Outdated thinking

In any economy, the banking system theoretically constitutes a basic linchpin for growth, in the sense that it operates as a source of funding for business plans that ultimately create jobs and wealth. The use of the word «theoretically» is significant as Greek credit institutions tend to belie rather than confirm this theory. As demonstrated by an extensive study of 26,000 businesses, published in today’s Greek edition of Kathimerini, the reality of the situation in our country is disappointing. Particularly as regards the funding of small and medium-sized businesses (SMEs), banks appeared to share a common outlook which is rather reminiscent of that of village moneylenders of old. The banks demand real sureties as a precondition for issuing loans, whereas they would do well to pay greater attention to the health, and chiefly the potential, of individual businesses. It is not necessary to immerse oneself in statistics to notice the chief trend of the country’s credit system. The deluge of advertisements for credit cards, mortgages and consumer loans is telling enough, and these are extremely competitive areas. The statistical evidence is overwhelming. When banks offer customers with savings accounts an interest rate of less than 2 percent but issue consumer loans at a rate which generally exceeds 10 percent, their profits can be deemed as usurious. And the overall consequences of such practices for the economy are highly negative. Although it is true that overindebted households stimulate market demand, it is equally true that they encourage imports to the detriment of locally produced goods. In any case, the purpose of the credit system is not merely to ensure easy profits. The system is also supposed to boost economic growth. Indeed, this particular mission of credit institutions is something that bankers themselves publicly promote. In fact, however, the contribution of banks in this area falls far short of the level it should reach. The statistics speak for themselves. No one is asking the banks to fund businesses without checking out their reliability. However, the ownership of properties and other assets is not the be-all and end-all. A more forward-thinking approach would be to issue loans based on the assessment of a firm’s potential, to support innovative business plans and to fund expansive initiatives. The motive behind such a stance is not social contribution but the acquisition of profit – not through the easy avenue of legalized usury, but by making an essential contribution to the production of wealth.

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