Financial hand, households are able to purchase items

Financial intermediation, where assets are
converted to other assets or liabilities is one important function which banks
play. It mainly involves banks taking funds from depositors and lending out
these funds to borrowers. They mainly earn profits from the different interest
rates charged and paid on the loans they give out and the amount of deposits
made respectively by their customers (Andrianova et al., 2012). Through financial intermediaries,
surplus economic agents connect with the deficit economic agents in an economy,
hence banks have become the safest place for people to deposit their money and
where they have an opportunity to earn interest on their money. Banks offer monetary
security, avenue for money movement, financing for businesses and they also
directly invest in the economy through their nominees leading to growth of any
given economy.

Andrianova
and others in their research agree that banks are important in an economy
because they ensure and enhance business facilitation through savings plan
development and they act as instruments for which governments obtain monetary
strategies (Andrianova et al.,
2012). Through credit provision, businesses are able to invest beyond
the amount of cash they have at hand, households are able to purchase items
without raising the cost of the whole items by themselves and governments are
able to fund for their various infrastructural projects due to loans advanced
to them by banks. This in turn fuels up the economic activity of a country,
creates cash flow and thus leading to economic growth and development.

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Other services offered by banks that are
geared towards economic growth and development include risk management services
and commercial consultancy to businesses, government and individual households.
This is done through pool risks that may befall the above entities from various
financial and market exposures. People and businesses are also able to remit
their cash from one place to another and this facilitates business transactions
in distance places. This enhances trade, both internal and external and money
continues to flow in the economy. Banks also make direct investments in various
sectors of the economy and this leads to rapid economic growth.

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