Potential competitors of banks in the field of consumer lending is a fairly wide range of economic entities that provide similar services to customers. The most significant today, both on the international and national markets, is competition with non-banking financial and credit institutions, which have recently been gaining more and more development. The strengthening role of these organizations has been observed since the seventies of the last century throughout the world. These organizations act like banks, adopting classic service approaches and using their own, non-traditional models.
Mortgage loans of non-bank financial institutions are mainly short-term and small in size. Therefore, their assets are sufficiently diversified, which helps to mitigate credit risks and protect the interests of their investors. The payment direction of loans of these companies helps to accelerate the sale of goods and services, which positively affects economic growth. Therefore, the services of non-banking institutions are in steady demand, these companies are actively competing with banks, especially in the field of consumer lending.
A credit union is a non-profitable organization founded by individuals, professional unions, their associations on a cooperative basis in order to meet the needs of its members in mutual lending and the provision of financial services through the combined monetary contributions of credit union members.
Such credit institutions satisfy the needs of their members in small consumer loans.
Recently, in developed countries there has been a trend towards greater universalization of the activities of credit unions. In particular, they provide brokerage services for operations with securities issuing credit cards, and provide advice on investment issues and commercial activities.
In most countries, credit unions have the right to complete a full list of banking operations. For example, in the United States and Canada, credit unions, in addition to attracting various deposits and issuing loans, invest in government and other highly reliable securities, provide settlement services, act as insurance contract agents, provide advice on tax financial management, and also perform many non-financial services. -financial nature for its members. Such a wide range of services, of course, favorably affects the quantitative and qualitative growth of credit unions in these countries.
So, credit unions are a powerful competitor to other financial and credit institutions.
In Ukraine, credit unions provide these types of loans to their members:
- consumer loans;
- loans for the purchase, construction, repair of housing;
- loans for peasant farms;
- farm loans;
- commercial loans;
- loans for other needs.
Despite a significant reduction in lending by credit unions in recent years, consumer loans are the most in demand, with a share of about 40%.
Second place is occupied by loans for other needs – 28%. A significant share is occupied by loans issued for the purchase, construction and repair of housing, as well as commercial loans. Lending to farmers and farms in recent years has a small share in the total volume of loans issued.
The rapid development of market relations in Ukraine is impossible without significant financial injections into the economy and the continuous and rapid circulation of capital. Therefore, the urgent problem of finding possible sources of investment resources, among which private investment is of particular importance for the national economy. They are very necessary for the Ukrainian economy, because without outside help and loans, today a breakthrough in technology, quality, structural adjustment, and solving social problems is simply unrealistic.
At the same time, the excessive amount of investment activity from abroad makes the national economy dependent on foreign capital, which can lead to a complete loss of economic independence. Therefore, the problem of attracting and the impact of private investment in the economy is very relevant.
One option for private investment is to invest in secured loans. A pledge of a client’s property is one of the most common ways to ensure loan repayment. A pledge of property is drawn up by a pledge agreement signed by two parties and confirming the creditor’s right when the borrower fails to fulfill the payment obligation, to receive preferential satisfaction of the claim from the value of the pledged property.
The use of collateral in the practice of organizing credit relations implies the existence of a special mechanism for its application. The pledge mechanism is the process of preparing, concluding and executing a pledge agreement and begins to act at the time of consideration of a loan application as a condition for concluding a loan agreement.
The use of this mechanism accompanies the entire period of use of the loan. A real appeal to the execution of the collateral mechanism arises at the final stage of the loan movement – at the stage of repayment of the loan – and only in certain cases when the client cannot repay the loan with revenue or income.