In your daily life, have you ever heard the word credit, or loan, or financing? Generally, people who apply for credit or financing have a need for funds for business capital or consumption needs. Then, what distinguishes the two?
In summary, credit is a financial facility that allows a person or business entity to borrow money to buy a product and repay it within a specified period of time subject to interest. Based on the Banking Law, credit is the provision of money or equivalent claims, based on an agreement or loan agreement between the bank and another party, which requires the borrower to repay the debt after a certain period of time with interest. Credit is provided by conventional commercial banks, rural banks, and pawnshops.
Meanwhile, financing is funding support for the need or procurement of certain goods/assets/services whose mechanism generally involves three parties, namely the funding party, the provider of certain goods/assets/services, and the party utilizing certain goods/assets/services. Financing products are provided by Islamic commercial banks/ sharia business units/ BPRS, and finance companies. However, there are also mechanisms that only involve two parties, such as gold financing in Islamic banks/BPRs and financing by selling and leasing back (sale and lease back).