Question

How do the concepts of credit and interest, as incorporated into banking, and money lending, help to stimulate economic growth?

Answer 1

Today banking system is a very important component of every economy. Banking or money lending will help to make available the funds from people who have excess funds to people who does not have adequate funds. This will help people who have every other resources but not having adequate financial resources to fund various projects.

All of these services are are provided by banks through various instruments.the basic function of a bank or money lender is to accept deposits from the public and give credit facility to the customer. The acceptance of deposit may be either in the form of savings,fixed deposit, etc. This will help to improve savings habits among the people which will help to the overall economic growth of an economy. H

a technical skill or knowledge is not enough for an entrepreneur, but financial stability is also one of the most important element of every business. Banks provide fund to every person who want fund and in return as a consideration they will charge interest against providing such funding requirements. Modern banks provide various services like mobile banking, internet banking, letter of credit and other payments of electronic mode. This facilities will help people to make fast transfer of fund and to increase the the standard of living and Smooth funding requirements.

Higher availability of credit leads to increased spending between the people which will helps to increase the level of income in economy and thereby leads to large economic growth.