Wealth Creation improves Credit Creation for Commercial Banks & Non-Bank Institutions
Split velocity is the only implementation-ready technology available today that is able to allow commercial banks to issue loans with no interest and yet enable commercial banks to earn significantly more than they did when they charged interest. In fact, a great deal more than when they charged interest.
Since commercial banks and non-bank financial institutions issue wealth creation alongside credit creation and earn income from both products this creates a win-win condition for creditors.
Wealth creation is the missing link in financial services
In Episode 2 it is mentioned that there is an indispensable financial service missing from the portfolio of services on offer. That missing service is wealth creation.
Wealth creation and credit creation are a perfect fit and work hand in glove to improve the services banks offer. In this new and more efficient model commercial banks’ earnings improve significantly allowing them to improve the credit support services they offer their clients. This is achieved by applying Split Velocity to credit creation.
Accelerating credit at constant price will allow banks and non-banks issuing loans to become more robust, become more profitable, innovative and issue credit at much lower risk. They will be able to offer their clients services they could not provide before. The income earned by commercial banks will certainly increase significantly allowing them to offer improved services that take commercial banking to the next level.
Wealth creation increases demand for loans
Wealth creation generates tremendous financial resources equivalent to GDP that have a major impact on internal short term growth of businesses, however, these finances are so widely dispersed businesses soon realize they have limited long term value. These finances are huge to the economy in general but small to individual businesses especially where their plans for long term growth are concerned. Consequently, their demand for loans from banks increases significantly. This is coupled with the fact that wealth creation improves the financial position of businesses thus making credit more affordable.
Wealth creation is designed to distributed by commercial banks therefore they earn income from it as they do from credit creation creating a win-win situation.
Banking with lower risk
Wealth creation also significantly reduces the risk of default as a result of operating in an economy where what they do is being accelerated. A more robust and more stable economy allows commercial banks to issue more loans with much lower risk which may in turn allow them to provide loans with less of a dependence on collateral.
Wealth creation complements credit creation by increasing the demand by businesses for loans from banks. In essence borrowing becomes more affordable flanked by businesses taking on bigger and more ambitious investments in the country.
A pilot will test whether wealth creation is able to achieve these outcomes.
Split Velocity Solutions Ltd 