BANKING AND THE EARLY CHINESE TRADERS

This landmark building (now owned by the GE Money Bank) located on the corner of Plaza de Santa Cruz and Ongpin Street was once home to the oldest savings bank in the Philippines, Monte de Piedad and Savings Bank. It was founded by Fr. Felix Huertas (de Huerta) of the Franciscan Order with the funds of the Obras Pias.

Inaugurated on August 2, 1882, it was originally located at the ground floor of Santa Isabel College, corner of Arzobispo and Anda Streets in Intramuros. In 1894, it was transferred to the Roman Santos Building at Plaza Goiti where President Manuel L. Quezon was at one time employed as clerk. It was then moved to this landmark building in 1938, but the building was destroyed during the Battle of Manila in 1945. It was rebuilt in 1946 and resumed operation in 1947. It was administered by Archbishop of Manila until 1949 when it was incorporated.

Before the 1800s, without any banks in the Philippine archipelago, anyone with a sizeable venture that needed funding would have to obtain a loan from the obras pias.

The obras pias were pious foundations in which two-thirds of their holdings were allocated for the furtherance of commercial maritime ventures at interest — a voyage to Mexico was 50 percent, to China 25, and to India 35 — substantially increasing the foundation’s original coffer. Earnings from such interest rates were then assigned to other pious and benevolent purposes. A third was generally kept as a reserve fund to cover possible losses. Among the biggest obras pias was the Hermanidad de la Miscericordia, established in the late 16th century.

The opening of the Suez Canal largely contributed to a global economic growth during the decades from 1820 to 1870, and thereby producing similar significant changes in the economy of the Philippines as well. With the Spanish government granting shipping subsidies, local commodities such as sugar, fibers, coffee, and many others were briskly exported. A dramatic spike in foreign trade in the Philippines emerged as a result of such bustling commerce.

The British and Americans dominated the foreign trade in Manila while the local Chinese traders acted as primary intermediaries between them and the domestic market.

But access to the funds of the obras pias was absolutely forbidden to the Chinese. Therefore, before 1850, there wasn’t much capital available for the Chinese communities who were, ironically, Manila’s astute merchants.

Nonetheless, a number of Chinese enterprises struggled to remain lucrative. One could borrow at six percent interest from the Chinese community chests or caja, but the funds were never large. Outside of the community, individual Spaniards were a source of venture capital to individual Chinese entrepreneurs during the middle and late eighteenth century. But everything was more of personal level, nothing organized and of larger scale. Although there were a few private banking efforts initiated in Manila during the second quarter of the nineteenth century, it is not known whether they opened their doors to the Chinese.

However, banking was a key function of American and European businessmen in Manila. Funds were entrusted with them by rich families, the Church, Manila entrepreneurs, and even by the native banks that have slowly sprung up. These funds were then loaned out in the form of crop advances. But advances were also made to the Chinese wholesalers to help them dispose of European imports and to buy up produce for export.

Soon thereafter, another source of funds became available to the Chinese. In 1851, the Banco Espanol Filipino de Isabel II (later renamed BPI - Bank of Philippine Islands) was founded to promote the use of savings for commercial investments. Most of the funds from obras pias were transferred to it and the government added other funds of its own, turning it into a government-regulated, quasi-official institution. Although the bank’s first transaction was the discounting of a promissory note for a Chinese, regular transactions with Chinese merchants were facilitated by non-Chinese guarantors for a fee.

When Banco Espanol Filipino de Isabel II would ask the European merchant firms for the names of Chinese businessmen who were good risks, sensing opportunity, they did not provide the names of the Chinese jobbers and purchasing agents they did business with. Instead, these European firms became guarantors for Chinese borrowers from the bank, including forwarding their payments to the bank, and assuming responsibility for settlement with the bank in case the Chinese defaulted.

For the Chinese focused on wholesaling or retailing ventures, obtaining goods on credit was more important than access to cash loans. Hence, the European and American firms advanced their imported goods to the Chinese dealers while these dealers, in turn, made their profits without having to raise the capital to procure the products.

Additional source:

The Chinese in Philippine Life 1850-1898
By Edgar Wickberg
Ateneo de Manila University Press

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