering all aspects all aspects of establishments and operation of
pawnshops in the line with the declared policy of the government to place the operation of pawnshops.

 It is a optimum advantages from them as an additional sources of credit and to prevent and mitigate practices prejudicial to
public interest. In the discharge of its supervisory and regulatory powers.

 The Central Bank 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.

 KEY POINTS
 Presidential Decree No.114

 LEARNING OBJECTIVES
 The implementation of the provision of Presidential Decree No. 114
Insurance Company
 The life insurance was first introduced in this country when the Sun Life Company of Canada established a local branch in
Manila in October 1898.

 During this early years, to the participation of foreign insurance companies and of course to the increase is not just
underwriting and protection, but also deals with investment of funds held by them in trust for their policy holders.

 No such loans shall have a maturity in excess of twenty years.

 The security of real estate granted a loan upon a period longer than five years shall be amortized in monthly, quarterly,
semi-annual and annual installments. Before the insurance company of the security of real estate shall be made if the title
to such real estate have first been previously registered under the provisions of existing mortgage laws.

 KEY POINTS
 Insurance is gaining national importance in the Philippines today

 LEARNING OBJECTIVES
 Analyze the importance of life insurance.
Savings and Loans Associations
 A savings and loan associations organized as a non-stock corporation shall confine it’s membership to well-defined group of person
and shall not business with the general public.

Principles Governing Credit Operation

The following principles govern credit operations of savings and loan associations.
a. Stock savings and loans associations shall provide the normal credit needs of the consuming public and of industry, commerce and
agriculture,
b. Saving and Loans association loans shall be for an amount not greater than what is deserved so as not to impose a repayment
burden on the borrower and a collection problem to the association.
c. Repayment period should be short.

Extensions or renewals of loans may be allowed under the following conditions:

1. For productive loans, the extension shall not exceed one-half of the original period. Provided, That thirty percent (30%) of the loan
shave have been paid. A second extension may be allowed. The same however shall not exceed one-half of the period of the first
extension.
2. For consumer loans, the extension shall not exceed one-half of the original period: Provided, that fifty percent (50%0 of the loan shall
have been paid.
3. For loans for medical purposes, the extension may be for the same duration as the original period: Provided, that thirty percent
(30%) of the loan shall have been paid.

d. The size of the loan should be measured by the borrower’s earning capacity, character and ability to repay the obligation, or the fair
value of the property offered as collateral.

Key Points:
 The savings and loan association's primary purpose is making loans to its members, usually for the purchase of real estate or homes.

Learning Objectives:
 The importance of Savings and Loans Associations
 To know the Principles govern credit operations and the extension or renewals of loan.
GOVERMENT FINANCING ISTITUTIONS
 Financing Institution is a national or state level co-eperative institution or organization, which provide a financial assistant or
advance or loan to a co-operative society or an individual.
 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 objective of the government and thus make development a reality.

>Example
 SSS
 Phil health
 PagIbig

SOCIETY SECURITY SYSTEM

 The concept of social security which saw the achievement under the administration of president Marcos has it's beginning in the
Philippines as early as 1846 when many western counties were still groupings on how cope with the social problem of the
community
 Through the principle of social security started here during the mid-spanish regime, it had already the undertones of a
compassionate social undertaking to take care of those who have less in life.

 During the post-war President Marcos called on the legislators to create a social security program in his state on the nation
address. But he died without passing the bill.

 The benefits under the Social Security Program are:

 Sickn​ess
 Maternity
 Retirement
 Disability
 Death
 Funeral
 Unemployment
GOVERNMENT SERVICE INSURANCE SYSTEM
 Is a government owned and controlled corporation of Philippines. Created by commonwealth act No. 186 past on
November 14, 1936. The GSIS is mandated to provide and administer the following social security benefits for government
employees.

 Compulsory life insurance, optional life insurance, retirement benefits, disability benefits for work related contingencies and
death benefits.

 Life Insurance
 One of the many benefits of being a GSIS member.

GSIS has two insurance program available:

 Enhanced life policy
 Life Endowment policy

 Retirement Program - The GSIS offers various retirement programs depending on the qualification of the member.
 Disability Program - Is granted to a member due to the loss or reduction in earning capacity.

 Burial - A burial is the act or ceremony of putting a dead body into a grave in the ground.
 Survivorship - Entitled to cash or pension benefits.

 Eligibility Requirements
 Documents Requirements
 Single
 Without primary beneficiary (without parents; with siblings

 Key points
 To ensure the safety and soundness of the financial system.

 Learning Objective
 Ability to make better financial decisions.
 Effective management of money and debt.
 Greater equipped to reach financial goals.
The Philippines National Bank

 The Philippines national bank was established as a government-owned on July 22 1916. It's primary mandate was to
provide financial services to Philippines industry and agriculture and support the government economic development effort.
 Miguel Cuadero - Central Bank Governor
 In February 4, 1916, public act 2612 was passed by the Philippines legislature providing for the established of the PNB.

 Benefits
 The PNB corporate credit card give you an ideal solution that is surely beneficial to you and your valued
employees.
 Simplified payment processes and improved cash flow
 The power to manage your company expend
 More information, added control.
 Greater convenience for you and your employees

 Key points
Knowing how your money works is very important.

 Leaning Objectives
To provide the best customer experience to generations, and achieve your financial goods.
The Development bank of the Philippines

 What is development Bank

 The development Bank As defined by Britannica Encyclopedia (2017), “development bank, national or regional financial institution
designed to provide medium- and long-term capital for productive investment, often accompanied by technical assistance, in poor
countries.”
 In this context establishing provincial and city private development banks meant creating the means for effective development and
rehabilitation of both city and provincial places through these banks.

 The DBP are authorized to do:

 They are authorized to grant loans to rebuild houses, create microfinance projects that shall allow businesses to emerge, and finance the
industries (e.g., fishing, agriculture, livestock, etc.)

 KEY CONCEPTS:
 loan
 Preferred Redeemable Share of Stock
 Industry?
 public finance
 corporation
 Cooperative Associations
 H8stock
 Amortization
INTERNATIONAL ORGANIZATIONS
 The particular class of credit is known as public credit, that is, one government borrowing from another if the municipal
government needs aid for the construction of their public market and the national government does not have enough money
to aid, the national government shall 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.

 Key concepts
 What is an organization?
 What are International Organization
 International Monetary Funds:
 Asian Development Bank:
 Credit Union?

FILIPINIZATION OF CREDIT

 Filipinization of credit follows two schools of thought, the first one contends that, since businessmen irrespective of their
nationality contribute to their own way to the task of nation-building, they should be entitled to the use of whatever credits
are available locally. The second school of thought says that foreigners should not contribute to the already acute shortage
of credit in the country.

 What is Filipinization of Credit?

 Filipinization of credit was part of the economic protectionism movement to promote nationalism and protect the Philippines
from too much involvement of foreigners in their economic progress and rehabilitation due to the devastating effects of
World War III.

 What are Foreign Investments?

 “Foreign investment involves capital flows from one country to another, granting the foreign investors extensive ownership
stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management
as a part of their investment or an equity stake large enough to enable the foreign investor to influence business strategy.”
(James Chen, 2020)