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Credit
Derived from Latin word credo (to believe, to trust) It means securing something of value, whether tangible or intangible, in return for a promise to pay at some determined future date. Trust is the fundamental element of credit.
Purchasing power. (Mill) Sale on trust. The exchange of an actual reality against a future probability. (Le Vasseur) Sale on trust. The personal reputation a person has, in consequence of which he can buy money/goods/labor, by giving in exchange for them, a promise to pay at a future time. (Mac Leod)
Consumer Credit
Industrial Credit
Trade Credit
Functions of Credit
Economic
Function
Medium of Exchange
Make Capital Available
Social
Chapter 1
Consensus among our credit men is that the true and full concept of credit consciousness has not yet found its mark on our people.
Before WWII: credit = debt 1932 Association of Credit Men, Inc. (Metropolitan Areas) After WWII there was a big market, but people had no cash to buy. Good credit risk customers started to show up. Philosophy developed:
if others can get away with it, why not me? To make matters worse, Legislature passed laws after laws all favoring the debtors neglecting the creditors.
An Ateneo study has observed that in the Philippines, the responsibility to collect exceeds the responsibility to pay. This means that in the ordinary course of things, a local businessman cannot expect to receive a centavo from his debtors of their own accord. He must go out and chase after that peso; corner it, pin it down and bring it back, just like the hunters do of wild animals in Africa. It is a dog-eat-dog society where a creditor has to fight tooth
Chapter 2
insulate the company from being victimized , consciously or unconsciously, by bad credit risk customers.
maximize profits and minimize bad debts losses through proper credit evaluation of each applicant and through efficient and consistent collection follow-ups.
Support to sales effort Customer counselling Contributions to finance Task force assignments