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Corresponding author:
1 Yuriy Fedkovych Chernivtsi National University, Ukraine.
E-mail: v.kharabara@chnu.edu.ua 
ORCID: https://orcid.org/0000-0002-8555-6440
2 Yuriy Fedkovych Chernivtsi National University, Ukraine.
E-mail: r.greshko@chnu.edu.ua
ORCID: https://orcid.org/0000-0003-3054-356X

DOI: https://doi.org/10.30525/2661-5150/2020-1-11

THEORETICAL FOUNDATIONS OF THE CREDIT MECHANISM  
OF MEETING CONSUMER NEEDS OF THE POPULATION

Violetta Kharabara1, Roman Greshko2

Abstract. Purpose. A significant role in ensuring the socio-economic development of the state, increasing the 
economic activity and purchasing power of the population is played by the credit mechanism of meeting the 
consumer needs of the population. However, the effects of crisis phenomena in the state economy have created 
high credit risks, which negatively affected the dynamics of consumer lending in Ukraine. Method. Thus, the 
purpose of this article is to study the financing of the real sector of the economy and increase its capital due to the 
effective functioning of the credit mechanism of meeting the consumer needs of the population. Research results.  
The theoretical approaches of scientists to the essence, elements and components of the credit mechanism of 
meeting the consumer needs of the population, external and internal factors influencing its efficiency, such as the 
ability of the borrower to return the credit, availability of credit, interest rate, as well as maturity and repayment terms 
are investigated in the paper. Also, the study analyzed legislative and regulatory acts on the development of credit 
relations and the banking system in Ukraine. The problems of organization of credit activity of banks, formation 
of effective credit policy, choice of effective methods, types of lending are considered. Particular attention is paid 
to the most common type of crediting of consumer needs with credit cards in the modern way. Value/originality.  
As a result, the paper proposes to consider the essence of the credit mechanism of meeting the consumer needs 
of the population as a set of forms and tools for influencing the system of credit relations between the subjects of 
lending to the consumer needs in order to provide the necessary volumes of consumer credit. In turn, as a result 
of using the method of comparative analysis, the list of consumer lending facilities is systematized in the work, 
the classification of credits for consumer needs of the population is improved, and the author’s vision of the main 
components of the credit mechanism of meeting the consumer needs of the population is characterized.

Key words: credit relations, consumer needs, credit policy, banks, Ukraine.

JEL Classification: Е51, G21

1. Introduction
At the current stage of Ukraine’s economic 

development, an important place in the search for 
ways of economic growth is occupied by the task of 
forming effective credit relations in the process of 
development of the consumer market of the state. 
A significant role in ensuring the socio-economic 
development of the country, raising the living 
standard of the population is played by consumer 
lending. In the context of the effects of crisis 
phenomena in the state’s economy, the problem of 
pulling people’s savings to finance the development 
of the real sector of the Ukrainian economy has 
become significantly aggravated. The provision for 

consumer needs of the population is characterized 
by an increase in interest rates, initial payments and 
commissions on credit proposals, a decrease in the 
value of mortgaged property, and an increase in 
requirements for borrowers in the near-term stop 
of the lending market. In addition, the decline in 
economic activity and further deterioration in 
purchasing power of the population have a negative 
impact on the dynamics of consumer lending. 
Taking into account high credit risks, the recovery 
in the growth of lending to the consumer needs of 
the population is slow and mainly short-term.

In turn, the acceleration of international capital 
flows leads to increased competition in the 



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consumer lending market due to the strengthening 
of market positions of non-bank organizations, 
brokerage, mortgage companies, which requires 
new approaches to meet the consumer needs of 
the population. The sphere of consumer lending is 
directly related to the needs for the development 
of national production, serving the interests 
of households and mediating the connections 
between the state, financial and credit institutions, 
commodity producers and the population.

Under these conditions, methods and 
instruments for lending for the consumer needs, 
sources of credit repayment, the peculiarities of the 
formation of the cost of credits for consumer needs 
of the population and the socioeconomic efficiency 
of the credit mechanism of meeting the consumer 
needs of the population require in-depth scientific 
study.

