Home Credit Importance of Credit and Financial Services for Individuals’ Growth and Investment 2021

Importance of Credit and Financial Services for Individuals’ Growth and Investment 2021

by Amarachukwu
Importance of Financial Planning in 2022

A financial service is a type of financial product or service that offers a variety of ways to borrow money through various forms of credit and other financial instruments.

Credit and financial services are important because money is important, and if money is important, then credit and financial services are important as well. As you all know, money is the lifeblood of an economy, and the financial system of a country is critical to its ability to function.

Importance of Financing Services 

Having access to financial services enables a country to better its economic situation, resulting in increased production in all areas, which results in economic growth.

People benefit from economic progress in the form of a better standard of life, which is reflected in the economy. A person’s ability to acquire or acquire numerous consumer goods via hire purchase may be found here. It’s a win-win situation for everyone involved, including the financial institutions that participate. To the benefit of the economy as a whole, these financial institutions are present.

Assisting others to invest

The availability of financial services increases demand for goods, and the producer must increase investment to keep up with that demand. The fresh issue market helps the investor such as a merchant banker to raise funds for the manufacturer at this point in time.

Investors are able to raise more money thanks to the stock market. There is a lot of interest from investors from throughout the world. Producing companies can acquire new equipment and technology for production by using domestic and international factoring and leasing organizations.

Second, encouraging savings.

Mutual funds and other financial services offer a wide range of options for saving money. Many investing choices are available to retirees and the elderly so that they can get a respectable return on their investments without taking on too many risks.

Investment possibilities are available for those who want to see the value of their funds rise. As a result of legislation passed by the government, the interests of the public who save money through financial institutions are well safeguarded. ‘

Various financial institutions offer a variety of financial services

  • Factoring
  • Leasing
  • Forfaiting
  • Hire-to-Own Financing
  • Cash on hand
  • Banking for businesses
  • The construction of a book
  • Asset and Liability Management
  • Finance for housing
  • Finance of a company’s stock portfolio
  • Underwriting
  • Credit Score
  • Interest & Credit Exchanges
  • Investing in mutual funds

Keeping the dangers to a minimum

Both financial services and producers benefit from insurance businesses’ presence. Natural disasters, as well as changeable business situations, are covered by many types of insurance policies.

Importance of Credit and Financial Services for Individuals’ Growth and Investment

As well as decreasing the risks, insurance is a source of money and a source of savings. Life insurance was privatized and a regulating agency for the insurance businesses was established by the government in 1999 (Insurance Regulatory and Development Authority).

Making the Most of Your Investments

Importance of Credit and Financial Services for Individuals’ Growth and Investment

For businesses, the availability of financial services provides an opportunity for greater profitability. It’s all because of the availability of low-interest borrowing. In order to purchase assets, producers might make use of a wide range of loan options. In some situations, they may be able to lease high-value items.

Factoring firms help both the seller and the producer boost their turnover, which in turn raises their profit margins. Manufacturers can sell their products at a low-profit margin even in the face of fierce competition. They might increase their profit by increasing the stock turnover.

Ensures a higher yield

There is a slight distinction between return and yield, as we have already observed. The higher the yield, the more producers will enter the market and raise their output to meet consumer demand. In addition to increasing revenues, financial services allow the producer to achieve maximum wealth through the use of these services.

Having access to financial services improves their reputation and encourages them to broaden their investment portfolios. The stock market and several derivative markets offer a wide range of chances for investors to earn a greater rate of return.

Growth in the economy

Importance of Credit and Financial Services for Individuals’ Growth and Investment

The health of the economy depends on the expansion of each of the country’s various industries. So that all three sectors receive equal amounts of money, the financial services ensure that funds are distributed evenly across the three sectors. As a result, employment prospects rise as a result of this balanced expansion in the economy.

The tertiary or service sector increases and this growth is an essential indicator of economic development. Service is the most important industry in a developed society, and it contributes more to the economy than either manufacturing or agriculture.

Growth in the economy

Financial services allow consumers to access a wide range of products and services that can help them enhance their standard of living.. It is possible to buy a car, house, and other necessities and luxuries through hire purchase, leasing, or housing financing firms. Consumers are forced to save money while reaping the rewards of their investments thanks to financial services.

The Government’s Benefit

The presence of financial services helps the government to generate short-term and long-term finances to satisfy both revenue and capital expenditures. Financial services are a necessity. Treasury Bills are issued by the government to raise short-term financing in the money market. From the money of their customers, commercial banks buy these securities.

Governments can also raise long-term funds by selling government securities on the securities market, which is part of the financial markets. Even the government’s foreign exchange needs can be addressed in the currency exchange market.

It is the most essential benefit for any government to raise money without providing any kind of protection. The government benefits greatly from financial services in this way.

