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TERRA ECONOMICUS

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  • Consumer lending rationalization for the local development benefits: an institutional approach

Consumer lending rationalization for the local development benefits: an institutional approach

TERRA ECONOMICUS, , Vol. 11 (no. 4.3),
p. 27-42

Consumer lending market performance largely depends on institutional conditions that guide main tendencies related to its evolution. Study of the borrowers’ behavior considered as a part of more general consumer behavior, needs to emphasize rather embedded patterns influencing it, than price and non-price terms of consumer loans. Interactions between lenders lacking for a supply of the socially oriented loan products, with borrowers highly demanding for a wide range of non-purpose, short-term, unsecured loan products result both in over-indebtedness of households and negative long-term externalities for local and regional socio-economic development. This, in turn, can cause high risks for the whole national economy. To improve the situation, an active policy aimed at endogenous institutional change in lending/borrowing patterns is supposed to be implemented. Consumer loans contributing to local and regional socio-economic development are to be used as a basis for appropriate policy measures construction. To ease an economic plight and prevent over-indebtedness of households is the long-term priority at that. Possible measures to be implemented imply elaboration of ways and methods to correct and harmonize interactions between the agents of the Russian consumer lending market within the institutionalized rationality framework. Habitualization of rational lending/borrowing practices, as a part of such institutional policy, would promote transformation of credit resources into the source of local socio-economic development. Being popularized and reproduced, advantages of best practices of rational lending are considered as the mechanisms of persuasion for the neighbor households.


Keywords: consumer lending; institutional theory; rational lending practices; borrowing behavior; local communities; institutionalized rationality; habitualization of lending/borrowing practices; construction of institutional policy; endogenous institutional change; local socio-economic development

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606