THE DEVELOPMENT OF CREDIT • The privilege of doing 2.

They were exploited by the

business in the galleon trade landlords who give them unfair share in
PRE-SPANISH TIME
went to the governor-general, the harvest.
religious officials, royal
The Philippines had been trading with
foreign countries such as:
officials, soldiers, and their 3. The negative attitudes of the
relatives and friends. borrowers toward their debts influenced
their refusal to settle their financial
• China OBRAS PIAS obligations.
• Japan • A charity foundation by laymen
• Sumatra used for charity works and 4. They considered loans as
• India religious activities. It became a another form of dole outs and therefore
banking institution run by friars they did not feel the responsibility of
• Arabia
paying the gov’t lending institutions.
• Siam • Forerunner of the banking
institutions in the Philippines.
• Borneo UNDER THE REPUBLIC
• Java
• The funds of the obras pias
were donated by rich citizens Philippines became a republic
• Moluccas for religious projects and these on July 4, 1946.
• East Indian islands were managed by the religious It was a period of
orders. reconstruction and
Hundreds of years prior to the arrival of
rehabilitation.
the Spanish colonization, what were
AMERICAN ERA
Filipino traders famous for? REHABILITATION FINANCE
American government gave CORPORATION
• Honesty and excellent credit priority to agricultural
record development. • Was established on Oct. 29,
The American administrators 1946.
These cultural values came from the
introduced a better banking It provided credit facilities for
Malay culture.
and credit system to promote the rehabilitation of
economic development, agriculture, commerce and
Dishonesty and non-payment of debt
especially in the rural areas. industry.
were greatly discouraged by
punishment which are considered Also assisted the
primitive under the present culture RURAL CREDIT LAW
reconstruction of
wardamaged properties.
SPANISH TIME • Was enacted in 1915
• Used to complement the
• 1958, it became the Dev’t Bank
During the initial years of of the
agricultural cooperatives,
Philippines.
Spanish rule, free trade was particularly credit associations
encouraged. in every town all over the
CENTRAL BANK OF
The goods of the Far East were country
THE PHILIPPINES
marketed to America through
Manila and then through PHILIPPINE NATIONAL BANK
Acapulco, Mexico.
• Established in 1949.
• Established in 1916 • After President Manuel Roxas
GALLEON TRADE assumed office in 1946, he
• Extended long-term loans to
instructed then Finance
agriculture and industry.
• Is a product of mercantilism in Secretary Miguel Cuaderno,
the • Has also functioned as de Sr. to draw up a charter for a
Philippines facto Central Bank of the central bank.
Philippines until 1949.
• Was called the Manila- • The Commission, which
FACTORS IN THE FAILURE OF THE studied Philippine financial,
Acapulco Trade CREDIT PROGRAM monetary and fiscal problems
• Was called galleon trade in 1947, recommended a shift
because it was carried on by 1. Farmers did not have steady from the dollar exchange
transpacific galleons. It was a income due to the destruction of their standard to a managed
government monopoly crops. currency system.
 • A central bank was necessary confidence on • The lender must feel certain
to implement the proposed the part of the that the borrower is a man of
shift to the new system. creditor. integrity. The delay caused by the
Motivated by obligation is vexatious, and men
• The establishment of a
faith in his
monetary authority became never voluntarily accept a credit
fellowmen. instrument which is likely to be
imperative a year later as a
result of the findings of the contested in the courts
2. FUTURITY
Joint PhilippineAmerican
There is always a CREDIT
Finance Commission chaired
future time involved is based upon confidence in
by Mr. Cuaderno.
Regardless of the character as well as upon
hour, day, month or confidence in business ability.
3 JANUARY 1949
year
The Central Bank of the 3. RISK CREDIT ARISES IN VARIOUS WAYS:
Philippines (CBP) was • The uncertainty faced by
1. Purchase and sale of goods
inaugurated and formally the creditor, if he gets paid
and services.
opened with Hon. Miguel in full, in part on not at all.
Cuaderno, Sr. as the first The risk is minimized when
2. Borrowing money.
governor. loan is “Secured 3. Issuance of fiduciary money.

Since the establishment of the CREDIT

CB, monetary policies have CONTRACT IS
WHAT IS THE BASIS OF CREDIT?-
been fashioned to improve CHARACTERIZED AS
CONFIDENCE
production, employment, and FOLLOWS:
quality of life of the people,
CONFIDENCE IS 2-FOLD IN
esp. in rural sectors where 1. It is a bi-partite contract.
CHARACTER
poverty has been more There are 2 parties involved.
widespread • The lender must feel morally
certain that the borrower will be
able to pay his debt; that his 2. It is a pecuniary contract.
THE BASIC ELEMENTS OF CREDIT
affairs are in such that he will be Pecuniary – in the form of
1. TRUST AND CONFIDENCE able to pay the debt, when it is money (it acts as the standard
• The essence of due. of value)
credit is

3. It creates a legal obligation.

• The contract creates the
right of the creditor to
collect from the debtor.

4. It has the fiduciary element.

• it is based on trust. Faith on
the borrower’s ability and
willingness to pay should
exist.

5. It is based on personal factors.

• The contract is perfected
based on the person’s
degree of moral as well as business
competence.