What is Consumer Credit?
“Any loan or line of credit that a borrower uses to purchase goods and services at the retail level. Typically, consumer credit finances any asset that depreciates quickly and is not used for investment purposes.
“Credit cards are a common example of consumer loan because one pays for ordinary expenses such as groceries or gasoline with a credit card; one ordinarily would not purchase stock with a credit card. Loans for education and cars are also examples of consumer credit……” Financial Dictionary
Consumer credit is the availability of the ability of individuals to have access to consumer good and services without having to pay immediately.
The consumer can have complete access to good and services now and pay against future income.
With consumer loan, individuals can have all he needs and requires for comfortable living, and pay back over a period of time from future income. And not have to save money for months unending to be able to buys household electronics, cloths, personal or/and family automobiles and homes
There have been many articles about positive relationship that exist between consumer finance and economic growth and development.
Little have however been written about the impact of consumer credits on corruption. Here are some of the ways consumer credits helps to discourage corruption.
Availability of consumer credit helps motivates economic rejuvenation and growth; It allows access to good and services without having to pay for them immediately; It gives manufacturers the necessary encouragement to keep production on because good are being sold and consequently new jobs are created.
Consumer finance helps create jobs:
In an economy where there is availability of consumer loan, the rate of unemployment is low or at best can be brought under control with credit stimulation of both consumers and retail sector.
Consumer credit stimulates purchases of consumer goods and services so manufacturers and retail marketers are kept busy. The consequent effect on job creation as the vast majority of unemployed youth are put to work. This invariably reduces the pressure on the few people that are employed as they have fewer mouths-to-feed.
Consumer finance reduces pressure for lifestyle funding:
One of the factors responsible for corruption is the need to fund lifestyle.
With availability of consumer credit, funding of holidays, good clothing, electronics and other lifestyle items can be purchased on credit. Then payment can be done over a period of time say 1 year or less depending on the consumer’s ability to pay.
Pressure on need to pilfer to fund lifestyle is thus reduced, since individuals can have immediate access to lifestyle products and pay over a period of time.
Consumer credit eliminates delayed access to basic needs of life
One of the major cause of corruption is pressure to quickly provide for their basic needs in an uncertain labor market. Consumer loans help eliminates this pressure.
According to Abraham Maslow, in his 1943 Theory Of Human Motivation. The most basic of human needs which he termed “Physiological Needs” includes need for food, air, water, shelter and clothing. With consumer credits these basic need can be satisfied without delay.
A fresh graduate can take mortgage and pay over 40 years. He can then start to live comfortably immediately he gets a job. He will not need to save money for years to be able to buy a piece of land with cash and build for several years after.
Also in an economy where consumer credit is encouraged, automobile loans can be obtained to finance the purchase of new automobiles. Individuals does not need to look for opportunities to shortchange government or his employer to be able to live comfortably.
Nigeria as a nation should embrace consumer loans so the current anti-corruption crusade of government can be effective and focused.
If employees in both public and private sectors cannot have access to consumer credit, and the system continues to force them to wait for years in other to afford the basic needs of life. Then they will continue to look for opportunities to bleed the system in other to afford these needs.