The role of credit in a market economy cannot be overestimated. The loan ensures the transformation of monetary capital into loan capital and expresses the relationship between lenders and borrowers. It is used to accumulate free cash capitals and incomes of enterprises, private sector and the state and to turn them into loan capital, which is transferred for a fee to temporary use.
A loan translated from Latin (credit) has two meanings — “I believe, trust” and “debt, loan”. Being an economic category, a loan expresses the economic relations arising between owners (economic entities) regarding the redistribution of temporarily free material resources, funds on the terms of repayment and payment. It acts as an independent economic category and has significant differences from the related category “finance”. First, it carries out returnable redistribution, while finance is characterized by irretrievably in distribution processes. Secondly, in credit relations there is a change in the user of loan material and monetary resources, but not their owner. In financial relations, not only the user but also the owner of the redistributed funds changes. Third, in the case of credit relations, loan funds are transferred for temporary use, in the case of financial relations — for an indefinite period, i.e. forever. Fourth, the provision of funds for use in the case of credit relations takes place on a paid basis, and in the case of financial relations — free of charge. Credit relations as a creditor and debtor relations are a form of credit existence.
The credit relation assumes subjects (the creditor and the borrower), and also object — lent cost in the monetary or commodity form.
A creditor is an entity that represents a loan, a borrower is an entity that receives it. After receiving the loan, the borrower becomes a debtor. In the conditions of a bank loan as an intermediary between the final real creditors and debtors acts as a credit institution, which is both the debtor of the creditor — investor and the creditor of the debtor - borrower.
In the course of historical development the social and class image of the subjects of credit relations has changed. In the Middle Ages they were merchants, merchants, craftsmen, churches, monasteries, state, monarchs, nobility, feudal lords. The use of the loan was mainly non-productive in nature. Creditors often became victims of their powerful debtors (feudal lords, monarchs).
In the epoch of capitalism, industrialists, traders, merchants, banks, credit cooperatives and the state became subjects of credit relations.
Capital cannot physically, in the form of means of production, be transferred from one industry to another. This process is usually carried out in the form of cash capital flows. Therefore, credit in the market economy is necessary, first, as an elastic mechanism of capital transfer from one branch to another and equalizing the rate of return.
Credit allows a contradiction between the need for free transfer of capital from one branch of production to another and the fixation of production capital in a certain natural form. It also allows overcoming the limitations of individual capital. At the same time, credit is necessary to maintain the continuity of the cycle of funds of operating enterprises, to serve the process of sale of industrial goods.
Loan capital is redistributed among industries, aiming at market orientation in those areas that provide higher profits or which are preferred in accordance with national programs.
The loan is able to have an active impact on the volume and structure of the money supply, payment turnover, and velocity of money circulation. Thanks to the credit there is a faster process of profit capitalization and, consequently, concentration of production.
The loan stimulates the development of production forces, accelerates the formation of sources of capital for the expansion of reproduction based on the achievements of scientific and technological progress. Regulating the access of borrowers to the loan capital market, providing government guarantees and benefits, the state directs banks to the preferential crediting of those enterprises and industries, whose activity corresponds to the tasks of implementation of national programs of social and economic development.
Without credit support, it is impossible to ensure the rapid and civilized establishment of farms, small and medium-sized businesses and the introduction of other types of entrepreneurial activity in the domestic and foreign economic space.
Russia's transition to a market economy, increasing the efficiency of its functioning, creating the necessary infrastructure is impossible without the use and further development of credit relations.