Everyone wants loans from banks. But the truth is that more credit means less development


Everyone wants money in loan from banks. Small, medium and large entrepreneurs, no one is excluded, knock on the doors of lenders to avoid default.

Here is the point. The purpose of the destination of the financing, as they say in “bank”, is not development but survival.

In Italy, in fact, there is a widespread opinion that the lack of credit is today one of the most serious constraints on the country’s economic growth. In some of its extreme variants, this line of thought comes to argue that the current recession is even the entire financial crisis, are due to a credit crunch.

Don’t be shocked if I tell you that the truth is exactly at the opposite. The crisis that we are experiencing and that we will experience in the coming months arose from theexcess credit, not from his shortage. And the pandemic is not the main cause. There pandemic it has only accelerated a process that pre-exists in Italy in the crisis of about twenty years, and which is, if anything, aggravated, or at least perpetuated, by an excess of dependence on bank credit. Italy, within the global crisis, especially in the SME sector, suffers from its specific inability to generate development and the absence of credit is only a very popular scapegoat.

All the professional experiences I have had in the past thirty years confirm one point: credit expansion is not the engine of development, least of all the expansion of undifferentiated creditor worse, in support of all companies in crisis.

More credit equals less developmenthere is the paradox that seems to emerge from the observations made in all these years.

The responsibility of the banking system, mica could be missing, is highlighted in three points.

First of all, credit expansion is not the only and not the main engine of economic development: banks can (and must) contribute to development in many other ways, even more important than credit such as the placement of mini bond.

Second, the undifferentiated expansion of credit would even be today harmful, given that the 50-60% credit is currently allocated to companies and sectors in structural crisis; It is crucial for economic development that new credit flows are allocated to companies with the greatest growth prospects.

Finally, beyond the reallocation and / or expansion of credit, the contribution of the banking system to the survival of businesses should consist in the ability to respond to the various competitive situations present in our economic fabric, with differentiated tools. Because basically in our country, at the moment, we have a very large group of stagnant businesses and already in a severe financial crisis that requires restructuring tools and crisis management that replace the current use of credit as palliative. At the other extreme, we find a small but very important group of fast growing and very solid companies, which instead needs to be supported with a very wide range of tools to support development, within which credit is only a small part.

But it’s not just the banks’ fault.

Prodromal to credit should be there clear and sustainable development plans, supported by an adequate risk capital that is not to be confused, a typical slip of the small business owner, with personal assets to guarantee credit lines. A well-capitalized company can support development plans; an entrepreneur with a satisfactory framework B (properties) of the tax return does not produce development.

Not only that, but there should also be forms of downstream advisory financial, also present in the company in the form of temporary managers, aimed at defining the most appropriate support package for corporate investment plans, or even forms of advisory that go into the merits of the same projects (for example by helping to assess the relative attractiveness of potential new markets).

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