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Money and credit - Ivanov V.M.

Theme 18. ROLE OF LOAN

18.1. The concept of the role of credit

Economic categories are characterized by a concrete manifestation of their functions in the given socio-economic conditions. The role of credit expresses the result of the functioning of credit relations and is determined by the nature of the latter, that is, it has an objective nature. However, the specific economic environment (including the subjective psychological motivation for making economic decisions) significantly affects the degree and nature of the objective role of credit, the results of its use in the reproductive process and the social sphere. Of great importance, for example, are the practical actions of economic institutions in organizing and developing credit relations.

So, in the conditions of planned and administrative management of the economy, credit, which by objective properties is a factor in the intensification of production, was often used as a lever for the extensive development of the economy. This was manifested, in particular, in the automatic nature of lending, during which loans were provided without coordination with the available credit resources, were used to cover non-productive costs, crediting over-planned stocks or were issued without provision of inventory items. Credit redistribution often played an anti-stimulating role, as it was carried out without taking into account the creditworthiness of business entities and was therefore used to cover the losses of inefficiently operating industries at the expense of well-functioning enterprises. The principle of loan repayment was not always respected. This lending practice, which does not adequately take into account or even contradicts the internal properties of credit, has impeded the realization of its role in the development and improvement of the efficiency of the economy. Meanwhile, this role is very significant and multifaceted.