The loan function is an expression of substance and substance. The loan function is understood as the focus and content of the loan. In the economic literature, more than 30 credit functions have been identified. They can be both intrinsic to this category (arising from its essence) and conditioned by external factors.
The essence and content of credit are manifested in its four main functions: redistributive, reproductive, substitution of real and cash money with credit instruments and stimulating.
The credit market performs a macroeconomic function. In the modern economy, monetary capital is accumulated mainly in the form of monetary loan capital. Therefore, the accumulation of monetary capital is important not as a separate process in itself, but primarily in terms of its impact on the entire course of reproduction, i.e. in the macroeconomic aspect.
The functions of the credit market are determined by its nature and the role it plays in the system of capitalist economy, as well as the tasks of reproduction of capitalist production relations.
Five main functions of the credit market should be singled out:
1. servicing of commodity circulation through credit;
2. accumulation or collection of monetary savings (savings) of enterprises, population, state, as well as foreign clients;
3. Transformation of monetary funds directly into loan capital and its use in the form of capital investments to service the production process;
4. Servicing the state and population as sources of capital to cover state and consumer expenditures;
5. acceleration of capital concentration and centralization, promotion of formation of powerful financial and industrial groups.
These functions of the credit market are aimed at maintaining the capitalist mode of production and ensuring the functioning of the economic system.
Reflecting the accumulation and movement of monetary capital, the credit market is organically connected with the movement of value in its monetary form, with the formation and use of various monetary funds in the form of credit resources and securities. By means of the market it is possible to measure and determine the movement, volume, direction of monetary funds going on the development of social reproduction, its impact on social and economic relations.
In the conditions of market economy the market of loan capitals acts as a kind of pump, pumping out temporarily free financial resources from some spheres of economic activity and directing them to other spheres, providing higher profit.
Saving of circulation costs. In the process of functioning of the enterprise there is a temporary gap between the receipt and expenditure of funds. At the same time, not only an excess, but also a lack of financial resources can be formed. That is why loans to compensate for temporary shortage of own circulating assets, which are used by almost all categories of borrowers and provide a significant acceleration of capital turnover, and, consequently, savings in total costs of circulation, have become widespread.
Acceleration of capital concentration. The process of capital concentration is a necessary condition for the stable development of the economy and a priority goal of any business entity. Real help in this task is provided by borrowed funds, which allow to significantly expand the scale of production and provide an additional mass of profit.
Maintenance of trade turnover. Such types of credit money as promissory notes, cheeses, credit cards, ensuring the replacement of cash payments by cashless transactions, simplify and accelerate the mechanism of economic relations in the domestic and international markets. The most active role in solving this problem is played by commercial credit as a necessary element of modern commodity exchange relations.
Acceleration of scientific and technological progress. Most clearly, this role of credit is manifested in crediting the activities of scientific and technical organizations, which are more specific than in other sectors, the time gap between the initial investment and the sale of finished products. Therefore, the normal functioning of the majority of research centers is impossible without the use of credit money.
Principles of crediting. Credit relations in the economy are based on a certain methodological basis, one of the elements of which are the principles strictly observed in the practical organization of any operation in the market of loan capital. These principles were spontaneously formed at the first stage of credit development, and later were directly reflected in the national and international credit legislation.
The repayment of the loan. This principle expresses the need for timely repayment of financial resources received from the lender after their use by the borrower.