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The Effects of Credit Culture
Credit culture refers to a set of policy, practices, and management attitudes that defines the
lending environment and determines the lending behavior acceptable to the banks. Credit culture
can also refer to the system of behavior, beliefs, style, and expression relating to the running of
the credit function. It surrounded by a set of principles that guide the lenders and borrowers.
Therefore, credit culture has both the advantages and disadvantages depending on its usage.
Most of the banking institution rely on credit culture for commitment to excellence.
When not put into consideration, the progress of the company will be questionable. The effort
involves determining which culture work best with the management goals, and ensure that the
proper tools are in place to implement and maintain the desired credit culture. Thus it helps
lenders to enlighten the understanding of what bank expects and how to achieve its objectives.
Credit culture helps to determine the credit risks. In most cases, there is a difference in
the payment terms between the and borrowers. Lenders will adopt the payments terms that will
reduce the credit risks (Golin 11). Consistent repayment measures successful credit risk
management. Hence an essential credit culture plays a crucial role in reaching optimal credit
management.
Straightforward understanding and communication among all stakeholders, government,
employees, and members are as a result of appropriate credit culture. Credit culture gives an
insight of what people are expected at all levels thus making it easier for the flow of duties.