2. Research results
The problem of crediting the consumer needs 

of the population is constantly enriched with new 
scientific developments, but the theoretical integrity 
and practical effectiveness of its development is 
insufficient, as there is a continuing controversy 
among scientists and practitioners about 
understanding the essence of the credit mechanism 
of meeting the consumer needs, the economic 
nature of this category and its main components. 
In this regard, it is important to develop a holistic 
paradigm of understanding the essence and basic 
components of meeting the consumer needs of the 
population, which would integrate all their features.

Credit is a form of cash flow that is provided in the 
form of a credit. Credit provides a transformation 
of monetary capital into a credit and expresses 
the relationship between commercial banks and 
borrowers. Solving the problems of the formation 
of a market environment and economic growth 
depends on the efficiency of the credit mechanism 
of banks and the banking system as a whole, which 
is explained not only by the increase in their role 
in the development of the economy, but also the 
opportunity to react quickly and effectively to 
newly introduced management mechanisms.

In their studies, such scholars as Kirichenko O.; 
Moroz A., Savluk M., Pukhovkina M.; Savluk M., 
Moroz A., Lazepko I.; Vitlins V. Pernarovsky O., 
Nakonechny Ya., Velikoivanenko G. consider only 
certain elements of the credit mechanism. Thus, 
credit policy is defined as a strategy and tactics 
of raising funds and directing them to lending to 

customer needs based on the principles of return, 
urgency, differentiation, security, and payment.

Important is the opinion of these scholars that the 
credit policy allows them to plan, regulate, control, 
rationally organize the relationship between the 
commercial bank and its clients in relation to the 
reverse flow of funds.

In turn, the authors of the article include to 
the components of the credit mechanism such 
elements, as: the classification of bank credits, the 
principles of bank lending, methods of lending and 
the form of credit accounts, the creditworthiness 
of borrowers and methods for its determination, 
the forms and types of security for the repayment 
of bank credits, principles and requirements for 
the conclusion of bank credit agreements with 
borrowers, the basic principles and legal aspects of 
lending to the market economy and the population. 
Among the principles, the return, urgency, 
differentiation, security and pay are distinguished. 
Consequently, the principles of bank lending 
are the basis of the credit mechanism, since they 
reflect the essence and content of the credit and 
the requirements of objective economic laws in the 
field of lending.

The issue of lending methods is considered 
in a number of works by the authors such as 
Liutyi  I., Kryklii A., Mischenko V., Naumenkova 
S., Versal N.; Moroz A., Savluk M., Pukhovkina M.; 
Savluk M., Moroz A., Lazepko I., where the method 
of lending is defined as a method of granting and 
repaying a credit in accordance with the principles 
of lending. Thus, lending methods determine the 
type of credit, ways of regulating possible credit 
debt, the form and procedure for monitoring the 
purposeful use of borrowed funds and their timely 
return.

For comparison, in the practice of the Ukrainian 
banks (PJSC JSCB “ARCADA”, PJSC “VTB 
BANK”, PJSCCB “PRAVEX-BANK”, PJSC 
“UKRSOTSBANK”, JSC “Raiffeisen Bank Aval”, 
JSC “Ukreximbank”) two methods of lending 
are used. The essence of the first method is an 
individualized approach to granting a credit, that 
is, a credit is provided to meet a certain target need 
for funds. This method is used to provide credits on 
specific terms, which are determined in advance. 
According to the second method of lending, credits 
are provided within the limits set by the bank in 
advance of a certain borrower, which is used by 
him or her as necessary, by payment of payment 
documents received during a certain period, that is, 



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in this case, the bank opens the borrower’s credit 
line. This form of provision is used for clients with 
a stable financial standing.

The effectiveness of the credit mechanism of 
commercial banks depends on two groups of 
factors – external and internal. Authors such as 
Liutyi I., Kryklii A., Mischenko V., Naumenkova S., 
Versal N., Liubkina O., Rozhko O.; Onishchenko V.; 
Pernarovskyi O.; Vitsinskyi V., Pernarovskyi O., 
Nakonechnyi Ya., Velikoivanenko G. underline the 
impossibility of the existence of a single, sustainable 
credit mechanism for all commercial banks, since 
each bank defines its own credit policy, taking into 
account all the set of internal and external risks 
that affect the effectiveness of its activities, and 
the attitude of the bank’s management to risk. It 
is debatable that in this case, the concept of credit 
mechanism and credit policy of a commercial bank 
are identified, and, in fact, credit policy is defined as 
a set of measures aimed at minimizing internal and 
external credit risks.

