THEORETICAL FOUNDATIONS OF THE CREDIT SYSTEM AND ITS ROLE IN ECONOMIC GROWTH

Abstract

This paper explores the theoretical foundations of the credit system and examines its crucial role in promoting economic growth. Drawing on classical and modern economic theories, the study analyzes how credit facilitates capital accumulation, enhances investment, and increases productivity. The research reviews key concepts such as financial intermediation, credit allocation, and liquidity creation, highlighting the mechanisms through which credit influences macroeconomic performance. Emphasis is placed on the role of financial institutions in channeling funds from savers to borrowers and the significance of credit availability for business expansion and innovation. The paper also discusses the potential risks of excessive credit growth, including inflationary pressures and financial instability. By synthesizing theoretical perspectives, the study provides a comprehensive understanding of how a well-functioning credit system can support sustainable economic development.