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This article is an invitation to reflect on the importance of credit for consumer welfare.

Our reflection begins with a question: why does someone decide to take out a loan and pay interest in return? One of the explanations provided by economic theory is that the consumers increase their well-being by smoothing out the costs of this consumption throughout their lives. Thanks to the credit market, it is possible to enjoy in the present and pay with future income, anticipating dreams and projects.

This smoothing of consumption depends on a functioning financial system and credit market, allowing consumers to take out loans when they want to increase present consumption and to access them when they want to increase future consumption.

The reality, however, is a little more complex. In the credit market, lenders' decisions are affected by the perception of the risk embedded in operations. In addition to the natural uncertainty of the future, the asymmetry of information represents another important obstacle to the supply of credit. Faced with these difficulties, consumers who may wish to anticipate the consumption of some good may face credit restrictions, even if they have the capacity to pay.

In the case of information asymmetry, the credit bureau sector acts directly to mitigate its effects and make the credit market more efficient, sustainable and accessible. The bureaus are therefore agents for broadening the well-being of consumers, making it possible to anticipate the consumption of high-value goods such as real estate and vehicles. For a long time, credit analysis was based solely on default records. Now the market relies on various other records, such as positive consumer information, which increases the effectiveness of credit models.

If they had to rely solely on savings, many consumers would only achieve their goal of home ownership at the end of their lives. In addition to consumer dreams, the credit market can be used to build a small business - in other words, to build a livelihood.

During the pandemic, we witnessed how credit was fundamental to maintaining a minimum of normality. In the midst of all the uncertainties and damage caused by the situation, families and companies obtained resources from the credit market to get through the period. This decision was based on the expectation that, once the crisis was over, they would be able to meet their commitments. On the supply side, the actions of the government and private companies proved decisive in meeting the demand for funds. Creditors opened up to debt renegotiations, which postponed the financial flow and preserved the economic flow. A stricter stance of increased credit restrictions would probably have resulted in the closure of many companies, which in the future could affect the creditors themselves.

Returning to the question that opens this article, about the reasons that lead someone to take a loan and pay interest in return, the answer is the search for well-being, since access to credit instruments enables consumers to transfer income over time. The social side of credit is revealed in issues such as mitigating uncertainties and their impact on people's minds, the threat of loss of income, restrictions on consumption, anxiety generated by excessive information, among others. Borrowers have a responsibility to consume consciously in order to avoid uncontrolled spending and its most serious consequence, which is over-indebtedness.

All the regulatory and technological efforts to make the credit environment more solid and efficient are aimed at more than just expanding these operations. A credit market prosperous contributes doubly to a society. Directly, because it allows the citizens of that society to anticipate resources to acquire goods or to set up a business that improves their living conditions. Indirectly, because the credit market induces a strong economy through the movement of financial resources, which in turn benefits society as a whole.

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor