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THE BIRTH OF

CREDIT SYSTEM
THE INTRODUCTION OF MONEY IN THE
ECONOMY USHERED IN A VERY SIGNIFICANT
MILESTONE IN THE DEVELOPMENT OF THE
CREDIT SYSTEM.
DEVELOPMENT OF
CREDIT
CREDIT BEING A TOOL OF
DEVELOPMENT AND PROGRESS OF
PEOPLE AND SOCIETY, HAS, FROM
ANCIENT TIMES TO THE PRESENT,
SERVICED THE SPECIFIC AND RELEVANT
NEEDS OF THE ECONOMY.
BECAUSE OF CREDIT SYSTEM THE PACE OF
DEVELOPMENT OF COUNTRIES HAS
ACCELERATED EVER SINCE

THE RATE OF ECONOMIC GROWTH OF A
COUNTRY DEPENDS ON THE AVAILABILITY OF
OF SUFFICIENT CREDIT, AND OF COURSE ON
THE PROPER USE OF CREDIT
PRE-SPANISH TIME
HUNDREDS OF YEARS AGO, PRIOR TO THE
ARIVAL OF THE SPANISH COLONIZATION,
FILIPINO TRADERS WERE FAMOUS FOR THEIR
HONESTY AND EXCELLENT CREDIT RECORD.
SUCH CULTURAL VALUES WERE THE
PRODUCT OF MALAY CULTURE.
Dishonesty and the non payment of debt were
greatly discouraged by punishments.


A GOOD EXAMPLE OF THE POSITIVE VALUES
OF FILIPINOS WAS THE MANNER THEY
HONORED THE CUSTOM OF TRADE.

THE REPUTATION OF FILIPINO TRADERS
CONTRIBUTED TO THE GROWTH OF TRADE
AND COMMERCE IN THE ASIAN REGION.

SPANISH PERIOD
DURING THE INITIAL YEARS OF SPANISH
RULES FREE TRADE WAS ENCOURAGED.
A PRODUCT OF MERCANTILISTIC POLICY IN
THE PHILIPPINES WAS A GALLEON TRADE,
THIS WAS THE MANILA-ACAPULCO TRADE.
IT WAS CALLED GALLEON TRADE BECAUSE IT
WAS CARRIED BY TRANS PACIFIC GALLEONS.
THE PREVILEDGES OF DOING BUSINESS IN
GALLEON TRADE WENT TO THE GOVERNMENT
OFFICIALS, RELIGIOUS OFFICIALS, ROYALS
OFFICIALS, SOLDIERS, AND THEIR RELATIVES
AND FRIENDS.


AMERICAN ERA
AGRICULTURE REMAINED UNDERDEVELOPED
UNDER SPANISH REGIME.
BUT THE AMERICAN GOVERNMENT GAVE
PRIORITY TO ITS DEVELOPMENT.
THEY INTRODUCED A BETTER BANKING AND
CREDIT SYSTEM TO PROMOTE THE ECONOMIC
DEVELOPMENT ESPECIALLY IN THE RURAL
AREAS.
CREDIT PROGRAMS OF THE GOVERNMENT
WAS THE ORGANIZATION OF THE FIRST
AGRICULTURAL BANK IN 1908 FOR THE
BENEFITS OF THE FARMERS.
1915 THE RURAL CREDIT LAW WAS ENACTED
TO COMPLEMENT THE AGRICULTURAL BANK.
THE BANKING SYSTEM GREW BUT IT WAS
DOMINATED BY FOREIGN INTEREST.
TO REMEDY SUCH SHORTCOMINGS IN THE
CREDIT SYSTEM THE PHILIPPINE NATIONAL
BANK (PNB) WAS ESTABLISHED IN 1916.
THE ORGANIZATION OF RURAL BANKS AND
AGRICULTURAL CREDIT ASSOCIATIONS WERE
ENCOURAGED BY THE GOVERNMENT.

