Credit Discrimination

the establishment by the banks of capitalist countries of more rigid credit conditions for some categories of borrowers than for others.

Under current conditions, credit discrimination is one of the forms of financial oppression and exploitation of broad strata of the population, including small entrepreneurs, farmers, and the purchasers of consumer goods who use various types of consumer credit. Credit discrimination is used by banks and specialized credit institutions to obtain additional profit and to redistribute scarce monetary resources when the money market is tight.

The most common form of credit discrimination is increased interest rates on loans for small enterprises and farms. Other forms of credit discrimination include depriving a borrower of medium-term and long-term credit and demanding dependable collateral as a guarantee for the loan. Such measures are applied, as a rule, to financially unstable firms. However, monopolistic companies are able at any time to obtain long-term credit under very favorable conditions.

Credit discrimination may also appear in international economic relations, in particular with regard to the economically less developed and dependent capitalist countries. The capitalist states have attempted to apply credit discrimination against the socialist countries as well. Thus, during the first years of Soviet power, the capitalist banks demanded that the Soviet foreign trade associations provide gold and only gold as collateral for credits; they charged a higher interest rate and limited the term of the credit.