Credit that promotes well-being through goods and services
Credit is an instrument for promoting social welfare, facilitating access to goods and services and the realization of projects. It makes projects feasible in the present by paying for them with future income. This requires a relationship of trust between lender and borrower, as well as a willingness on the part of the borrower to bear the cost of this anticipation in the form of interest.
For the credit sector to thrive, access, transparency and sustainability are important, through appropriate practices and regulations that inhibit abuse and excessive indebtedness.
In Brazil, there are regulatory, technological and educational efforts to make the credit environment more solid and efficient, focused on all sections of the population, affected by periods of low economic growth, inflation rates and high interest rates.
A good way of assessing how important credit is for financing consumption and investments is to compare the amount of credit with the size of the economy, or the so-called Credit to GDP ratio. The higher the ratio, the more important the role of credit, demonstrating the maturity of the credit discipline in the risk assessment process. However, if the ratio is very low, it signals room for evolution in the credit market. The most recent data from the World Bank is from 2023 and shows that in Brazil the ratio reached 71.6%, a percentage well below that observed in the United States, where the rate was 192%.
1) Credit for people - borrowers
Access to essential goods and services: credit operations, in their many forms, make it possible to acquire goods and services that are not immediately accessible, such as the purchase and renovation of housing, the purchase of household appliances, electronics and vehicles, access to education and health care. In short, credit contributes to improving people's standard of living and living conditions.
Support in emergency situations and financial crisess: although the ideal is to build up a financial reserve to deal with emergency situations, if this is impossible, credit can play a supporting role. In these cases, you need to be aware that using credit will compromise part of your income.
Personal development and training: Educational funding is often the only way to make academic training possible for part of the population and, by supporting these investments, credit opens doors to opportunities for individual, family and community growth.
2) Credit for companies - creditors
Credit is also an inducer of growth for companies of all sizes, as it enables investment, expansion and competitiveness.
Promoting entrepreneurship and growth: a strong credit sector drives innovation, job creation and wealth generation, contributing to economic development and improving employment opportunities.
Business turnover: credit enables better management of the company's cash flow, allowing greater control over the management of daily expenses.
Credit to attract customerscredit can be used to generate a competitive edge in attracting and retaining customers, increasing the value of sales and allowing installments.
Credit for times of crisis: in challenging times, credit is essential for business survival, and can offset the drop in turnover and other challenges, such as those seen during the 2020 pandemic.
Finally, it's worth pointing out that the benefits of credit are maximized when individuals or companies take out a loan that best suits their needs and conditions, which requires research and dedication. Maintaining a good credit history and a credit rating as high as possible and analyzing your own ability to pay are other important points for contracting sustainable credit, reinforcing the vocation of credit, which is to promote well-being through goods and services.
