Band 6+: The increased availability of consumer to credit in some countries has contribured to the problem of debt. Who is responsible for the high level of indebtedness: the financial institutions that lend money or the individuals who borrow money?

In some countries, the increase in levels of indebtedness is attributed to the availability of credit offered to customers. Some people argue that financial institutions need to take responsibility for this problem, while others opine that this should be borne by the individuals who borrow money. In this essay, I will evaluate the persuasiveness of each school perspective.

On the one hand, financial institutions, especially commercial banks, can be considered the priority party that has to take responsibility. It is evident that the revenue from lending activities accounts for the majority of banks’ revenue; consequently, financial entities often design some promotion strategies and decrease the interest rate in order to encourage customers to borrow money for their personal purposes, such as auto loans, and mortgage loans. Although the proceeds that banks earn from these financial services can increase considerably, the potential risk of customers being unaffordable can be a problem. If commercial banks do not strictly follow their lending process by conducting history credit checks and monitoring borrowers’ cash flow, it can give rise to enhancing financial distress.

On the other hand, many people believe that individuals have to bear responsibility for their personal debt. With the advent of technological advances, currently, people can easily borrow money by using digital banking systems. If they do not have a clear understanding and are aware of the terms and conditions of their loans and their capability to pay back contractual cash flow, people might be faced with indebtedness issues. It is necessary that people have to manage their cash flow so that they can have the ability to pay their debt.

In conclusion, I think both financial institutions and individuals are responsible for the high level of indebtedness. The former should analyze the customer’s financial status before making a loan, while the latter needs to understand information about the lending contracts and carefully allocate their money in order to have the ability to handle the debt.