In the credit market, complying with clear criteria of responsibility and sustainability ensures that access to money is used consciously and efficiently.

Imagine that credit is like a road concession system. Each benefit offered is a road within this system that connects resources to opportunities. For this mechanism to work effectively, it needs to be well planned and executed, with good sidewalk, obeying clear criteria of responsibility and sustainability. In the credit market, this ensures that this access to money is used consciously and efficiently.

Just as well-planned, high-quality roads bring about urban improvements, the sustainability of credit promotes solid growth for those involved in this financial universe.

This analogy shows access to credit as an essential tool in the economic development equation, highlighting the importance of its responsible management to avoid problems and promote sustainable growth.

What is credit sustainability?

Contrary to what many people think, the term “sustainable credit” is not exclusively related to the environment. Rather, it has to do with how resources are used to build greater well-being or to reduce damage, such as debt, for example.

Sustainable credit is directly linked to the promotion of good practices for using loans and financing with awareness and responsibility.

With this model of system, the aim is to keep finances balanced, without making a loss every month. It is based on information, including on defaults.

For those who decide to obtain credit, the more information they have about the characteristics of the operation, the lower the chances of a large debt and the better the conditions offered by creditors.

Sustainable credit will be efficient, then, if those who acquired the loan or financing are able to make the expected use of the resources and honor their commitments. On the side of those who granted the credit, it's a good idea to avoid difficulties in collection or, in the event of a renegotiation, to recover assets or values.

Bureaus and the functions of credit sustainability

Credit is fundamental to the functioning of any economy, but it will only be sustainable if it is beneficial to all parties involved. What's the point of taking out credit on terms that are incompatible with your payment conditions, harming both you and the creditor?

The concept of sustainability is based on the principle that the process of granting credit must be viable in the long term, i.e. it must balance the decisions of the credit grantor with the borrower's ability to pay, taking into account both the financial risks of the operations and the social and environmental aspects.

More than enabling consumers to use credit to carry out their projects, sustainable credit encourages investment, boosts the supply of goods and services, boosts the economy, contributes to the growth of companies and contributes to social welfare, without causing negative impacts on consumers and encouraging sustainable or renewable projects.

For this ecosystem to function in a “healthy” way, an important and essential player is the credit bureau.

The bureaus provide credit grantors with information on potential customers, using tools to assess the risks involved in the credit granting process, and borrowers with an assessment and analysis of their credit situation. With monitoring and analysis of payment capacity, lenders can define the most appropriate conditions for each customer profile, determining specific product offers for each of them. And borrowers, with guidance, tend to improve their ability to take out credit consciously.

The bureaus also monitor documents and transactions, produce alerts and reports, have anti-fraud systems and debt renegotiation initiatives.

With all this information and sophisticated technology, credit bureaus transform available information into applied models, making the relationship between those who grant credit and those who take it more transparent and positive. See below for the functions of sustainable credit:

1 - credit aligned with the lender's objectives and the borrower's conditions

The volume of credit granted must not exceed the borrower's ability to pay, as this can lead to an imbalance in budgets and default on commitments. A possible default undermines confidence in the credit market, affects lenders' results and harms consumers' financial health. More assertive credit assessment models help to balance this equation. Credit bureaus take on this role of providing lenders with the best instruments for granting credit, reducing defaults; and on the borrower's side, they are always there offering CPF and credit score checks, and financial education tips.

2 - credit that respects market dynamics

A credit market that is sustainable over time is able to offer solutions that deliver value to both the lender and the borrower, which is fundamental for maintaining a vigorous economy and generating positive impacts on society, such as job creation, financial inclusion and improved well-being. The credit market is constantly changing, interest rates change, default rates change and the amount of credit granted varies. The credit market must always adapt to the movements of the economy and market fluctuations, finding the best answers for each moment.

3 - credit in line with ESG practices

ESG (Environmental, Social and Governance) is the acronym that summarizes the three main dimensions used to assess sustainability and the impact of business activity on the environment and people's lives. The more in line with ESG practices a credit offer is, the more sustainable it will be, promoting a given company's performance in these three dimensions. Examples of credit aligned with ESG practices include credit for non-polluting companies, credit for social inclusion projects and credit for companies that operate ethically and transparently.

4 - credit that promotes investment, productivity and the financial health of companies

In a country with so many social, political and economic challenges, in order to increase the potential growth of the economy, issues related to the investment capacity and financial health of companies are decisive. As a powerful promoter of economic development, it is through credit that companies and entrepreneurs obtain capital to expand their businesses, develop new products and services and invest in technology and innovation. Access for these companies to short and long-term sources of finance, increasing working capital, expanding production capacity and modernizing processes, facilitates investment and contributes to job creation and increased company productivity.

5 - credit with legal certainty

As with any relationship between economic agents, the credit market also needs a set of rules and guarantees to ensure that the rights and obligations of both credit grantors and borrowers are respected.

Legal certainty in the area of credit ensures that loans and financing are protected by a legal framework that generates trust, transparency and predictability, contributing to the constant expansion of the credit market and investments. It is essential that any practices that harm the market are combated, keeping the environment healthier.

6 - credit that boosts the economy and promotes social welfare through goods and services

Credit is a great partner in providing resources for major infrastructure projects that improve the well-being of people and regions. Financing sanitation, energy and public transportation projects has a huge impact on people's quality of life.

Not just for big projects. Credit can also boost small businesses with an impact on the well-being of people and communities, such as credit lines aimed at micro-entrepreneurs and small businesses, micro-credit, especially in communities with low purchasing power. It also offers credit to small farmers, via agricultural credit. In this context, credit can transform realities and raise purchasing power, increasing the chances of small entrepreneurs staying in business.

7- credit that protects borrowers from over-indebtedness

Over-indebtedness is a chronic problem in Brazil, with consequences for financial life, society and credit conditions, as it increases the risk perceived by financial institutions. The approval of Law 14.181/2021, of July 2, 2021, known as the Over-indebtedness Law, was important for the discipline of credit, in the quest to protect those who have taken on too much debt and are only able to pay it off by compromising their basic needs. The fundamental fact is responsible credit, taking into account the financial conditions of the borrower.

8 - credit anchored in legitimacy (anti-fraud)

Fraud is also very common in the credit market. The use of false identities, credit card cloning and payroll loan fraud. The bureau sector has a number of innovative solutions aimed at combating fraud, serving consumers and companies, with tools that rely on state-of-the-art technology for monitoring, registration verification, evaluation, authentication, among other services.

It is worth emphasizing that the more information available in this credit scenario, the more security for everyone involved in the market: for those who grant credit, for those who take credit and for the economy.