What are some pathways to sustainable credit and finance? And in the face of the perceived excesses of financialisation, does broader access to finance promote human flourishing? Such questions have attracted considerable scholarly and public debate in the aftermath of the financial crises and have led to an emerging focus on institutional alternatives to market exchange in finance and beyond. In this paper we study the persistence of non-intermediated credit relationships in contemporary settings, whereby lenders and borrowers engage in transactions directly and without the participation of a financial intermediary.
Abstract
What are some pathways to sustainable credit and finance? And in the face of the perceived excesses of financialisation, does broader access to finance promote human flourishing? Such questions have attracted considerable scholarly and public debate in the aftermath of the financial crises and have led to an emerging focus on institutional alternatives to market exchange in finance and beyond. In this paper we study the persistence of non-intermediated credit relationships in contemporary settings, whereby lenders and borrowers engage in transactions directly and without the participation of a financial intermediary. Given that such forms of peer lending were a mainstay source of credit prior to the emergence of the formal financial sector, our benchmark case study outlines the key features of credit relationships before modern banking in Western Europe. The other two case studies come from jurisdictions where non-intermediated credit persists on a broad scale despite the fact that transacting parties have access to a modern financial sector.
The aim of this contribution is three-fold. First, we wish to identify features of non-intermediated transactions that are consistent with a notion of sustainable credit, in the sense that they are not destabilising either for the transacting parties themselves or the broader community. Secondly, we wish to identify some scope conditions and limits for the use of non-intermediated credit. Finally, we wish to evaluate such credit transactions along a set of different normative benchmarks and draw out some lessons for contemporary finance and financial regulation. We show that the mechanisms for the conclusion of credit transactions, as well as the adjustment of terms and dispute resolution across all settings are not purely informal, even if supported by relational norms giving these transactions the hallmarks of sustainable credit. Even if such non-intermediated credit relationships cannot provide a complete alternative to modern finance, they do provide templates that can allow financial institutions to tailor products to the needs of certain customers and to outsource credit assessment, as well as allowing financial regulators to identify and resolve the concrete problems of access to credit for specific disadvantaged communities.