The Importance of Financial Services

Categories : Gembing

When people think of financial services, they may think of banks, brokers and mortgage lenders. But those are just three of the many sectors that comprise this expansive industry. It includes insurance companies, securities traders, investors and Wall Street. In addition to serving consumers, the industry also provides support for small businesses and large corporations as well as the government.

Financial services help to channel cash from savers to borrowers, redistribute risk and add value to the pool of funds. Examples of this include aggregating savings from depositors, investing those funds and lending them to borrowers; managing investment assets such as securities; transforming or repackaging funds (e.g. through securitization); facilitating the purchase and sale of commodities; administering payment systems; and providing advice and investment management.

The financial services sector is vital to the economy. When it is strong, consumer confidence and purchasing power increase. This sector also contributes to economic growth by promoting domestic and foreign trade. In addition, it helps to provide the means to buy goods and services that would otherwise be unavailable.

Financial services providers like banks play an important role in boosting the growth of the economy by ensuring that companies have adequate funds to boost their production and hence, reap more profits. This is done by making credit available to them at reasonable rates. In addition, financial services promote entrepreneurship by encouraging businessmen to start new ventures. They are also instrumental in reducing poverty in less developed areas by offering fiscal and monetary incentives, such as tax breaks and cheaper credit.