What Are The Functions Of Credit?

To give credit means to finance directly or indirectly the expenditure of others against future repayments. Credit is the foundation upon which the economic structure of the countries both developed and developing is strengthening.
Credit instruments are used as media of exchange in place of metallic coins. There is thus a saving of precious metals. Moreover, the use of credit instruments in all business transaction is more effective and convenient than any other form of money.
If an industrialist is short of spending power when the production is going on, he can finance the industry by obtaining credit from banks. He need not sell the plant or other fixed assets just for the purchase of raw material, paying wages to the labor, insurance charges, electricity bill or other pressing emergencies.
If the prospects of invested capital are bright and the profits are being earned left and light, the firm can obtain possession of funds even by selling bonds. The firm can reply the interest as well as principal easily at the specified date out of profit earned during the course of production.
The credit enables the manager of young firm to develop its resources at a rapid speed which otherwise would not have been possible.