According to Vitlinskyi V., credit policy is the 
basis of the risk strategy in the bank and can be 
aggressive and traditional. The basis of the credit 
policy is the bank’s strategy is aimed at increasing 
its capital or increasing current income, or a mixed 
strategy. Consequently, credit policy in the narrow 
sense is a system of bank facilities in the area of 
lending its clients, which the bank carries out to 
implement its general strategy for a certain period 
of time.

The results of scientific research by the team 
of authors Moroz A., Savluk M., Pukhovkina  M. 
indicate that the credit policy of commercial 
banks has its own internal structure. Summarizing 
the results of the study, we will present the main 
elements of the credit policy: a strategy for 
the directions of the credit process; tactics of 
lending organization; control and monitoring the 
implementation of the chosen strategy and tactics.

The efficiency of the credit mechanism of meeting 
the consumer needs of the population is significantly 
dependent on the intensity of competition in the 
banking sector, which differs in the development 
of forms, accompanied by the development of 
information technology and communications, 
which leads to the expansion of the territorial 
scope of banks, the spectrum of banking products 
and services, increases the diversification of the 
banking industry. Therefore, the credit mechanism 
of meeting the consumer needs of the population 
contains, as a component, a credit policy, but, in 

addition, should be supplemented by: a detailed 
classification of credits for consumer needs of 
the population and facilities for lending for the 
consumer needs of the population; definition of 
forms, methods, tools and directions of crediting 
of consumer needs of the population; elements 
of macroeconomic modeling in relation to the 
formation of the value of credits for consumer 
needs of the population; definition of conditions, 
forms and methods of cooperation of crediting 
subjects of consumer needs of the population with 
market institutions that influence the efficiency of 
credit relations.

The authors of the study agree with Galchinsky A. 
that the activities of financial and credit institutions 
should be subordinated to the main macroeconomic 
task, namely: to balance economic development, to 
ensure optimal employment and to curb inflation. 
The activities of commercial banks should promote 
the introduction of economic ideology to stimulate 
solvent demand and supply of goods.

Issues of organizing credit activities of 
commercial banks are reflected in the writings of 
foreign authors: Ansoff, Barltrop & McNaughton, 
Frost, Edwards, Karloff, Kaufman, Rose & 
Hudgins, Sinkey, Woelfel. In the definitions given 
by foreign economists, the effectiveness of the 
credit mechanism is determined by the focus on 
increasing consumer demand, using a bank of the 
most profitable markets for the sale of banking 
products, taking into account the real needs of 
borrowers.

The effectiveness of a bank’s lending activity 
depends on the optimally created commodity, 
price, communication and marketing policies of the 
bank, as stated in Dickson’s work. The Bank focuses 
on specific functions of the bank in providing credit 
services, namely: studying and forecasting demand 
for banking products, issuing banking products, 
pricing, creating an image, expanding market 
shares.

In studies by researcher Romanenko L., there 
is a meaningful description of measures for the 
formation of consumer demand for credit products, 
namely: concentration of efforts of the bank to 
meet the needs of the client, focusing on the long-
term result of the focus on achieving the final result.

Thus, in the above definitions, the focus is on 
the commercial aspect of an effective lending 
mechanism, insufficient attention to strategic 
performance of the bank; the emphasis is on 
achieving the optimal end result under certain 



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conditions, however, in our opinion, the 
effectiveness of the implementation of the credit 
mechanism is determined, first of all, by the socio-
economic efficiency of lending activities.

It should be noted that the effectiveness of 
the credit mechanism is determined by the 
priorities of selecting the target segment of clients; 
the competence of the bank’s management, 
professional training and experience of the 
personnel, persons involved in the selection of 
specific credit applications and forms the terms of 
credit agreements. Thus, the credit mechanism, in 
a strategic way, includes the priorities, principles 
and objectives of a separate bank in the lending 
market, tactically – the toolkit used to implement 
goals for the implementation of credit agreements, 
the rules for their implementation, the rules of the 
organization of the credit process.

The credit takes specific forms that enable the 
existence of the lending process. The credit form 
reflects the external manifestation and organization 
of credit relations. In a market economy, there are 
different forms of credit, which differ by the subject 
and object of the credit, the source of payment 
of interest, the specific content of the credit 
agreement. Forms of credit are constantly evolving, 
accordingly their place in the structure of economic 
relations changes.

