The Nature

and
VII Functions of Credit
CREDIT
AND
THE
ECONOMY
“The power or ability to
obtain goods or services in
exchange for a promise to
pay for them later”
 Credit Distinguishing
from Debt

Power of a person to obtain goods, or Amount/any remaining portion of the

services without the requirement of original amount
paying for them immediately upon
delivery.
 Credit Distinguishing
from Credit Volume

Limit is fixed for a given period May increase or decrease from time
to time
 Credit Distinguishing
from Wealth

Means by which one may acquire the Any material or physical thing that
right to use wealth satisfies a human want, provided that
is limited in amount
Users Of Credit

Consumers
 House and lot

Motor Vehicle

Household Appliances

Travel Wedding Expenses

CONSUMERS
Educational Services

Clothing and Jewelry

Users Of Credit
Consumers

Businesses
 Payroll

V Purchase of Merchandise

Construction of building and facilities

BUSINESSES Purchase Equipment

Refinancing of maturing debts

Users Of Credit
Consumers

Businesses

Government
 Even local government resort
to borrowings when expected
revenues fall short of program
expenditures

GOVERNMENT
 Consumer Credit

• Charge Account

• Installment Credit

• Revolving Charge
Account

• Personal Loans
 Consumer Credit

Trade Credit
• Open Book Credit

• The Trade Acceptance

• A Promissory Note
 Consumer Credit

• Commercial loans Trade Credit

• Real estate loans
• Agricultural loans Bank Credit
• Industrial loans
• Salary loans
• Automotive loans
• Deposits collateral loans
• Interback call loans
 Consumer Credit

Trade Credit
Type of credit
required by Bank Credit
businesses and the
government to finance Investment Credit
the construction and
operation of certain
projects
 Consumer Credit

Trade Credit
Loans used to
finance the production Bank Credit
and marketing of
agricultural products. Investment Credit

Agricultural Credit
 Consumer Credit

Trade Credit
• Letter of credit
Bank Credit
• Documentary bills
Investment Credit
• Open account
Agricultural Credit

Export Credit
 Consumer Credit

Trade Credit
Loans extended to
the government Bank Credit
whether at the
national, provincial, or Investment Credit
municipal level.
Agricultural Credit

Export Credit

Public Credit
What are the
basis of
credit?
HARACTER
APACITY

APITAL

ONDITION

OLLATERAL
Interview with History and growth
the Applicant. of the Applicant’s
business

Nature of the
products and
services handled

Sources of raw
materials or stocks
of merchandise
Interview with
the Applicant.
Competitive
position of the
business

Plans for the future

Lender’s own
record
Credit Rating
Agencies
Financial Statement