Modern lending is often framed as a technical exercise. Credit scores, risk models, pricing algorithms, and recovery ratios dominate conversations across boardrooms and dashboards. Yet beneath every loan agreement lies something far older than financial technology—a shared understanding of fairness.

The Moral Economy, a concept explored in the work of historian E. P.Thompson, reminds us that economic exchange has always been shaped not only byrules and markets but by social expectations about justice, dignity, and responsibility.

While the original work examined how communitieshistorically responded to perceived unfairness in economic systems, its lessonsresonate powerfully with lending today. Credit, especially in unsecured and MSME segments, does not operate purely through contracts. It operates through trust.

Borrowers repay not only because they legally must, but because they believethe system is legitimate and fair. When that belief erodes, even strong enforcement mechanisms struggle to maintain discipline.

In high-growth lending environments, this dimension is easy to overlook. Portfolio expansion, automation, and scale often prioritize efficiency over empathy. Processes become standardized, communication becomes impersonal, and decision-making becomes more algorithmic. Yet lenders frequently discover that portfolio stability depends on more than precision models. It depends on whether borrowers perceive fairness across the lifecycle—from approval to collections.

The idea of a “moral economy” suggests that every economic system operates within unwritten expectations. Communities accept markets when they believe outcomes are balanced and transparent. The same principle applies to lending. Borrowers accept obligations more readily when terms are clear, pricing is understandable, and communication remains consistent.

Conversely, unexpected fees, opaque decisions, or aggressive recovery practice scan break this social contract long before financial stress appears.

This insight is particularly relevant in MSME lending. Small business owners often borrow not simply for growth, but for survival—working capital, seasonal inventory, or operational continuity. Their relationship withcredit is deeply personal.

A lender who understands the realities of their cash cycle builds long-termtrust. A lender who treats the loan as a purely transactional asset riskscreating friction that eventually translates into delinquency.

Ethical lending does not mean reducing discipline orignoring risk. On the contrary, it means designing structures that alignobligations with real-world capacity. It means giving borrowers clarity aboutexpectations and offering predictability in moments of stress. In many cases,fairness becomes a risk-reduction tool. Borrowers who feel they are treated fairly are more likely to communicate early, seek restructuring when needed, and remain engaged rather than default silently.

The moral economy lens also helps explain why collectionsstrategy matters beyond immediate recovery. Traditional approaches often focuson enforcement intensity—calls, escalations, and pressure.

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Yet history shows that systems perceived as unjust invite resistance,disengagement, and loss of legitimacy. Modern lenders increasingly recognizethat collections is not merely a recovery function; it is a crucial momentwhere trust is either reinforced or broken.

Digital lending has amplified this challenge. Automationenables scale but can unintentionally remove context. Generic reminders, rigid workflows, and one-size-fits-all escalation paths may improve operational efficiency while weakening borrower relationships. The challenge for lenders isto combine consistency with contextual intelligence—ensuring technology supports fairness rather than replacing it.
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For CXOs and technology leaders, this raises an importantstrategic question: how do you operate fairness on a scale? The answer lies in designing systems that treat borrowers as participants in a long-termrelationship rather than isolated transactions.

Transparent loan journeys,contextual messaging, and borrower-sensitive servicing are not soft features—they are structural elements of portfolio health.

Unsecured lending makes this even more pronounced. Withoutcollateral, repayment depends heavily on borrower intent and engagement. Intentis shaped by experience. If borrowers perceive fairness, they are more likely to maintain dialogue during stress. If they perceive exploitation or inconsistency, disengagement accelerates. In this sense, trust becomes theinvisible collateral that supports unsecured portfolios.

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