CREDIT AND COLLECTION

Ganzon, Jhoailla Faye C. BSBA2L

1. What are the types of Financial Intermediaries?

There are several financial intermediaries formed to serve the different aims and objectives
of the customers or members or lenders and borrowers. These entities are explained in detail
below:

 Banks: The central and commercial banks are the most well-known financial

intermediaries simplifying the lending and borrowing process, along with providing
various other services to its customers on a large scale.
 Credit Unions: These are the cooperative financial units which facilitate lending and
borrowing of funds to provide financial assistance to its members.
 Non-Banking Finance Companies: A NBFC is a financial company engaged in
activities such as advancing loans to its clients at a very high rate of interest.
 Stock Exchanges: The stock exchange facilitate the trading of securities and stocks, and
in every trading activity, it charges the brokerage from each party which is its profit.
 Mutual Fund Companies: The mutual fund organizations club the amount collected
from various investors. These investors have identical investment objectives and risk-
taking ability. The funds are then collectively invested in the securities, bonds, and other
investment options, to ensure a capital gain in the long run.
 Insurance Companies: These companies provide insurance policies to the individuals
and business entities to secure them against accident, death, risk, uncertainties and
default. For this purpose, they accept deposits in the form of premium, which is pooled
into profitable investments to gain returns. The insured person can claim the money in
case of any mishap as per the agreement.
 Financial Advisers or Brokers: The investment brokers also collect the funds from
various investors to invest it in the securities, bonds, equities, etc. The financial advisers
even provide guidance and expert opinions to the investors.
 Investment Bankers: These banks specialize in services like initial public offerings
(IPO), other equity offerings, proving for mergers and acquisitions, institutional client’s
broker services, underwriting debts, etc. As a result of constant mediation, between the
investor or public and the companies issuing securities.
 Escrow Companies: It is a third party acting as an intermediary and responsible for
getting all the conditions fulfilled at the time of loan provided by one party to the other
for the real estate mortgage.
  Pension Funds: The government entities initiate a pension fund. A certain amount is
deducted from the salary of the employees each month. This collected sum is then
invested in different schemes to gain profits. The investor’s fund is returned with interest
after their retirement.
 Building Societies: These financial intermediaries are similar to the credit unions, owned
and facilitating mortgage loans and demand deposits to its members.
 Collective Investment Schemes: Under this scheme, the various investors with common
investment objective come together to pool their funds and collectively invest this
amount into a profitable investment option. Later they distribute the interest among
themselves as per the agreement.

2. List the financial and Credit institutions in the Philippines.

As of 22 June 2016, the Department has revised the list of financial institutions in the Philippines
for the purpose of meeting the financial requirements of a Student visa application.

The following organizations may meet the requirements of a ‘financial institution’ under the
Regulations for the purpose of student visa applications:

ANZ Banking Group LTD Asia United Bank Corporation

Bangkok Bank Public Co LTD Bank of America N.A.

Bank of China Limited – Manila Branch Bank of Commerce

Bank of the Philippine Islands BDO Private Bank, Inc.

BDO Unibank Inc BDO Elite Savings Bank Inc

BPI Family Savings Bank Inc Cathay United Bank Co Ltd – Manila Branch

China Banking Corporation China Bank Savings Inc

Citibank, N.A. Citystate Savings Bank Inc

CTBC Bank (Philippines) Corp Deutsche Bank AG

Development Bank of the Philippines East West Banking Corp

Hongkong & Shanghai Banking Corp Industrial Bank of Korea – Manila Branch

ING Bank N.V. JP Morgan Chase Bank National Assn.

Korea Exchange Bank Land Bank of the Philippines

Maybank Philippines Inc Mega International Commercial Bank Co Ltd

Metropolitan Bank and TCO Mizuho Bank LTD – Manila Branch

Optimum Development Bank Inc Philippine Bank of Communications

Philippine Business Bank Inc A SB Philippine National Bank

Philippine Savings Bank Philippine Trust Company

Philippine Veterans Bank RCBC Savings Bank Inc

Rizal Commercial Banking Corporation Robinson’s Bank Corporation

Security Bank Corporation Shinhan Bank – Manila Branch

Standard Chartered Bank Sumitomo Mitsui Banking Corporation – Manila

Branch Al-Amanah Islamic Inv Bnk of the Ph

Sterling Bank of Asia Inc (A SB) The Bank of Tokyo-Mitsubishi UFJ LTD

Union Bank of the Philippines United Coconut Planters Bank

3. Understand the concept of Loans and Investment

A loan is when you receive money from a bank or financial institution in exchange for future
repayment of the principal, plus interest. The principal is the amount you borrowed, and the
interest is the amount charged for receiving the loan. Since lenders are taking a risk that you may
not repay the loan, they have to offset that risk by charging a fee - known as interest. Loans
typically are secured or unsecured. A secured loan involves pledging an asset (such as a car, boat
or house) as collateral for the loan. If the borrower defaults, or doesn't pay back the loan, the
lender takes possession of the asset. An unsecured loan option is preferred, but not as common.
If the borrower doesn't pay back the unsecured loan, the lender doesn't have the right to take
anything in return. On the other hand, investment is using money to purchase assets in the hope
that the asset will generate income over time or appreciate over time. Investing is putting money
to work to start or expand a project - or to purchase an asset or interest - where those funds are
then put to work, with the goal to income and increased value over time. The term "investment"
can refer to any mechanism used for generating future income. In the financial sense, this
includes the purchase of bonds, stocks or real estate property among several others.

4. Explain the functions and operations of financing companies.

The primary function of finance companies is to make loans to individuals and corporations.
Finance companies do not accept deposits, but borrow short- and long-term debt, such as
commercial paper and bonds, to finance the loans. The heavy reliance on borrowed money has
caused finance companies to hold more equity than banks for the purpose of signaling solvency
to potential creditors. Finally, finance companies are less regulated than commercial banks, in
part because they do not rely on deposits as a source of funds.

Some finance companies lend to consumers, while others make loans to businesses or finance the
sales of manufacturers' products to customers. Because they do not take in deposits from the
public, they are not classified as banks, and they are not subject to the strict banking regulations.
Finance companies that engage in commercial credit activities base their loans on the value of
the assets that borrowers pledge as security. Finance companies obtain funds for lending through
their own borrowing or from parent corporations.