The Financial services sector comprises banks, credit unions and building societies, credit-card companies, insurance companies and other companies that offer financial products and/or services. The sector also includes financial intermediation services such as securities firms, brokerages, money-market mutual funds and the like.
The government can raise long-term funds in the securities market which is part of the financial services and this helps it to meet its investment requirements. The presence of financial services enables the individual to acquire consumer goods on hire purchase and this enhances consumption and production thus helping in economic growth.
A thriving capital market is a good barometer of the economy and this too is a direct consequence of financial services. It is a medium through which people can invest their savings in various businesses and earn a return on it. This leads to a healthy and vibrant economy as the economy is well-diversified.
Financial services help in establishing economic prosperity by creating jobs and encouraging the primary, secondary and tertiary sectors to grow. It allows consumers to buy more of the goods they need, while producers are able to increase their production capacity and earn more profits.
It also facilitates foreign trade through a host of services such as forfaiting and factoring which boost domestic as well as international trade. It also enables people to build up their wealth by investing in stocks and bonds. If a person is financially well-off, it improves their health and mental wellbeing and they can save for emergencies or to make investments.