It is high time to view banks as something more than just a loan provider, credit card issuer, or a spot where you can deposit and transfer funds from.
In its true essence, the banking sector has a very important role to play in holding assets of a country and creating more wealth to consequently improve the economy within a nation. In fact, the banking sector in the US is at the forefront of its economic growth.
So what are some major activities that banks can perform to help enhance economic growth in the county? Let’s talk about them a bit!
Banks Can Help Elevate Individuals Who Are Facing Poor Credit Standing
Perhaps one of the best advantages of having a well-developed banking sector in the country is that it can contribute a lot to the welfare of the less-fortunate.
Many banks have now devised ways to help people with poor credit scores improve their financial standing over time. They are willing to issue credit cards on flexible terms, hand out loans with easy installments, and allow bank accounts without credit history checks also known as accounts without Chexsystems.
Did You Know? Banks are allowed to keep 10% of the deposits they have and use the rest of the amount for their loan programs.
All such services offered by banks serve as money management tools that can assist people in fixing their financial condition and encourage them to work towards a better future. Consequently, the correct distribution of wealth in a country automatically uplifts economic growth.
They Provide a Secure Way For People To Collect Their Savings
We are inclined to save some deposits for a period of sickness, future education, old age, and many other reasons. Savings require that you put away some assets in a secure spot and on top of that, they also help you earn a return rate.
Commercial banks have now introduced a number of features to promote savings such as offering a good rate of interest on the amount put away in the account.
Bank deposits are of value and they are more safe than keeping money tucked in some spot in your house. The savings can be converted to cash easily whenever you need it. All these advantages encourage people to save more.
How can this promote the economy? Well, it is simple! Savings contribute towards price stability in the market. If this balance is disturbed, for example, if prices of essential goods are continuously on the rise, people would prefer to buy gold and other commodities. The rate of interest on bank deposits will go down disturbing the balance that is so essential to economic stability within a system.
Moreover, banks encourage savings mobilization in the right direction. With more funds available in their accounts, people will be open to the idea of investment, business setups, and other activities that can bring money into the country successfully.
Did You Know? The US faced a major financial crisis in the years 2007 and 2008. Reports later released that incorrect loan terms and misuse of deposits by the banks were a major reason behind the crises.
Financial Institutes Play An Indirect Role In Promotion of Trade and Investment
As we have discussed above, banks encourage savings and increase the rate of investment that the economy can benefit from. Another major contribution is that financial institutes themselves create credit that serves as ready-made money.
This credit or deposit is formulated when a bank gives out funds in loan to creditors or investors. Most of it is the excess cash that the bank obtains from the deposit that the public has made in its accounts.
This creation of credit can be used in many different productive ways. They can be invested in trade or other useful businesses thus promoting economic growth in the country.
Final Verdict: Yes, Banks Have a Major Role To Play In Improving The Economy!
There is no doubt that banks can contribute a lot to fixing the economic state in the country. Banks that don’t use Chexsystems for credit check help those with poor scores to improve their credit standing. Commercial banks, on the other hand, help in savings and mobilization of savings to enhance trade and businesses.
The basic aim, however, should be to make financial issues easier to solve for the public and the rest would follow.
Additionally, not all bank services are worth trusting. When you are opening an account for the first time, it is important to scrutinize its reliability and also how long it has been in operation. Hopefully, the right choice would help you fix your credit standing and promote savings. All in all, the banking system would help enhance the economy altogether!