כרטיס אשראי
כרטיס אשראי צילום: ISTOCK

Today, the fintech market suggests that the Covid-19 pandemic entails an economic recession not only in the United States and Europe but throughout the world. In order to avoid a blow to the economy, the government needs to take stimulus measures, namely, to support consumer demand by amending the law on credit policy. A payday loan is a common financial boom that has been mentioned by many financial experts.

Productivity and Payday Loan Lending During a Pandemic

The availability of credit, given payday loans for high-performing companies, is an important factor contributing to the recovery in economic activity after the shock. This note analyzes how, in terms of company productivity levels, lending has changed in 2021 in the face of the crisis, and the expansion of government support for business compared to 2020.

The analysis showed that in January-August 2020, the volume of loans issued (payday loans) increased relative to the level of the previous year. At the same time, there were changes in the structure of loans. We are talking about the organizations like https://directloantransfer.com/instant-cash/ They are explained by the effect of preferential lending programs which began to operate in May-June 2021. This indicates that a large number of companies have taken advantage of concessional lending programs this year, partially or completely covering temporary liquidity needs at the time of a significant decrease in demand/revenue.

The structure of non-concessional lending in 2021 did not undergo significant changes compared to 2019. Banks still prefer to lend to more productive enterprises and MFOs take advantage of this by luring them to take payday loans.

High-performance companies offer their employees payday loans in 2021 in the same volume as in 2019. This suggests that efficient enterprises which should become drivers of economic recovery do not experience problems with access to credit in 2021 taking payday loans.

Payday Loans From the IMF During the Pandemic and After Its End

In light of the unprecedented uncertainty and severe economic impact of the COVID-19 pandemic, the Fund continues to adapt payday loans. At the same time, the Fund aims to set realistic targets, maintain credibility in programs and ensure that countries themselves actively participate in their development, thereby offering payday loans.

To date, the Fund has provided financial assistance. This is mainly through the use of emergency and preventive lending instruments to about 80 countries choosing payday loans. In addition, more than 30 countries have expressed interest in Fund-supported programs to rebuild financial safety nets and tackle the immediate impact of the pandemic considering payday loans.

To help member countries cope with the worst pandemic in a century, as they transition from the initial phase of containing the spread of the virus to stabilization and eventually recovery, the IMF's lending programs (offering payday loans) are being adapted through innovation and flexibility.

Short-Term Challenge: Macroeconomic Stabilization With Payday Loans

In the short term, IMF-supported programs are primarily aimed at stabilizing the economy by offering payday loans. Specifically, it is about setting spending priorities (for example, health and other social spending, spending to support the liquidity and income of the firms and households most affected by it). Monetary policy should be as adaptive as possible and at the same time take into account inflationary risks. A policy on the financial sector should aim to prevent credit contraction while maintaining a steady-state of the balance sheets of institutions. Thus, payday loans from verified MFIs do not pose a threat per se to consumers.

However, traditional policies may not be enough. In some cases, additional measures may be considered. Thus, the flexibility inherent in the existing regulatory framework for payday loans can be maximized. There may be additional scope for unconventional monetary policy measures. Some measures such as monetary financing of budget deficits may threaten to undermine hard-won policy and institutional capacity-building gains, setting disastrous precedents that will be difficult to reverse in the future.

In the current crisis, monitoring of the Fund's programs (including in the area of ​​emergency financing) is more focused on the quality of expenditures and their management than on specific measurable conditions that are traditionally imposed on IMF lending. For example, indicators of borrowing by the central government.

The unprecedented uncertainty caused by the pandemic has made it harder for governments to plan economic policies, and targets can quickly lose relevance. Payday loans come to the rescue which can be taken by a needy consumer. This trend is likely to continue until the end of the pandemic when there is an opportunity to form a more solid understanding of the prospects for economic development and funding conditions. Until then, despite the application of a more holistic assessment of countries' policies, they will still need to demonstrate that the Fund's resources are being used appropriately.

Payday Loans Dealing With Uncertainty

At the same time, national authorities will need to remain flexible in responding to economic shocks and addressing future risks. In this regard, regular discussions about payday loans between government authorities and Fund staff are of particular importance. Consideration is given to the discussion of effective policy responses in both programmatic and oversight activities.

As debt levels rise, the number of countries at risk of severe debt is likely to grow. In a situation where it is not possible to establish the degree of sustainability of the country's debt situation, it may be advisable to extend the maturity of government obligations. Until there is greater clarity about the possible scope of application of debt relief measures to determine a further plan of action. Again, a payday loan can be a good helper to resolve all the above-mentioned financial conditions.

There are costs associated with this measure such as rating downgrades and the risk of default. But investors can benefit from resolving the underlying problems that led to the loss of market access.

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