The question of the forms and types of credit 
in economics is debatable. Differences in the 
approaches of economists depend on understanding 
the criteria, principles and classifications of forms of 
credit. The authors of the article share the opinion 
of researcher Lagutin V. concerning the following 
forms of credit: commercial credit; bank credit; 
state credit; consumer credit; mortgage credit; 
leasing credit; international credit.

Credit relations mediate the functioning and 
development of both production and exchange, and 
the sphere of final consumption. In this area there 
is a specific form of credit: a credit for consumer 
needs, designed to meet the consumer needs of 
individuals and households. An essential feature of 
a credit for consumer needs – end-user financing. 
The peculiarity of a credit for consumer needs is 
that the main guarantee of its provision and return 
is the constant cash income of a physical person – 
the borrower. The population is able to consume 
goods and services at the time of payment of their 
full value. Thus, the development of lending to 
consumer needs contributes to raising the standard 
of living of the population. In macroeconomic 

terms, lending to consumer needs of the population 
increases the total solvent demand for consumer 
goods and services, which, in turn, stimulates the 
expansion of their production volumes.

According to the authors of the study, the factors 
that determine the effectiveness of lending to 
consumer needs are: the ability of the borrower to 
repay the credit; availability of credit; interest rate; 
maturity and repayment terms.

According to Pernarivsky O., the subjects of 
lending, consumer needs of the population are 
commercial banks, credit unions, mutual funds, 
credit cooperatives, credit exchanges, trade 
organizations, pawnshops, rental offices. The 
specifics of the final consumption sphere require, 
in the context of considering consumer financing 
lending, to identify trading organizations that carry 
out intermediary activities for the purchase of 
goods and services. Consumer credit is a form of 
cooperation of a trade organization with a financial 
and credit institution to meet the current demand of 
the population. In this case, the trade organization 
must find the optimal combination of direct sales of 
goods for money and sales in installments.

The object of lending to the consumer’s needs 
of the population is the costs associated with 
satisfying the needs of the population, namely: 
the cost of meeting the needs of the current nature 
(the acquisition of goods in personal property); 
expenses for meeting capital and investment needs 
(construction, acquisition and maintenance of 
real estate). The proposed classification of lending 
facilities for consumer needs is shown in Figure 1.

Historically, the first form of credit for consumer 
needs was the so-called “tali trade” – trade in 
installments, which began to develop in Western 
Europe back in the 18th century. Traveling traders 
(“talimen”) from time to time (for example, on 
a monthly basis) delivered goods in certain areas 
and sold to certain households, agreeing to a partial 
regular payment, with the delay of the final payment 
for a certain period (until their next arrival).

Credits for consumer needs include an extremely 
wide range of credit types. In the conceptual plan 
they distinguish commodity and money credits for 
consumer needs. Commodity credit for consumer 
needs is associated with the sale of durable goods in 
credit (with installment payment). Cash credit for 
consumer needs is the provision by financial and 
credit institutions of credits to individuals to meet 
consumer needs. Unlike the production credit, 
according to scientists, Savchuk V., Mazurko P., 



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Panchuk A., used to create a new value, the use of 
credit for consumer needs stimulates the growth 
of the value of the labor force proposed on the 
market.

The practice of crediting the consumer needs by 
domestic financial and credit institutions allowed 
the authors of this study to identify the following 
lending objects: the acquisition of real estate 
(mortgage credits); purchase of motor vehicles; 
purchase of durable goods; payment for services 
(training, treatment, tourism); receiving cash for 
other urgent current needs (see Figure 1).

The list of domestic and foreign manufactured 
goods recommended for sale by installments is 
tele-radio equipment, electrical household goods, 
sewing machines, musical instruments, cinema 
equipment, furniture, goods for newborn children, 
garden houses, standard houses with complete sets 
of details, building materials , clothing, footwear, 
carpets, crystal items, porcelain, earthenware, fur 
products, vehicles, personal computers, etc.

