About Credit and Financing

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 their business capital or consumption needs. So, what is the difference between the two?

In summary, credit is a financial facility that allows a person or business entity to borrow money to buy a product and pay it back within a specified period of time with interest. Based on the Banking Law, credit is the provision of money or bills that can be equated with it, based on an agreement or borrowing and lending agreement between a bank and another party, which requires the borrower to repay the debt after a certain period of time with interest. Loans are provided by conventional commercial banks, and pawnshops.

Meanwhile, financing is funding support for the needs or procurement of certain goods/assets/services whose mechanism generally involves three parties, namely the funding provider, 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 at Islamic banks and financing by sale and lease back.


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