New Cuba Loan Policy Takes Effect

HAVANA TIMES, Dec 19 — Starting tomorrow, December 20, new regulations will come into force pertaining to Cuban credit policy and other banking services, according to a note today in the Granma newspaper.

Decree-Law 289, three additional resolutions by the Central Bank of Cuba and an instruction from the Ministry of Economy and Planning, aim to increase and diversify the supply of credit to individuals.

Those prioritized will be self-employed workers, farmers and those people seeking to build or repair their homes by their own means.

For the granting of loans, which are always given in regular Cuban pesos, national banks have authorized such operations for nearly 500 branches throughout the country.

The amount of funding available for the new loan program has not been announced.

One thought on “New Cuba Loan Policy Takes Effect

  • It is still unclear to me as to how credit is generated in Cuba. Credit, we should remember, is money. Any issuance of credit therefore is the issuance or creation of money. Such new money augments a nation’s money supply, and begins hop-scotching through the economy to exchange goods and services.

    Under capitalism, the process of credit extension begins when the loan officer of a bank receives an application from a customer. The bank is in the business of issuing credit as loan debt and charging interest on it. As the loan principle is paid off, the debt disappears from the bank’s account ledger, literally “destroying” the money formerly created. The nation’s money supply then is reduced.

    The principle paid on the credit debt however remains on the bank’s account ledger as profit, and may be used by the bank as monetary property in the real world marketplace. It remains in and augments the money supply, and belongs to the bank.

    It’s an odd system, guaranteeing the bank enormous profits off the labor and genius of working people. The system however is functional in the sense of employing labor and genius and circulating the goods and services produced thereby.

    Credit is issued–and money is created–by a bank through the decision of the loan officer. He or she looks primarily a two things: 1) the collateral put up to secure the “loan” an motivate its payback, and 2) the income of the “borrower” and his or her ability to repay.

    The strange thing about it all is that, whether under capitalism or state monopoly socialism, new credit/money is not the loaning of money from a bank’s vault. It is a monetizing of the borrower’s ability to work in the economy, produce use values and receive enough of them to fund both his or her life needs and repayment of the credit debt.

    This article raises lots of questions about the Cuban banking system, but I guess it could boil down to the question of the loan officer. What motivates her or him to grant a credit extension and thereby to augment the nation’s money supply? Is it to make a profit for the state bank off of interest, or is there some other motivation?

Comments are closed.