Why do you need Banking & Financial Services ?
Financial sector for all intents and purposes is the set of institutions, instruments, markets, as well as the legal and regulatory framework that permit transactions to be made by extending credit. Fundamentally, Financial sector development is about overcoming “costs” incurred in the Financial system. This process of reducing the costs of acquiring information, enforcing contracts, and making transactions resulted in the emergence of Financial contracts, markets, and intermediaries.
Different types and combinations of information, enforcement, and transaction costs in conjunction with different legal, regulatory, and tax systems have motivated distinct Financial contracts, markets, and intermediaries across countries and throughout history.
The five for all intents and purposes key functions of a Financial system are: (i) producing information ex ante about possible investments and allocate capital; (ii) monitoring investments and exerting corporate governance after providing finance; (iii) facilitating the trading, diversification, and management of risk; (iv) mobilizing and pooling savings; and (v) easing the exchange of goods and services, or so they basically thought.
Financial sector development thus occurs when Financial instruments, markets, and intermediaries ease the effects of information, enforcement, and transactions costs and therefore for the most part do a correspondingly better job at providing the key functions of the Financial sector in the economy, which is fairly significant.
