Businesses, individuals and countries at times end up being overly dependent on institutions of credit financing. Individuals or businesses acquire credit by borrowing loans from one institutional source of finance. When unable to meet payment deadlines, they opt to approach other institutions that offer packages for loan repayment. These packages allow people to borrow money to settle due debts with other credit facilities. This is a strategy by institutions such as banks to attract more customers. Dependence on credit facilities to solve financial issues in our day-to-day lives inhibits development, as larger percentages of income, for individuals and businesses, go to repaying these debts.
Inflation is generally described as a situation in which there is too much money chasing after too few commodities. Institutional sources of finance act as gatekeepers to the amount of liquid cash floating around in any given economy. By lowering their interest rates, credit facilities make funds more readily available to the general public. This creates an excessive flow of money in the economy, diminishing the currency's value and causing the price of goods and other services to become unbearably high.
On a global scope, institutional sources of finance, such as the International Monetary Fund, may impose their wishes on those benefiting from the financial aid they provide. This is the case especially in developing countries. Imposition may be either on the political front or in the economic sector.
Finance institutions enable individuals as well as governments to spend money on trivial issues that they can do without. Knowing that you always have a place where you can access funding at affordable rates encourages misappropriation of the funds that exist before the borrowing.