Money and credit - Ivanov V.М.

18.2. The regulatory role of credit and its aspects

Considering the results of the functioning of credit in modern conditions, it is first of all necessary to note its regulatory role, the degree and nature of its impact on economic processes are largely determined by the mode of production. With a planned economy, the regulatory role was limited and subordinated to the plan, the loan was considered and used only as one of the economic instruments for organizing the fixed and circulating assets of enterprises. The insignificance of the regulatory impact of credit has served as the basis for some economists in general to deny the regulatory role of credit. As the transition to the market, the widespread introduction of economic management methods, increasing the role of value categories in the management of the economy, the regulatory role of credit increases. In a developed market economy, credit is an instrument of direct regulation of reproduction processes. The forms of the regulatory impact of credit are manifold. It manifests itself simultaneously at the macrolevel (through the state credit policy) and the microlevel (through self-supporting relations or relations of commercial calculation).

It is necessary to take into account that the regulating role of credit is manifested not only at the stage of distribution, but also covers the entire reproduction process. Being a distributive category, credit can not act as a material factor of production, directly affect the production process. At the same time, credit provides a process of changing the value forms of enterprise funds, serves the process of expanded reproduction and thus acts as a factor of its continuity. The active influence of credit on the reproduction process is realized by applying it as an instrument for the redistribution of free resources, and also at the expense of its stimulating properties, which determine the rational use of loans.

It is known that credit objectively serves as an indispensable source of formation of fixed and circulating assets of economic entities, that is, the use of credit along with own funds is a normal moment in the activity of enterprises. Due to credit relations, there is no need for mandatory accumulation of own funds and there is a faster involvement of resources in economic turnover by saving time in the purchase of raw materials, materials, etc. Thus, by facilitating the continuity of the reproduction process, credit is also a factor in its acceleration. Its impact on the acceleration of the reproduction process is realized by reducing the time spent on changing the functional forms of the product, which ultimately increases the turnover of funds. This is achieved through the involvement of temporarily free resources, especially through the provision of payment loans and commercial loans, which directly contribute to the acceleration of the sale of goods. In addition, as a factor in accelerating the reproduction process, credit also has a stimulating effect: the need to return the borrowed funds forces the borrower to take measures to increase the efficiency of social production and, consequently, to accelerate the reproduction process.

The degree of credit impact on the speed of turnover of funds is more noticeable in the sphere of circulation, where the involvement of credit resources in the circulation makes it possible to speed up payments and thus directly affects the reduction of turnover time.

Because of its nature, credit interacts closely with the balance of the economy, which is the most important condition for the effectiveness of social production. In particular, the normal functioning of credit relations in economically justified borders implies the observance of an equilibrium between the temporarily available resources in the society and the amount of funds redistributed with the help of credit.

Interacting with the balance of the economy, credit relations directly affect it. Thus, in a market economy, the role of credit is manifested in regulation, that is, maintaining or optimizing the proportions of social production. The credit form of redistribution of the gross national product and national income is final. It encompasses, along with the financial form, the redistribution between the productive and non-productive spheres, between the branches of production and the regions. Thus, credit to a certain extent affects the formation of the structure of social production, the most important proportions of the social economy: the ratio between the funds of reimbursement, accumulation and consumption; The ratio of growth rates of I and II units, etc. By facilitating the equalization of the rate of profit in various sectors, credit affects the sectoral structure of the public economy, since temporarily free resources are redistributed to industries where higher profits are obtained.

At present, this role of the loan is not fully realized. Active participation of the loan in regulating industry proportions is hampered by the inadequacy of the development of market principles in the Ukrainian economy. In particular, the loan capital market has not been fully formed, a credit system adequate to market relations has not been created, the process of demonopolization and decentralization of the economy and the banking system has not been completed, the activity of commercial banks in lending to the public economy does not yet conform to market principles. The regulatory effect of credit on reproduction proportions is also complicated by the production crisis and the development of inflationary processes. In these conditions, credit redistribution leads to a transfer of loan capital from the sphere of production to the sphere of circulation, leading to a violation of macroeconomic balance. Given the existing high degree of monopoly of social production and the large specific weight of centralized credit resources in the sources of credit investments of commercial banks, the movement of loan capitals on a free competitive basis is largely hampered and does little to equalize the rate of profit in various sectors. Lending in large amounts of the state budget deficit violates the justified proportion between the accumulation and consumption funds.

At the same time, at the present stage, credit is one of the factors in the development of market relations. As is known, under capitalism of the period of free competition, credit served as the basis for the concentration and centralization of capital, facilitating the transformation of private enterprises into joint-stock companies, as well as the formation of monopolies. Thus, the loan contributed to the qualitative development of market relations, the transition to a new organizational level. In modern conditions, as a result of corporatization of state enterprises and banks, credit facilitates the decentralization of the economy and the development of market relations in Ukraine. In addition, the participation of credit in the formation of the market is to some extent realized through the programs of priority crediting of non-state forms of management.

The interaction of credit with the balance of the economy is manifested in its direct influence and on the commodity-money balance. On the one hand, the use of credit in the public economy, with compliance with all the principles of lending (without violating returns, etc.) contributes to an increase in the production of goods. It is very important that in competitive conditions and with the commercial orientation of banks' activities, loans are issued to enterprises in which production is organized more efficiently and whose products are in demand. Thus, credit stimulates the expansion of production of goods, which society needs, that is, it helps to expand the market capacity from the position of supply. However, the stimulating effect of the credit on the efficiency of production is, as already noted, significantly weakened due to the underdevelopment of market relations and the economic crisis.

