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Banks as intermediaries for money
Banks are important for ensuring that money circulates freely. They distribute the money belonging to people who do not need it just now to those who do. The banks accept savings and pass these funds on, in the form of loans, to companies, private individuals or the state. For most private individuals, looking for creditworthy borrowers to whom to lend their money would be too time-consuming. Similarly, companies would find it very troublesome to raise large sums of money directly from private savers. This is where the banks perform their role as intermediaries.
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Banks perform an important function for the economy: they channel money to where it is needed.
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