Economics » Financial Institutions » Financial Institutions and Economic Development

Role of Financial Institutions in Economic Development

The financial sector plays an indispensable role in the overall development of a country. The most important constituent of this sector is the financial institutions, which act as a conduit for the transfer of resources from net savers to net borrowers i.e. from those who spend less than their earnings to those who spend more than their earnings. The financial institutions have traditionally been the major source of long-term funds for the economy.

These institutions provide a variety of financial products and services to fulfill the varied needs of the commercial sector. They also provide assistance to new enterprises, small, and medium firms as well as to the industries established in backward areas. Thus, they have helped in reducing regional disparities by inducing widespread industrial development.

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