UNFORTUNATELY THE CREDIT PROGRAM OF
THE GOVERNMENT FAILED IN THE RURAL
AREAS. FARMERS DID NOT PAY THEIR
OBLIGATIONS. THE FAILURE OF THE CREDIT
PROGRAM WAS CAUSED BY A COMBINATION
OF SEVERAL FACTORS :
1. FARMERS DID NOT HAVE STEADY INCOME
DUE TO DESTRUCTION OF THEIR CROPS BY
NATURAL CALAMITIES.
2. THEY WERE EXPLOITED BY THE LANDLORDS
BY GIVING THEM UNFAIR SHARE IN THE
HARVEST. THUS IT WAS NOT REALLY
POSSIBLE FOR THEM TO PAY THEIR LOANS.
3. THE NEGATIVE ATTITUDES OF THE
BORROWERS TOWARDS THEIR DEBTS
INFLUENCED THEIR REFUSAL TO SETTLE
THEIR FINANCIAL OBLIGATIONS.
4. THEY CONSIDERED THEIR LOANS AS
ANOTHER FORMS OF DOLE OUTS ND
THEREFORE THEY DID NOT FEEL THE
RESPONSIBILITY OF PAYING THE
GOVERNMENT LENDING INSTITUTIONS.
UNDER THE REPUBLIC
THE SCARS OF WORLD WAR II WERE STILL
CONSPICUOUS WHEN THE PHILIPPINE
BECAME A REPUBLIC ON JULY 4, 1946.
SO THERES A GREAT NEED OF
RECONSTRUCTION AND REHABILITATION.
IN RESPONSE TO THE CREDIT NEED OF THE
COUNTRY THE REHABILITATION FINANCE
CORPORATION WAS ESTABLISHED ON
OCTOBER 29, 1946.

UNTIL A VERY SIGNIFICANT IMPROVEMENT IN
THE FINANCIAL SYSTEM WAS THE
ESTABLISHMENT OF THE CENTRAL BANK OF
THE PHILIPPINES IN 1949.
SINCE THEN MONETARY POLICIES HAVE BEEN
FASHIONED TO IMPROVE PRODUCTION,
EMPLOYMENT, THE QUALITY OF LIFE OF THE
PEOPLE ESPECIALLY THE RURAL SECTORS.

BASIC CONCEPTS OF
CREDIT
CREDIT THE WORD CREDIT CAME FROM THE
LATIN WORD CREDITUM WHICH MEANS
TRUST.
CREDIT REFERS TO THE ABILITY TO ACQUIRE
SOMETHING OF VALUE, SUCH AS GOODS,
SERVICES,SECURITIES OR MONEY AT THE
PRESENT TIME IN RETURN FOR A PROMISE TO
PAY AT SOME FUTURE TIME.
TWOPARTIES INVOLVED IN
ANY CREDIT TRANSACTION
THE CREDITOR- WHO PROVIDES THE THING
BORROWED AND THE
DEBTOR- WHO RECEIVES IT AND ASSUMES
THE OBLIGATION TO PAY.
IT IS OBVIOUS THAT THE MOST IMPORTANT
AND BIGGEST CREDIT TRANSACTIONS ARE
THOSE WHICH INVOLVE THE USE OF MONEY.
CREDIT INSTRUMENT
A promissory note or written evidence of
a debtor's obligation
It must be in writing in accordance with the
requirements of the LAW.
CREDIT SYSTEM
THIS INCLUDES CREDIT, CREDIT
INSTRUMENTS, CREDIT INSTITUTIONS, LAWS
AND CUSTOMS ON LENDING AND
COLLECTION.
A GOOD CREDIT SYSTEM SHOULD BE
RESPONSIVE TO THE NEEDS AND WELFARE OF
THE POOR WHO CONSTITUTE A GREAT
MAJORITY OF OUR POPULATION.

A GOVERNMENT PROGRAM WHICH BENEFITS
THE POOREST OF THE POOR IS AN EXCELLENT
PROGRAM.
ECONOMIC PROGRESS WOULD BE ONLY REAL
WHEN THE FRUITS OF DEVELOPMENT
IMPROVE THE QUALITY OF LIFE OF THE POOR.

ELEMENTS OF CREDIT
TRUST- THIS IMPLIES THAT THE CREDITOR OR
BANKER HAS FAITH IN THE ABILITY AND
WILLINGNESS OF THE DEBTOR TO FULFILL HIS
OBLIGATION, BE IT AN INDIVIDUAL,
CORPORATION OR GOVERNMENT.

TIME OF PAYMENT- THE BORROWER HAS AN
OBLIGATION TO PAY HIS DEBT IN A DEFINITE
TIME OR DATE. A CERTAIN FIXED DATE IS
AGREED UPON FOR HIM TO PAY AS
PROMISED.
RISK- LIFE IS FULL OF RISKS AND THIS
INCLUDES A PAYMENT OF LOANS. THE
ABILITY OF THE BORROWER TO FULFILL HIS
PROMISE TO PAY MAY BE REDUCED BY
CIRCUMSTANCES BEYOND HIS CONTROL,
SUCH AS NATURAL CALAMITIES AND
PERSONAL MISFORTUNES.
TO BE CONTINUED

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