For my project, I will investigate the credit system of Cuba, which is currently in transition. I want to learn by what means Cubans can obtain loans, how much they can borrow, and under what conditions they are allowed to borrow money. I want to know what institutions exist to loan money, where these institutions get their funding, who decides whether to give a loan and how that decision is made, , whether there are profits or losses, and how large they are. In the case that lending institutions are not robust enough to cover both the supply and the demand for borrowing money in Cuba, there will be both a black market and an informal credit system, both of which I would like to investigate.
All economies have some form of credit, so that people who want to consume more than their current income allows can borrow from people who would rather spend some of their current income (plus interest) in the future. People have borrowed money for much of human history, in formal and informal markets. The development of sophisticated credit markets allows countries to develop strong private enterprise. Insurance, savings, bonds, stocks, and other forms of lending and borrowing allow for entrepreneurship by people who would not otherwise have the means to execute their plans for a business.
Even the Cuban government has implicitly acknowledged the importance of credit when it announced in September of last year that it will extend credit to entrepreneurs, in order to replace the jobs for the workers that the government planned to lay off. This new reform aims to improve Cuba’s productivity, principally by allowing for competition and innovation, and by providing additional incentives for individuals to work, even if the state can’t quickly plan to allow for more production in a certain sector. These reforms probably also seek to legitimize activities which already take place in the black market, as many of these activities are well-known already to occur in the black market.
In fact, credit is probably provided by the black market right now, given that demand for credit, and supply of credit almost certainly supersede the amount allowed in the regulated market. Obviously, investigating this facet will be touchy, and I will have to be careful, but it would be fruitful to ask questions about how the black market functions in this regard, both of officials and non-officials. Black market creditors in the U.S. are usually loan sharks, but in a country which does not have a strong formal credit system, it is possible that the black market here does not have highly inflated interest rates, and may be associated with other black market activities rather than with gambling and organized crime the way that it is in the U.S.
In addition to a true black market system, it is possible that Cuba has an informal but legal credit market. Friends and family members in many countries will loan each other money to cover short term needs, often with no interest payments due. Without credit cards or other easy methods of obtaining short term credit, this may be far more common in Cuba than it is in the United States and other wealthy countries.