The Social Problem

Entrepreneurship is the life blood of a thriving economy, and the availability and affordability of credit is the central artery that makes entrepreneurship possible. However, the credit market has practically slowed to a standstill due to the global recession that has impacted so many countries. According to a recent online article from the UK based Gaurdian, the IMF (International Monetary Fund) has found that, “65% of the world’s countries are in recession – more than at any other time since 1960.” The article can be found from the following link: http://www.guardian.co.uk/business/2009/apr/16/imf-warns-severe-long-lasting-recession

So what is the social impact of this credit crunch? For those of us who are fortunate to live in developed countries, obtaining personal and business loans has become increasingly difficult. I have first hand experience with the plight of would-be borrowers since I work as a Financial Advisor for a major Canadian bank. For instance, I can see first hand the impact of the current credit issue on local businesses, as most find banks reluctant to extend any more credit to them unless they are in a profitable position. As you can imagine, with the economy being the way it is, profits have turned into losses.

As serious as the current situation is domestically, developing countries are being impacted the most by this recession. To their misfortune, the availability of affordable credit has always been a problem. But the current recession is hitting these developing countries hard. According to Justin Yifu Lin, who is the Senior Vice President and Chief Economist at the Koreo Development Institute, Seol, one of the effects of the recession on developing countries will be a, “substantial reduction in their exports, as the rapid pace of trade expansion of this decade decelerates sharply. The IMF recently projected growth in world trade volumes of just 4.1 percent in 2009, down from 9.3 percent as recently as 2006”. (Source: http://crisistalk.worldbank.org/files/Oct_31_JustinLin_KDI_remarks.pdf

This major reduction of exports will have a detrimental impact on these developing countries, unless a real effort is made by the developed countries to extensively increase their imports from these developing countries. Unfortunately, with the economies of the major developed countries in shambles, making the necessary contributions to developing countries has become next to impossible.

substantial reduction in their exports, as the rapid pace of trade expansion of this decade
decelerates sharply. The IMF recently projected growth in world trade volumes of just 4.1
percent in 2009, down from 9.3 percent as recently as 2006
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