What Are the Advantages of Financial Support Services?
The type of services provided by the financial companies is called financial service support. "Financial Company" is an ‘envelope’ term that covers both liability management companies and asset management companies. The first type comprises acceptance and bill discounting houses. The 2nd type comprises mutual funds, issue/portfolio managers and merchant & retail bankers.
Financial services are the kind of products and services offered by banking institutions to facilitate different types of transactions such as, loans, credit cards, insurance, money management etc. These services also create investment opportunities and provide accurate details about stock market and other market conditions.
Financial service sector is a strong arm of any economy and works as intermediary between institutions and individuals, leaving no space for the middlemen. The system assists in facile and fraud-free transactions.
How do financial services contribute to a country’s economic and overall progress? Let us explain it.
Economic Growth & Development: Financial support services play an instrumental role in ensuring a country’s continuous growth and development. Banking and other financial institutions assist both individuals and businesses with the correct and timely investment and saving decisions. Private Citizens save their money with banks for two reasons – to earn interest on deposits and have peace of mind that their assets are in safe hands.
The same goes true for business units. Moreover, banks provide loans to both start-ups and big business houses. Giving loans to businesses is a way to help them with expansion and efficiency enhancement. Most importantly, business expansion can happen both nationally and internationally.
Another important aspect of financial services provided by banks is these help the low-income group of society. These people are most vulnerable to fraud. Banks help them control their assets and provide them with income opportunities through different small-scale loan schemes at low-interest rates. This way, banks play an important role in eradicating poverty from society.
Liquidity Promotion: The fundamental feature of financial service is it uses monetary assets and liquid money for producing goods and services. To maintain the never-ending economic loop, a regular flow of money is highly required. In finance, money is the most liquid asset followed by monetary assets such as, bonds, bank deposits etc. These bonds and bank deposits are quickly transferrable into money. By promoting liquidity, financial services help to reduce the chance of loss even where high risk appetite is involved.
GDP Contribution: Financial service sector is the largest earning sector in the world. Should there be any doubt that financial services contribute heavily to the empowerment of the economy? And it reflects through improved GDP (Gross Domestic Product).
Employment Opportunities: Financial services play a crucial role in generating employment opportunities in the seminal stage of a country’s growth. It is especially beneficial for developing countries as they face huge unemployment crisis in the primary stage of growth and development. Financial services also help in market expansion, which increases FDI flow – a prime requirement for the country’s growth.
Low-Cost Transaction & Borrowing: Financial activities help to cut down the time and cost of transactions. When cost is reduced, it increases the chance of earning more profit. The sector employs new methods to facilitate low-cost borrowing. Financial services also contribute to providing long-term and cheap loans to different industries.
Expansion of Financial Activities: Financial services have a role in developing the process of expansion of financial activities. At the same time, banks and other financial institutions also try to penetrate deeper into the system. Financial broadening refers to increasing the volume of financial assets and the variety of instruments and participations. Financial deepening refers to adding to financial assets as per the percentage of GDP.
Financial services are the backbone of any country. Whether it flourishes, suffers loss or gets stagnant determines a country’s present and future to a great extent. A smoothly running financial sector always keeps an economy alive and afloat.