Financial Institutions’ activities are widened

There are many advantages to having financial services available to financial institutions, including the ability to generate funds and distribute them in the most profitable manner. Financial organizations provide financing for a variety of services, including mutual funds, factoring, credit cards, and hire buy financing.

Expanding their activity and diversifying the usage of their funds is possible for financial institutions. There is a guarantee that the economy will remain dynamic.

The Stock Exchange

The presence of a robust capital market is one of the most important indicators of an economy’s health. Because of the high activity in the capital market, a good economic outlook can be seen. Every company will be able to raise its output and profit margins with the help of financial services.

Individual development and investment will be discussed in this article. Let’s get this started:

Credit is a Must

We cannot overstate the importance of credit in our daily lives and the economy. In order to lend money or resources to someone else, a person must have the trust of another person. A country’s economic operations are bolstered by its credit system. 

Our financial, personal, and professional aspirations may not have been possible without the use of credit. People’s money are taken by commercial banks and loaned out to those in need and to enterprises. “Get instant pleasure” is what we can say when someone uses credit to buy something they can’t afford. After graduating from college, you may need to take out student loans to cover the costs of your new schooling.

Entrepreneurs who have a great mind and entrepreneurial spirit can use their abilities and qualities to manage successful businesses with the support of loans. A lack of credit would be a waste of time and effort for them. To acquire a loan to start a business, you must have a strong credit history. The large-scale production of items and the growth of technological research are made possible by bank credit loans. In addition, if you’re looking for insurance, your credit rating will be taken into account when calculating your rate.

When it comes time to buy a house, credit plays a significant role in our personal development. Make sure you can pay back your loan before you lend money to someone else. It is important that you have a steady source of income so that you can pay back the loan and your other living expenditures.

When making investments, credit plays a vital role. Credit rating companies give reports on the creditworthiness of firms and individuals, which are utilized in the grading process. Investors, banks, and financial institutions use this grade to determine whether to invest money, purchase bonds, or lend money. It is quite important for us to know how these ratings affect our investments. We are more willing to put our money into anything with a higher rating.

Importance of Credit Facilities

Credit instruments, financial products, and services are all part of the financial system, which provides a wide range of financing options. Consumers who want more investment options are driving up demand for financial services, which in turn drives up demand for products. 

A country’s economic situation improves when it has access to financial services. As the economy improves, people’s standard of living rises as a result. Hire purchase, factoring, and other financial services make it possible for individuals to acquire a wide range of consumer goods.

Financial services such as mutual funds give people a wider range of investment options that can provide a respectable return on their savings. In order to raise cash or promote investment, merchant bankers will use the fresh issue market and mobilize more funds. 

Producers benefit from the presence of insurance companies, which help to mitigate the risks posed by changing business conditions and natural disasters. There are a variety of financial assets that businesses can use to increase their profits. Factoring companies, for example, allow producers and sellers to boost their revenue and profit.

Finally, whether you love or loathe credit and financial services, you can’t ignore their importance in many facets of our lives.

Final Thoughts

These days, the term “credit economy” is frequently used to describe modern economies. True to form, modern, sophisticated economies rely heavily on money as a medium of commerce, a means of payment, and even as a store of value.

A wide range of financial services is becoming increasingly important in all modern economies because of the availability and use of credit. A modern economy that does not rely on credit is nearly impossible to imagine.

Individuals, corporations, and governments all have the ability to provide credit to one another in the form of short-term loans, which allow those with immediate financial needs to borrow money and utilize it to make purchases that would otherwise be out of reach for the borrower. There will be no macroeconomic distortions in the economy if savers (lenders) shift purchasing power to consumers (borrowers). Instead, as has previously been said, it encourages the country’s greatest economic growth and development.

Overall, the availability of credit facilities, which are financed through normal savings, is an essential and necessary component of all modern economies. The financial authorities should have little more than an oversight role in the management, organization, and internal controls of the organization.

The administration of the entire credit extension process is included. When it comes to both financial intermediaries, when it comes to financial markets, the authorities should limit their intervention to the financial markets.

Establishment of a legal and accounting framework that is both protective and transparent, within which institutions can operate, and that markets are capable of functioning properly.

The financial authorities, on the other hand, do more than merely an oversight job, especially when it comes to international credit extension activities and the creation of money by governments, Institutions involved in the banking industry

Furthermore, there is another type of credit extension that has become increasingly important in the context of macroeconomic financial management, and that is the extension of bank credit that also serves to produce money in the process. 

Banks are not the same as traditional financial intermediaries, which accept funds from savers and then provide loans to borrowers out of the funds received. Banks have the ability to produce money in order to provide loans, and in doing so, they can boost the total purchasing power of the economy.

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