The Role Of Financial Intermediation In Developing The Economy - PowerPoint PPT Presentation

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The Role Of Financial Intermediation In Developing The Economy

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Financial Intermediation is the process of indirectly accessing funds from savers through the aid of a financial intermediary. – PowerPoint PPT presentation

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Title: The Role Of Financial Intermediation In Developing The Economy


1
Financial Intermediation
2
The Role Of Financial Intermediation In
Developing The Economy
  • Have you heard of a financial intermediary before
    and wondered what they are?
  • They are financial firms and organizations that
    play the role of a middle person in an economic
    context between a service provider and a
    consumer. 
  • Even though many people do not realize the
    importance of financial intermediation, the fact
    remains that it plays a significant role in
    maintaining an economy.

3
Facilitates self-employment
  • One of the most potent drivers of economic
    development is employment.
  • Financial Intermediation helps individuals access
    finances from savers, thus promoting
    self-employment initiatives.
  • Self-employment, in turn, generates more income
    in the country, thus boosting the economy. 

4
Promotes entrepreneurship
  • Different banks have effectively dispatched
    innovative Development programs.
  • At first, through Lead Bank Scheme, banks were
    creating business openings at the local level.
  • There are so many people with underlying business
    ideas that could possibly blow out if ta all
    financed.
  • So with the aid of financial intermediation,
    entrepreneurs have managed to push their business
    ideas into the market hence promoting
    entrepreneurship.

5
Risk Sharing
  • Where there is an investment, risks are expected.
    Risks involve the various uncertainties that
    negatively affect the expected returns from
    invested assets. 
  • In this case, financial intermediation comes in
    to reduce the probability of risks affecting
    investors through a process referred to as
    risk-sharing.
  • Essentially, intermediation encourages investors
    to invest in multiple assets.

6
Reduces transaction cost
  • Transaction costs involve costs identified with
    the time and cash spent on conveying financial
    deals.
  • These expenses can harm the whole economy,
    however, chiefly little savers and borrowers.
  • Indeed, if exchange costs are excessively high,
    it turns out to be practically unthinkable for
    them to approach monetary business sectors.

7
Supports rural development scheme
  • Under this plan, financial mediators finance
    socially and financially discouraged individuals
    by giving loans to them to different financial
    exercises.
  • 33 of the credit will be an appropriation, while
    66 of the loan will convey a slower pace of
    revenue under the premium sponsorship plan of
    RBI.
  • Along these lines, different monetary projects
    pointed toward improving rural financial
    conditions are implemented.a

8
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