The Financial Sector and the Reasons for Its Existence

The Financial Sector and the Reasons for Its Existence

Money will always be inadequate. There will always be times when we have no choice but to seek out additional funds either because there is not much in our savings accounts or because a situation calls for an immediate source of money. The desire to satisfy both his needs and his wants and the scarce nature of economic resources has been the two main reasons why money, for a lot of people, is always not enough.

This demand for money led to the rise of the financial sector. Composed mainly of banks and non-banking institutions, the financial sector aims to answer the growing demand for money. The money that is being demanded range from small, simple and short-term loans that individuals seek out in order to fill in momentary financial gaps to huge, complex and long-term corporate loans that businesses use for their expansion or to sustain their operations.

The growth of the financial sector has been very steady. With economic activities expanding and the number of people's needs and wants rapidly increase as time progresses, financial institutions also adjust to the new situation. They do so but offering new products and services that would cater to the varying requirements of would-be borrowers.

Whether it is a payday loan company or a large bank, financial institutions require borrowers to pay certain charges for the loan that they are sought. Interest rates are prime examples of charges that borrowers have to pay for after securing a loan. Other charges may also include payments related to paperwork and other bank or financial institution processing services.

Borrowers have varying reasons in securing a loan. For instance, individuals apply for cash advances in a payday loan company in order to cover their expenses until the next pay day. Businesses, on the other hand, seek out loans to either expand their operations or sustain the current ones that they have.

Whether it is a payday loan company extending credit to small borrowers or a huge investment bank that caters to the needs and requirements of corporations and other big businesses, the financial sector will always be there to do business and extend credit whenever they are needed. The continuously growing demand for money and the increase in people's varying business and personal activities will continue to be the lifeblood of banks and non-banking financial institutions in years to come.

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