The sale of goods by installments is carried out on 
the basis of an agreement on the sale and purchase 
of goods in installments, which is concluded in 

Objects of lending for the consumer needs of the population

Current needs Capital and investment needs

Purchase of durable goods: 
audio, video, household 
appliances; Computer 

Engineering; communication 
facilities; photo equipment; 

portable electronics; furniture; 
windows; door; plumbing; 

heating systems; gas 
equipment; building materials; 
equipment; clothing; jewelry.

Acquisition of services: 
education; tourism services; 
medical services; services of 
sports facilities (fitness club, 
swimming pool, gym, etc.); 

services for the organization of 
weddings, holidays, birthdays, 

anniversaries.

Construction: individual dwelling 
houses with outbuildings; houses in 

rural areas that are not primary 
housing; cottage-type houses and 

landscaping of garden plots; outdoor 
buildings for keeping livestock and 

storing agricultural products; 
summer kitchens; greenhouses; 
workshops; sunshades; fences; 

garages.

Purchases of real estate in the primary 
and secondary markets: apartments; 

individual dwelling houses with 
outbuildings; houses in rural areas that 
are not primary housing; houses of the 

holiday type; workshops; garages; 
commercial real estate; land plots.

Repair and reconstruction: 
apartments; individual dwelling 

houses with outbuildings; houses in 
rural areas that are not primary 

housing; houses of the holiday type; 
outbuildings; greenhouses; 

workshops; garages; joining real 
estate to engineering and 

communications networks.

Purchase of vehicles: cars, trucks,
motor vehicles (new or used): 

foreign production; foreign 
production put together on the 

territory of Ukraine; production of 
CIS countries; domestic 

production.

Figure 1. Classification of objects of crediting the consumer needs of the population

Source: was compiled by the authors on the basis of the results of lending of Ukrainian banks



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a definite form between a business entity and an 
individual (buyer), according to which an entity 
undertakes to transfer the specified goods, and the 
buyer to make calculations for the good in terms 
and in the amounts stipulated by the agreement. 
Necessary, important and profitable is the sale of 
expensive goods in installments, both for business 
entities, which have many problems with the sale 
of products, and for consumers, since it makes the 
majority of goods available.

Depending on the target nature (appointment), 
different types of cash credits are used, namely: 
investment credits; credits for the development 
of individual farms; credits for the purchase of 
consumer goods or payment for services; targeted 
credits to individual social groups (young families, 
students); credits for non-target consumer needs.

According to Kravchuk K. and Turpak A., 
investment credits are credits for the construction 
and renovation of housing, the construction of 
garden houses, landscaping garden plots. This type of 
consumer credit is long-term. Long-term consumer 
investment credits are provided by commercial banks 
on mortgage – apartments, houses, cottages, land 
plots, garages. Provision of building consumer credits 
is often carried out by the bank by opening a credit 
line, with the credit being provided to the client by 
parts that correspond to the cost of completed stages 
of construction and installation work.

Credits for the purchase of consumer goods or 
payment services include the purchase of expensive 
goods and services for long-term use, namely: 
cars, household appliances, electrical engineering, 
furniture, medical services, recreation, etc. Such 
a credit has a social orientation, therefore it should be 
accessible to the necessary volumes for the majority 
of citizens. Target credits to individual social groups 
(young families, students, etc.) are used within the 
framework of national programs of social protection 
of the most vulnerable sectors of the population. 
They are provided on preferential terms: at a low 
interest rate, under simplified terms of execution. 

Credits for non-target consumer needs are 
credits, the need for which arises due to special 
circumstances of unforeseen nature in the life of 
the population. 

The feature of this type of credit for consumer 
needs is that it is provided in cash in an amount that 
depends on the borrower’s income and without 
specifying the purposes of its use. Interest for 
using this credit is differentiated depending on the 
maturity of the credit. Unsolicited cash credits are 

also provided by pawnshops on property pledges, 
mutual assistance pays, and separate economic 
organizations.

According to the subjects of credit relations – in 
terms of the creditor – credits for consumer needs 
are divided into bank and non-bank; in terms of 
the borrower – credits provided to all segments 
of the population, different social groups, 
different age groups; by way of provision – direct 
credits provided directly to borrowers, and 
indirect, provided through intermediaries (trade 
organizations, pawnshops, rental offices); by 
the degree of coverage of the credit of the cost of 
consumer goods and services – credits for full value 
and for partial payment of goods (services).

