Financial services are economic services tied to finance, which include credit unions, banks, credit-card companies, consumer-finance firms, insurance companies, accounting companies and stock brokerages. The industry is important because it allows for the free movement of capital and liquidity in the economy, which stimulates businesses and consumers. It is also a major source of employment and is an important contributor to the overall GDP of a nation.
A well-developed financial service sector lubricates the economy by channeling funds from savers to those with investment ideas and helps individuals raise money to invest in business or themselves. The more developed a country’s financial markets, the greater its capacity to grow and attract foreign investments.
The presence of financial services also ensures that companies can obtain adequate funds to enhance production and reap profits in the long run. A robust financial system will result in a positive growth of the economy as the production from all sectors is evenly distributed in the primary, secondary and tertiary levels.
In addition, financial services help reduce risks and minimize losses resulting from business fluctuations or natural calamities. This is possible by providing insurance policies for various unforeseen events and liabilities. A well-developed financial services sector will also make it possible for individuals to maximize their returns from businesses by enabling them to access credit facilities at reasonable rates.
