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The ideal credit policy
Something which must be considered most while assigning credit is the security. This means, before giving credit one must try to research what is the most secured asset on which credit should be given. Now answer me one simple question, can there be anything more secured than law, in terms of politics. Governments may change, but law is protected by democracy and almost 70 percent of the world now follows democracy and protects it. So in my opinion law is a security if you think politics.
If you consider nature then land is the most secured asset. If law is safe then we may conclude that land is also the most secured asset. Reason is, because it has infinite useful life, it cannot decay. It has almost zero depreciation. So if an economy is based on these two then it would always be the most stable economy. A protected legal system which is secured by democracy and safe natural asset, i.e land.
The growth of such economy will be decided by development of land. And with the increasing population development will always be in demand. This demand will make sure that the value of land will be on rise always. Security and demand, what else does an economy needs to grow? This is the reason that in a developing economy land is the most valuable asset.
So if we consider above facts we can say that an ideal credit policy in such economy will be to provide credit not only on the present value of the asset(here land) but also on its future value, if a business seems to be growing and has a good future prospect. For example, suppose cost of a land now is a million per acre and from the history of land records we can estimate that the rise in land price 10% per annum then we can estimate that it may become double in the next 7 years. In such case any legal creditor, for example a bank, may provide a credit of 2 million for the next 7 years, if it finds a business which has nice future prospect. A good research work will be required and it will be a win win situation for all. Though this definitely don't mean that the inspection of the business should not be done after providing the credit. Care also must be taken to keep the credit asset progressive.