One kind of credit for consumer needs is a credit 
provided by pawnshops. Pawnbrokers are credit 
institutions that borrow money on a pledge of 
movable property. For the first time, pawnbrokers 
were founded in the 15th century by money-
lenders who came from Lombardy. In Ukraine, the 
network of pawnbrokers has been widely developed 
on municipal (city) and joint-stock basis in the late 
19th – early 20th century.

The main task of the activity of the pawnshops is 
to provide credits to the population on the pledge 
of personal and household goods, as well as the 
preservation of these items for a small fee. As a rule, 
property is taken as collateral, which can be realized 
quickly. In this case, the mortgage provides the 
repayment of the credit. The insurance of the acquired 
property takes place at the expense of the mortgagor.

Pawns give a credit at an amount that is less 
than the value of collateral. As a rule, precious 
metals and stones, pearls, gold watches, for which 
the size of the credit may reach up to 90% of the 
value estimate, are most “valued” as collateral. The 
borrower retains the ownership of the property 
entrusted to the pawnshops. In the case of non-
repayment within the established term of the 
credit, as well as the evasion of the person who has 
laid things in the pawnshop, from their receipt, the 
right of ownership passes to the pawnshop, which 
transfers the property for sale (realization). From 
the proceeds, the pawnshop holds the amount of 
debt, accrued interest, remuneration, insurance 
costs of the pledged property and its sale.

Consumer credits are also provided by non-
banking institutions such as credit unions, mutual 
assistance funds, and credit cooperatives, which are 
voluntary organizations based on personal savings 
for mutual lending. These lending institutions 



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are not intended to receive profits, therefore they 
provide credits without interest or at minimum 
interest. Credit unions work with those strata of the 
population who, for economic reasons, cannot get 
a credit in a bank. Such lending institutions meet 
the needs of their members in small credits for 
consumer and production needs.

The specific component of the credit mechanism 
of meeting the consumer needs is the rolled items. 
For registration of a rental agreement, the client 
submits a passport and a certificate from the place 
of work or training. The contract stipulates the 
term rental and the monthly tariff. Payment notes 
are marked and issued in duplicate. For each day of 
delayed payment, a penalty of 1% of the amount of 
monthly tariff is charged. Repairs of rental facilities 
are carried out at the expense of a rolling point, if the 
damage is not the result of improper exploitation of 
the property by the recipient.

The main share of credits for consumer needs of 
the population falls on banks. In Ukraine, one of 
the types of cash bank credits for consumer needs is 
the checking credit and bank credit cards. Checking 
credit is a type of credit for consumer needs, which 
provides a credit through the opening of a checking 
account. In banking practice, two main types of 
check credit are used: lending from an overdraft 
account (with a negative balance on the current 
account) and lending based on the use of a special 
checking account and special bank checks.

In modern terms, the most widespread is 
the crediting of consumer needs by means of 
a credit card. The main advantage of a credit card 
is the convenience of practical use. A credit card 
is a registered (with the owner’s identifier) cash 
payment-settlement bank document that is used 
to provide a credit for consumer needs. Today, in 
developed world countries, credit cards come in 
first place as a means of calculating consumption. 
Credit cards in the monetary sphere replaced cash 
and checks: payments for goods and services are 
carried out by the borrower at the expense of their 
credit card. The use of credit cards greatly facilitates 
the provision of credit for consumer needs, but 
increases the risk of abuse and fraud. 

The use of credit cards organizes economic 
relations, in the process of lending to consumer 
needs, between the three entities: a commercial 
bank; cardholder (borrower); trading organization. 
Between a commercial bank and a trade 
organization, an agreement is concluded on the 
use of this bank’s credit cards when purchasing 

goods. The trading organization must give its 
official consent to accept the cards of this bank 
when calculating for the goods. For a commercial 
organization, a credit card is a guarantee of opening 
for a buyer of a credit in a bank.

On a periodic basis (or immediately), trade 
organizations transfer to the bank bills for goods sold 
to credit card holders. The bank pays these bills by 
transferring a certain amount of funds to the current 
account of the trading organization. Gradually the 
lending limit is exhausted and if the cardholder 
does not repay his or her obligations to the bank, 
the card loses its validity. Credit card holders are 
constantly receiving information on the balance of 
the credit limit on it and, accordingly, on the need 
to extend the credit. Thus, the stages of the process 
of crediting consumer needs through credit cards 
are as follows: the issuance of a credit card by a bank 
to the client-borrower; purchase by the borrower of 
goods through credit card calculation; transfer of 
bills for the purchased goods to the bank by a trade 
organization; transfer of funds from the bank to the 
current account of a trading organization; return of 
the borrower’s funds to the bank.

