ROLE OF THE BANK CREDIT IN THE DEVELOPMENT OF THE ECONOMY - Наукові конференції
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ROLE OF THE BANK CREDIT IN THE DEVELOPMENT OF THE ECONOMY

01.09.2015 18:40

[Секція 6. Банківська справа. Гроші, фінанси і кредит]

Автор: Kovalenko Alexander, Kyiv National Economic University named after Vadym Hetman



Economic growth cannot be imagined without developed credit market which is a source of the financial resources so needed for economic subjects to support reproductive process. Credit market consists of two parts: market of securities and bank system. According to this there are two types of an economic system (depends what system to exceed): with market of securities-core system and with bank-core system. An example of the first kind is the USA system where most financial resources are borrowed on the market of securities. An example of second type is European economic system where banks are main intermediaries on the financial market. Bank system play significant and particular role, especial in the second type. All economy depends from its functioning and stability. Ukraine refers to bank-core economic system. 

An impact of the credit on the economic growth is widely investigated in the economic literature. There is straightforward relation between credit and GDP. Especially this relationship is felt in the bank-core system. Significant role of credit, especially bank credit, explains necessity of further investigate of this question.

In Ukrainian economic literature credit is considered as public relationships arising between economic subjects in connection with the transfer in temporary use available funds based on repayment, paying and voluntary [3].

Bank credit is credit when one of the sides of the credit relation is bank [1].

Bank system plays significant role in the economic system and it is different from another creditor. Bank is creditor and borrower at the same time. Banks get their resources from legal person and individuals. Then they are placed between ones who have need in additional resources. Within this process transformation is took place: transformation of time, volume and risk.

Borrowed funds and credits have usually different term and volume. So borrowing and then grant the resources banks transform. Risk transformation is achieved by credit portfolio by diversification.

Credit is integral of the function of the legal person (especially legal persons that have season function as agricultural). For smooth work legal person must have access to the additional resources including credit. Credit using enables to cover gaps between receiving profits and implementation of the cost.

The basis of the banking is the credit activity that gives the opportunity to bank to function like kind of business. According to this there are two important things.

Credit has two displays in the economy: on macro and micro levels. Functioning on micro or macro levels it has appropriate influence on the economy.

Micro level includes functioning of economic subjects: individuals and legal persons.

Individuals use credit to buy expensive things like automobiles, apartments… Wide use of credit for individual crediting gives opportunity to extend sales for retailers. 

Economic subjects within operate functioning have gaps between moment of implementation of cost and getting profit. Credit use lets to close those gaps. As result production can be smooth. Within the monetary policy (credit channel) credit play also significant role. Credit channel (in condition when other factors are unchanged) can stimulate or decline economic growth in the country. This is possible for monetary multiplication.

Credit plays also important role for start-up projects. At the beginning this projects don’t have so needed financial resources to start operation. But in Ukraine, unfortunately, this isn’t popular because of the higher risk comparing with the traditional kind of credits.

Macro level includes display of credit influence on the state level. Within the monetary policy (credit channel) credit play also significant role. Credit channel (in condition when other factors are unchanged) can stimulate or decline economic growth in the country. This is possible for monetary multiplication.

Essence of thing or process appears within its function that it plays in some system. Credit isn’t exception. The best of all essence of credit appears within its function in the economic system. Question of the credit function is controversial. Scientific debate is discussed of number and meaning of the main credit functions. According to domestic scientific literature there are three main credit functions:

• redistributive function;

• emission function;

• control function [2].

Conclusions

So we can do next conclusions. Bank credit plays important role in the economic development of the state. This role is displayed on two levels – macro and micro levels of economy. That is why bank system needs not only government regulation but also government support.

On micro level credit lets to close time gaps between implementation of costs and getting profit. But on macro levels this let production to be smooth.

Use of credit let to start new projects that don’t have financial resources. 

On macro level credit use gives opportunity, instrument, to stimulate economic growth through credit channel of monetary policy.

References

1. Artus, M. M. (2005), Hroshi ta kredyt [Money and Credit], Vydavnytstvo Yevropejs'koho universytetu, Kyiv, Ukraine.

2. Lutsiv, B. L. (2000), Hroshi, banky ta kredyt: u skhemakh i komentariakh [Money, Banks and Credit: schemes and comments], Kart-blansh, Ternopil, Ukraine.

3. Savluk, M. I., Moroz, A. M. and Pukhovkina, M. F. (2002), Hroshi ta kredyt [Money and Credit], KNEU, Kyiv, Ukraine.





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