Money and credit - Ivanov V.М.

Topic 15. CREDIT

15.1. Credit as an economic category, its essence, objects and subjects

Credit (from the Latin creditum-loan, debt) is one of the most difficult economic categories. The prerequisite for its emergence was the property stratification of society in the period of the decomposition of the primitive communal system. However, the emergence of conditions that have given credit a character of objective necessity is caused by the formation and development of commodity-money relations.

The general economic reason for the existence of a loan is commodity production. Specifically for a loan of fundamental importance is such a characteristic of it as a returnable compensated movement of value.

The peculiarity of the credit transaction is that, whatever its initial conditions, the final stage is always carried out in cash. Regardless of the form of the loan - monetary or commodity - it has a monetary nature. At the same time, credit relations are not identical with money. These are specific, modified monetary relations that have become isolated as the exchange process develops.

Along with the objective basis, there are specific reasons for the emergence and functioning of credit relations. They are associated with the need to ensure the continuity of the process of reproduction. In particular, the regularity that creates the possibility of the functioning of a loan is a temporary release of cash and the emergence of a temporary need for them in the process of moving production assets of enterprises.

Fluctuations in the fixed assets circulation are caused by a discrepancy between the need for large non-recurring expenses for the renewal of fixed assets and the gradual nature of the restoration of their value in the process of depreciation. As a result, enterprises may be formed as a temporary surplus of funds accumulating in production development funds, and the need for additional financial resources for technical re-equipment and production construction in the event of inadequate own savings.

The need for working capital depends on many factors specific to each enterprise: the seasonality of production, the nature of the output and the raw materials consumed, the size of the working period, the ratio between the time of production and the time of circulation of products, the level of prices for it, etc. However, As a temporary surplus of current assets, and the need to attract additional cash resources.

Temporarily free can be the incomes and savings of the population, the monetary accumulation of the state, the own funds of credit institutions; At the same time they may have a need for additional financial resources. Finally, the balances on the accounts of budget organizations prior to their use are also temporarily vacant.

Individual circulation and turnover of means of economic entities are interrelated within the framework of a single reproduction process. In this regard, there is the possibility of temporary shortage of funds of some economic agents to be filled at the expense of temporary surplus of others, since the release of funds and the additional need for them, as a rule, do not coincide in terms of education, time and quantitatively. The process of accumulation of temporarily idle funds and their redistribution are carried out with the help of a loan. Thus, the contradiction between the temporary settling of funds and the need for their effective use is resolved.

The nature of the credit transaction, based on the temporary borrowing of someone else's property, necessitates the material responsibility of its participants for fulfilling their obligations. Thus, participants in a credit transaction must be legally independent persons and operate on the basis of economic or commercial calculation. Individuals can become subjects of credit relations, if they are legally competent and have stable guaranteed sources of income.

An obligatory condition for the appearance of a loan is the coincidence of the economic interests of the creditor and the borrower. The lender should be equally interested in issuing the loan, like the borrower - in obtaining it. Such a coincidence is not achieved automatically if there is free money resources for one and the need for them in another. Of decisive importance is the coordination of the specific parameters of the loan - its collateral, the loan term, the interest rate, etc., as well as the availability of alternative financing options and the allocation of funds.

Being one of the most developed commodity-monetary forms, the loan has a complex structure, the analysis of which should include a description of all its properties and reflect its integrity.