What is the role of banks in economic development?

Banks play a key role in economic development. For the local community, banks provide access to financing and financial services to local business and citizens, as well as money banks invest back in community through employees, business investments and taxes. On a larger scale, national banks offer similar access to credit and financial services to larger businesses, local governments and in some cases international customers. Investments made by National Banks are widely spread across the country and therefore affect economic development throughout the country or geographical region.

The specific role of banks in economic development varies depending on the extent. The participation of banks in economic development focuses primarily on the provision of loans and services to generate revenue, which are then invested back to the local, national or international community. Banks of specific roles play in the economic development of the small community of roles play banks in national or international economic development. Although the role may vary, factors such as access to credit and banking investment policies or procedures, remain constant, regardless of the extent of economic development.

To illustrate various roles of different banks in economic development, a National Bank with numerous local branches in a particular region can be considered. Local bank provides consumers and commercial mortgage organizations, credit lines, bank accounts and various financial services, such as portfolio management and employee wage services. Fees generated for services are invested back in the local community through sponsorship, providing low -cost funding of socio -economic programs and investing in local administration or business companies. At national level, the bank provides the same financial services to large corporations and state or regional governments, except for consumers and small businesses. Rather than investing income dHowever, local economies also invest in national, regional or national enterprises; socio -economic programs; and traditional investment in the stock market.

International banking affects economic development on a large scale. The bank that operates internationally plays a much different role in economic development than the local or national banks. The provision of loans and other financial services to the whole country and the national government gives such banks an extensive impact on the economic growth of a particular country or region. Positive and negative effects are carried out depending on international banks against governments.

Economic hardships at the beginning of the 21st century provide an example of possible negative roles of banks in economic development. Many countries, including the United States and Eulano countries, recorded slowing economic growth at the beginning of the 21st century. Numerous factors such as high unemployment, poor investment performance and political uncertainty, helped create a distrust and reduced witěru between international banks and governments with previously strong national economies. This resulted in a reduced credit ranking of several countries and increased interest rates for loan extended to these governments. Such increased costs have gone through and increased interest rates for government loans to businesses and individuals and reduced financing available to socio -economic programs such as education and health care.