Financial services are the companies and organizations that provide investment products, insurance, credit, banking, and more. The industry is very diverse and includes thousands of depository institutions, providers of investment products, and a range of other credit and financing organizations. It also encompasses many nonprofits that offer counseling or money management advice.
Financial service firms provide depository services by accepting savings deposits from individuals and businesses and offering checking accounts and other deposit products. They also extend credit by providing loans and credit cards to individuals and companies. They evaluate the creditworthiness of borrowers and set interest rates. Financial services companies also manage payment systems and process electronic funds transfers.
The presence of financial services enables businessmen to maximize their returns by encouraging both domestic and foreign trade through various types of credit. These services include factoring and forfaiting, which help in increasing the sale of goods in the local market as well as exporting them to foreign countries. Financial services also promote development of all three sectors of the economy by providing fiscal and monetary benefits such as tax rebates, cheaper credit and other incentives to investors.
Another important aspect of financial services is helping to control the amount of money in the economy by adjusting repo rates, participating in open markets and setting cash reserve ratios. They also control inflation by purchasing and selling government assets. Finally, financial services are instrumental in allowing people to invest their money into stocks and bonds, which allows them to grow their wealth over time.