On the other hand, the loan is one of the main regulators of the aggregate money turnover, and through the latter - the intraeconomic turnover of each subject of economic activity and turnover of the money income of the population. As a result, credit helps to expand the market capacity from the demand side. This aspect of the role of credit in market conditions is extremely important and is due to the fact that banknotes and payment instruments circulating in modern monetary systems are of a credit nature. The credit function of replacing cash with credit operations can be called monetary, since the movement of credit directly affects the money supply in circulation. The realization of this role of credit is carried out through centralized regulation of the circulation of money through the credit sphere, using the norm of mandatory reserves, the discount rate, and so on.

It is necessary to take into account that the credit and money spheres are characterized by unity, as a result of which monetary relations in turn significantly affect credit. The return movement of the loan is significantly complicated in the event of a slowdown in the monetary turnover or its frustration caused by inflation. Thus, the slowdown in the movement of money due to, for example, mutual non-payments between enterprises, leads to the involvement of excessive credits into the economic circulation and a significant increase in the risk of their non-return. In the conditions of inflation there is an acceleration of the credit turnover due to the redistribution of credit resources in the sphere of circulation, which contributes to the growth of excess money supply. The structure of credit investments deteriorates due to a sharp decrease in the share of long-term loans, which has a negative prolonged impact on the reproductive structure.

A special role in the impact on economic processes belongs to the bank loan. It is known that the peculiarity of banking activity is that when banking services are rendered, profit is not created - it is formed at the expense of the profits of customers using the bank's services. This encourages banks to direct credit resources to finance the most profitable industries, enterprises or highly effective measures. Otherwise, the risk is not only to lose less than expected profit, but also to lose part of own funds. As a result, bank credit really contributes to structural reorganization of the economy. Moreover, bank credit currently acts as a factor in the decentralization of economic management. The main instrument of the regulatory impact of the bank on the activities of an economic entity is its capital. The Bank establishes the amounts and conditions for the provision and repayment of loans, applying various economic sanctions in case of violation of the loan agreement or refusing to provide a loan in the future. If there are serious breaches of payment discipline, the bank may take actions directly regulating or controlling the economic activities of the borrower. Thus, the system of bank lending directly affects the formation of proportions of production, since the issuance of loans contributes to the development of certain industries. The regulatory impact of the central bank, the state's credit policy, is mainly indirect, corrective and is implemented through targeted refinancing of commercial banks, rationing of their activities and interest rate policy.

With the development of market principles in the economy of Ukraine, an increasingly important regulatory role will play commercial credit, which can affect both the volume and speed of money turnover through the formation of a bill of exchange, and the efficiency of the functioning of both the borrower and the lender (provided sufficient development of bank accounting Transactions with bills). With the development of the stock market and the conversion of the republic's domestic public debt into government securities, conditions will be created for the implementation of the regulatory role of public credit. In making transactions with government securities, the central bank in a developed market economy influences the resource potential of commercial banks, thereby regulating the volume of credit investments.

Thus, the regulatory role of credit is great and multifaceted. Realizing it, credit acts as an economic method of managing public economy. Decentralization of the economy and the transition to the market significantly increase the role of credit in this capacity and it begins to act as one of the most important means of regulating the aggregate monetary turnover. Along with this, credit is a special form of regulation of circulation and turnover of funds of economic entities. As an economic method of management, credit is realized through the procedure for lending, that is, the conditions for granting and repaying loans. Therefore, economic institutions that organize credit relations, due to the objectivity of their activities, can have both a positive and negative regulatory impact.

Being involved in the economic circulation on the basis of credit, temporarily free funds ensure the continuity of the change in the forms of production assets, promote the production and sale of products. Thus, credit makes it possible to rationally organize the turnover of enterprise funds, without diverting significant resources into cash funds to create stocks of raw materials. In addition, credit contributes to improving production efficiency, strengthening self-financing through its incentive qualities, conditioned by the return, urgency and payment of credit. In order to fulfill the terms of the loan agreement, the enterprise needs to efficiently and efficiently use the borrowed funds, to make efforts to accelerate their turnover. At the same time, the stimulating role of credit can not be overemphasized. Although credit relations objectively create prerequisites for improving the efficiency of the borrower's economic activities, the realization of these prerequisites in a particular transaction is determined by many factors (and not only economic nature), both dependent on the borrower and conditioned by the general economic conditions. At present, for example, often the reasons for the non-return of loans are difficulties in selling goods due to the narrowing of demand for them in the face of significant inflation, the destruction of a single economic space, the growth of mutual debt, etc.

The functioning of economic entities in market conditions on the principles of self-financing means that the expansion of reproduction should be carried out primarily through internal sources of enterprises - profits and depreciation. However, self-financing has objective boundaries, which are due to the limited internal funding sources. In a market economy in the context of competition between credit institutions and a wide range of credit services, credit is a relatively easy and reliable source of free resources, and taking money on a loan is often more beneficial than accumulating or spending your own resources.

Thus, credit is the most important source of formation of fixed and circulating assets of business units. In recent years, with the development of market relations, this role is increasing, as the share of budgetary appropriations for the development of production is reduced, occupying an inadequate place in the structure of state budget expenditures. However, in conditions of high inflation, the realization of this role of credit is significantly hampered by the deterioration of the structure of credit investments, i.e., the overflow of credit resources into the sphere of circulation and a significant reduction in the terms of granting loans. With the development of the stock market, the role of credit as a source of increasing the own funds of economic entities is widening: the incomes of enterprises are formed among other sources at the expense of interest on deposits, income on shares, bonds and other securities. When corporations are corporatized, credit is also a source of capital investment.

So, credit and self-supporting relationships are closely interrelated. The nature and extent of this relationship give rise to some economists view credit as a self-supporting category, ie, refer the scope of its functioning entirely to the system of self-financing. However, the role of credit goes beyond self-supporting relationships, for example, in its forms, such as state and consumer.