Every people has a role to play in the Global economy just like banks who also play an important role in the Economy. Their role is to be a trusted enabler for economic stability and growth. When there is distrust in this sectors, the effects and consequences can be devastating.
Banks have a crucial role in transforming savings to investments. Banks and other financial institutions are also known as Financial intermediaries. They provide a crucial link to those who line to lend and to borrow.
Governments allow banks to grow bigger because they play a crucial role in the society and economy. Here are some of its important roles:
- They are the experts in channeling funds. They have the expertise in channeling funds to areas that yields high return thus attracts more deposits.
- Based on their expertise they give expert advice to its clients. They can advise on where to save and how to borrow.
- Banks perform a Maturity transformation. Banks are willing to lend money long-term.
- Banks transform risks. You do not know all companies well and you don’t want to risk lending them money. Banks know their clients, they can assess these risk and lend.
- We use the banking system to transmit payments for consumption, utility bills and more.