IdealweenFinancial institutions and banks
Small and large businesses have a major effect on most economies, especially in developing countries. They make up the majority of jobs around the world and are important factors in job creation and global economic development. They also represent about 90% of jobs and more than 50% of employment worldwide. Formal small businesses provide up to 40% of national income (GDP) in emerging economies. These figures are significantly higher when they include informal small and large businesses.
Experts estimate that 600 million jobs will be needed by 2030 to attract a growing global workforce, making small business development a top priority for many governments around the world. In emerging markets, most formal jobs are created by small businesses, which create 7 out of 10 jobs. But access to finance is one of the main constraints on small business growth. This issue is the second obstacle that small and large businesses face in growing their businesses in emerging markets and developing countries.
Small businesses are less able to get bank loans than large companies. Instead, they rely on the internal budget or cash assistance of friends and family to start their own companies.
The need of today's societies for financial institutions and banks
Financial institutions are kinds of businesses and organizations involved in collecting and distributing money. They develop methods by which they can collect money from depositors and give it to borrowers. They develop financial securities and provide financial markets in which lenders, borrowers, investors, and other kinds of dealers can exchange money for future payments in order to gain more profits, for property interests such as stocks to pay for future claims. The money raised is then given as a loan or as an investment to other businesses and organizations to finance specific projects or other needs.
Businesses make money by providing the right goods and services, and the better the product or service, the more they can earn, and the higher the return on investment in the business. Financial institutions, with the desire to be more profitable, contribute to the success of successful businesses and allow them to grow faster and even more desirable goods and services. This is how financial institutions contribute to the efficient allocation of economic resources. Hence, financial institutions are also financial intermediaries and are needed by people nowadays.
Financial intermediaries benefit by earning a higher return on their capital than they pay for their financial resources. The assets of a financial intermediary include loans, stocks, bonds, and real estate that the company invests in, and its liabilities include liabilities to its customers, including deposits, insurance policies, and pension payments.
Central Banks
Central banks are the largest financial institutions in a country that have the greatest impact on the economy, as they determine the amount of money and key interest rates and regulate and supervise other financial institutions, especially depository corporations.
Central banks, as regulators and supervisors of financial institutions, issue and enforce many banking regulations, requiring institutions to have a minimum amount of capital relative to their obligations. They may inspect financial institutions to make sure they are following the right practices and not taking too many risks. Central banks also provide financial institutions with services such as clearing services, especially for checks and electronic money transfers. The main function of central banks is to regulate the money supply, and the money supply must be commensurate with the growth economy.
The amount of money in an economy must be stable. If it grows too fast, the resulting inflation will cause people to distrust the currency and save less and buy more. In this case, people with fixed incomes are harmed. Jobs also cannot plan effectively due to uncertainty about the future value of money.
If the money supply decreases relative to the size of the economy, the resulting inflation will cause people to keep their money to be more valuable in the future. Reducing costs leads to a loss of job income, which in turn leads to unemployment. Rising unemployment is driving demand even higher and creating a spiral of inflation.
Central banks monitor the money supply either by setting key interest rates or by creating and destroying money, usually in the form of buying or selling government securities. Central banks are also the financial representatives of their countries and provide banking services to the government. They collect tax receipts and provide payment services to the government. They also issue and collect government securities.
Economic importance of financial institutions
The Great Depression of 2008 and 2009 underscores the importance of financial institutions to the economy. For instance, jobs depend on financial institutions through money. When they can’t get paid, unemployment rises, mortgages and other credit defaults rise, people and businesses stop spending, which reduces incomes for other people and businesses, and lowers government tax revenues, which in turn It makes them reduce their expenses, increases unemployment, and so on. That’s why governments around the world injected trillions of dollars into their financial institutions during the Great Depression to prevent them from collapsing and the economy from collapsing.
The most important thing is done by banks is to improve the access of small and large businesses to the budget and find innovative and yet useful solutions to spread sources of investments. The approach of organizations, financial institutions, banks and other companies active in the field of comprehensive finance is a combination of consulting services and lending to customers to increase the share that small and large companies can have in the economy.
How can Idealween marketing company help you in this field of business?
You may be wondering how we can help you grow your business.
Many companies use marketing research methods to grow their business, so if you are in this field of business as well, you better think about it and get help from experts (such as Idealween) and join the field.
Advice and support for small and large business finance mainly includes diagnostic cases, implementation support, global support and knowledge sharing of good practices. Idealween can provide the following services for you:
⦁ Assessing the financial sector to determine areas for improvement in regulatory and policy aspects, the possibility of increasing the access of small and large businesses to finance
⦁ Supporting the implementation of projects such as the development of a feasible environment, the design and implementation of credit guarantee schemes
⦁ Improving credit infrastructure (credit reporting systems, secure transactions and collateral, and identifying bankruptcy agents) that can lead to greater access to finance for small and large businesses.
⦁ Introduce innovation in small and large business finance such as e-lending platforms, use of alternative data for credit decision making, e-billing, e-invoicing and chain financing
⦁ Analytical services and other consulting services in support of the financial activities of small and large businesses
⦁ Knowledge management tools and leading publications on good practices, successful models, and policy frameworks
You can contact us for further information.