Understanding Consumer Credit through Comparative Lens

The growth and spread of consumer lending in the last decades necessitated the use of technology to quickly process a large number of loans. For many reasons, the application of these formalizing tools is incomplete and various forms of consumer credit shun formalization and instead depend on informal social ties or other foundations. Our paper focuses on consumer credit in Central and Eastern Europe where one finds a large variety of forms of credit addressing different social segments of the population. We discuss three sectors: mass retail lending (including retail banking, purchase credit and mortgages); fringe lending (includes payday lending and usury) and collectivist forms of financing (rotating saving associations and saving coops). We analyze the ways that the three sectors generate demand and recruit clients, screen applicants, and deal with non-payment. We compare how formalization and social ties are deployed in these different sectors of consumer credit market, and how they produce unique identities, classify clients, generate reputation, and enact justice. We also discuss how these formal tools and informal bases of consumer credit simultaneously reduce uncertainties, create new ones and affect social inequalities.