CREDIT AND COLLECTION The Need for Money.

Adam Smith, in his

book entitled "Wealth of Nations",
CHAPTER 1 entertained the belief that money originated
in man's rational effort to meet the
Different periods of history termed as:
necessity of finding some medium of
•Stone Age exchange. Thus, it was introduced into
man's economic life designed purposely to
•Neolithic Age overcome the shortcomings of barter.
•Bronze Age, This brought about the birth of that dictum
"justum pretium" which in economics
•Atomic Age
means the doctrine of the "just price."
A number of them has been quick to coin
Still more important in helping to break
such terms as "The Moneyless Society",
down the ori-ginal prohibition was the
"The Credit Society," and many others to
doctrine relating to "lucrum cessans".
describe such development.
One of the unique features of our business
Barter. The complicated money and credit
system is that it operates to a large extent
exchange system of today is the product of
on promises, called credit.
a long process of evolution. It had its crude
beginning in a barter economy. The word credit comes from the Latin
credere which means "to trust."
Cattle was a convenient standard of value in
ancient Persia (now known as Iran). The Use of Credit. The use of credit
especially in the business world is so
Raw materials are turned into finished
common that, by way of compliment, it is
products which provide not only gainful
generally called as "the life-blood of
employment among the country's labor
business."
force but also contribute to the increase in,
what economists call, the multiplier effect. ADVANTAGES OF CREDIT
Hoes and knives are said to have been used a. Credit facilitates and contributes to the
as money by the Chinese, and later, through increase in wealth by making funds
the slow process of evolu- tion, miniature available for productive purposes.
copies of said articles, although lacking
utility as commodities, nevertheless b. Credit saves time and expense by
circulated as money. providing a safer and more convenient
means of completing transactions.
Barrenness was to him an essential nature
of money, usury (interest) which made c. Credit helps expand the purchasing
money bear fruit, was unnatural. power of every member of the business
community - from producer to the ultimate
Saint Thomas Aquinas took up this view consumer.
and combined it with the doctrine of Roman
Law which distinguished bed tween goods
which were consumptibles and fungibles.
d. Credit enables immediate consumption 4. Charge account enables consumers to
of goods thereby providing for an increase obtain goods even before they have the
in material well-being. money.

e. Credit helps expand economic 5. Charge accounts provide a valuable

opportunities through education, job means of reference in many business
training and job creation. transactions.

f. Credit spreads progress to various The buyer is often asked to make a partial
sectors of the economy. payment at the time of purchase, termed
down payment.
g. Credit makes possible the birth of new
industries. As a policy and practice, a buyer of goods
on installment credit is required by the
h. Credit helps buying become more selling company to sign a formal agreement
convenient for customers. known as an installment contract.

Chattel mortgage is a conditional transfer

of rights in movable property as security for
CHAPTER 2
a debt or obligation, insuring the debtor
Most personal credit, by and large, is used reversion of ownership upon payment of the
by individuals to buy consumer goods obligation.
intended to provide immediate satis faction
The borrower who signs the note is the
to their wants and needs. Thus, invariably,
maker.
they are also called as consumer credit.
A person with a good credit standing may
Kinds of Consumer Credit.
be able to borrow on his signature alone.
Other names for this type of credit are: This is called signature or character loan
because the borrower's character is the
•open-book credit impor tant factor in the lender's decision to
make the loan.
•the open charge account

•30-day credit.
CHAPTER 3
Proponents of charge accounts list its
advantages as follows: Sources of Credit
1. It is a very convenient way of shopping. •Financial Intermediaries
2. It eliminates the inconvenience as well as •Financial Institutions
the danger of carrying too much money.
•Investment Houses
3. Charge accounts enable customers to
buy goods only at the time they want them. •Commercial Banking

•Saving and Mortgage Banking

CHAPTER 4 inspect" was derived from (scuppa)
meaning "room" or "booth".
Individual money lenders in this country fall
under two types: Those who grant loans as Merchandise credit is the retail store, more
a personal accomoda- on to friends and popularly known as the "sari-sari" store (the
relatives termed in Pilipino as pakikisama or Pilipino word "sari-sari" meaning variety).
to reciprocate a debt of gratitude or what is
known as "utang na loob." Grocery and Department Stores. More
sophisticated, grocery and department
stores are two examples of retailing
establishments.
Commercial Establishments
The present-day pawnshops evidently owe
•Retail stores their origin from the Montes Pietatis which
were established by Francis- cans (Friar
•Grocery and Department Stores
Minor as they were invariably called then) in
•Supermarkets. Italy. The terms mons referred to any form
of capital accumulation and pietatis from
•Pawnshop the Latin "pietas" meaning pious. As such,
montes pietatis consisted of charitable
•Insurance Companies
funds from which loans come from, which
•Savings and Loan Association were exempted from interest, but secured
by pledges. Such loans were granted to the
•Government Financing Institutions poor.

•International Organizations Under the New Society. In accordance with

Presidential Decree No. 114, otherwise
•Filipinization of Credit
known as the Pawnshop Regulation Act, the
Individual Money Lenders - Primitive Central Bank of the Philippines is charged
societies had no need and use for money. with the task and responsibility of regulating
the operation of pawnshops in this country.
Individual money lenders in this country fall
under two types: Redemption and Disposition. The pawner
who fails to pay his obligation on the date it
•Those who grant loans as a personal falls due may, within ninety days from the
accomodation to friends and relatives date of maturity of the obligation, redeem
termed in Pilipino as pakikisama or the pawn by paying the principal as well as
the interest corres ponding to the
•to reciprocate a debt of gratitude or what is
obligation.
known as "utang na loob."
Insurance is gaining national importance.
Retail Stores. The disappearance of barter
as a method of exchange transaction has Savings and loan association is any
made retail stores very important. corporation engaged in the business of
accumulating the savings of its members or
It may be interesting to bring to mind that
stockholders, and using such
the word "shop" which means "to buy or to
accumulations, together with its capital in
the case of a stock cor- poration, 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.

Government Financing Institutions

•Social Security System

•Government Service Insurance System

•The Development Bank of the Philippines

This wide and varied group of lenders, not

mentioned previously, include:

•credit unions

•trust companies

•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.