The bank receives interest on the credit granted 
to holders of cards within the credit limit. The 
bank regulates the size of the credit limit on cards 
and periodically restores the cards itself, which 
allows it to overestimate the creditworthiness of 
cardholders. As a rule, only leading commercial 
banks are able to issue their own credit cards, 
because in order to provide profit, the distribution 
system of cards should be large enough. The main 
costs associated with the use of credit cards for 
banks are the costs of their release to the market 
and the search for a commercial network that would 
have agreed to accept them as a means of payment. 
It is clear that the issue of their own credit cards is 
a rather expensive banking transaction. Therefore, 
in practice, banks use national (even worldwide) 
credit card systems (VISA, MasterCard, American 
Express, etc.). It should be noted that credit cards 
for consumer needs are issued not only by banks 
but also by airlines, railways, hotels, telephone 
companies, and trade organizations.

According to the authors of the study, a credit 
for consumer needs of the population should be 
understood as a credit, aimed at satisfying the 
personal needs of individuals, that is, serving the 
sphere of personal consumption. The proposed 
classification of credits for consumer needs is 
presented in Figure 2.



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In turn, the authors of the study propose to 
determine the credit mechanism of meeting 
consumer needs of the population as a set of 
forms, methods and tools for forming credit 
relations between the subjects of consumer credit 
financing for the development of the sphere of final 
consumption and the financial services market 
of Ukraine, with the participation of market 
institutions that affect the efficiency of credit 
relations. The main components of the credit 
mechanism of meeting the consumer needs are 
presented in Figure 3.

The basis of the credit mechanism of meeting the 
needs of existing and potential customers is the 
credit policy of lending entities, which determines 
the priorities of the development of credit relations 
through the offer of a wide range of credit products 
and services. The credit policy contains the 
objectives, principles and conditions for granting 
credits to different categories of borrowers, priority 

areas of credit activity, allocation of powers, limits 
on credits to one borrower, requirements for the 
provision and repayment of a credit, the procedure 
for granting credits to employees and founders of 
the bank, a set of quality control measures for the 
credit portfolio.

The essence of credit policy is determined by the 
peculiarities of lending to consumer needs, namely:
– consumer credit refers to the relationship between 
the creditor and the borrower, whose purpose is 
to finance end-use consumption, in contrast to 
credits provided to business entities for production 
purposes or for the acquisition of assets generating 
the movement of value;
– users of consumer credit are mainly individuals;
– consumer credit is a means of meeting the 
consumer needs of the population, that is, personal, 
individual needs. Lending to the population, on 
the one hand, increases their solvent demand, 
living standards in general, and, on the other hand, 

Classification of credits for consumer needs of the population

− short-term;
− mid-term;
− long-term.

− with down payment;
− without down payment;
− one-time payment;
− under the annuity 

scheme;
− according to the usual 

scheme.

− with the participation of 
intermediaries;

− without the participation 
of intermediaries;

− with the participation of 
trade organizations;

− without the participation 
of trade organizations;

− mortgages; unsecured.

− with full cost coverage;
− with partial coverage 

of the cost.
− bank;
− non-bank.

− investment;
− card;
− check
− for the development of 

an individual household;
− for the purchase of 

goods and payment of 
services;

− target groups of 
consumers.

By purpose By repayment method By way of organization

By terms of delivery

By the degree of coverage 
of the cost of goods 

(services)

By subjects of credit 
relations

Figure 2. Classification of credits for consumer needs of the population

Source: compiled by authors



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accelerates the sale of inventories and services, 
contributes to the creation of fixed assets of 
production enterprises;
– all types of credit for consumer needs are social 
in nature, as they contribute to solving social 
problems: raising the standard of living of the 
population (especially low and middle income), 

the adoption of the principles of social justice.  
The above has a manifestation in preferential terms 
of lending and development of loyalty programs.

Credit relations between the subjects of consumer 
lending mediates the development of the final 
consumption, which necessitates the cooperation 
of trade organizations and financial and credit 

Credit mechanism of meeting the consumer needs of the population

Credit policy

− commercial banks;
− credit unions;
− mutual assistance 

funds;
− credit cooperatives;
− credit exchanges;
− trade organizations;
− pawn shops;
− rental points.

− expenses for meeting 
the needs of the 
current nature;

− expenses for meeting 
capital and investment 
needs.

Forms, methods and 
tools for lending for the 
consumer needs of the 

population

− acquisition of durable 
goods;

− purchase of vehicles;
− purchase of services;
− construction;
− purchase in the 

primary and secondary 
real estate market;

− repair and 
reconstruction.

Macroeconomic factors Activities of the National
Bank of Ukraine

Market institutions that affect the efficiency of credit relations: trade 
organizations; insurance companies; collection companies (protection of 

interests of financial and credit institutions); anti-collector companies 
(protecting the interests of borrowers); credit brokers; bureau of credit 

histories.

Subjects of lending for 
consumer needs of the 

population

Directions of lending for 
consumer needs of the 

population

Objects of lending for 
the consumer needs of 

the population

Conditions, forms, 
methods of 
cooperation

Credit products and 
services

Figure 3. Components of the credit mechanism of meeting the consumer needs of the population.

Source: compiled by authors



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institutions. An additional condition for consumer 
lending is the life insurance of a borrower, which 
requires the involvement of insurance companies 
in cooperation.

The efficiency of the functioning of the credit 
mechanism for providing consumer needs is 
significantly influenced by macroeconomic factors 
that shape the solvent demand of the population, 
as well as trends in the banking system in terms 
of volume dynamics, transformation of credit 
portfolios of banks, and dynamics of problem 
debt volume. At low level of solvent demand of the 
population at considerable volumes of the given 
credits the volume of problem debts of creditors, 
which requires attraction of collecting companies 
in the sphere of credit relations, significantly 
increases. In addition, according to the authors, 
the reduction of the volume of problem debts in 
the credit portfolios of financial institutions is 
facilitated by cooperation with credit brokers and 
a bureau of credit histories.

3. Conclusions
It can be argued that solving the problems of the 

formation of a market environment and economic 
growth depends on the efficiency of the credit 
mechanism of commercial banks and the banking 
system as a whole, which is explained not only by 
the increase in their role in economic development, 
but also by the opportunity to respond quickly 
and effectively to newly introduced management 
mechanisms. The basis of an efficiently functioning 
credit facility is the planning of credit activities, 
justification of their expediency taking into account 
the trends of economic development of the country 
and the banking system, in particular.

In this paper, the authors investigated the 
credit mechanism of meeting consumer needs 
by structuring the relationships between subjects 
and objects of lending to consumer needs, forms, 
methods and tools for the formation of credit 

relations in the conditions of the development of 
the consumer market, which allowed to obtain the 
following results of the study:
– with the help of comparative analysis, the authors 
improved the classification of credits for consumer 
needs of the population, which provides for their 
division by purpose, terms of provision, repayment 
method, the degree of coverage of the cost of goods 
(services), the way of organizing credit relations, 
subjects of credit relations, while a credit for 
consumer needs of the population means a credit, 
which is aimed at satisfying the personal needs 
of individuals and serving the sphere of personal 
consumption;
– the work proposes its own definition of the 
credit mechanism of meeting consumer needs 
of the population as a set of forms and tools for 
influencing the system of credit relations between 
the subjects of lending to the consumer needs of 
the population in order to provide the necessary 
volumes of consumer credit;
– the authors identify the main components of the 
credit mechanism for the provision of consumer 
needs, such as: the credit policy of consumer 
crediting entities, which is formed under the 
influence of macroeconomic factors and regulatory 
measures of the central bank of Ukraine; subjects 
and objects of lending; forms, methods, tools and 
directions of consumer lending; market institutions 
that affect the efficiency of credit relations.

Resolving the problems of effective functioning 
of the credit mechanism of meeting the consumer 
needs of the population remains relevant, 
concerning the coverage of new methods, 
conceptual approaches to the valuation of 
mortgaged property, risk insurance for non-
repayment of credit and determination of the value 
of credits for consumer needs of the population. 
These problems require additional study and will 
be the subject of further scientific research by the 
authors.

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