Every economy depends on financial institutions in one way or another. Financial institutions,
including banking and non-banking, are governed by the central government body. Additionally, these institutions support the transition from net savers to net borrowers by bridging the gap between idle savings and investments and their borrowers.
What are financial services?They are the financial services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, and stock brokerages, investment funds, individual managers, and some government-sponsored enterprises.
Financial services companies are present in all economically developed geographic locations. However, they tend to cluster in local, national, regional, and international financial centres such as London, New York City, and Tokyo. They are the hub of business investment opportunities.
Not only in the big cities outside the country, but there are many investment banking firms in India with similar services. These investment banks offer transactional advisory services like business modelling, M&A, and valuations.
The role of financial services in business development
Minimizing the risk
The presence of insurance companies minimizes the visible risks of financial services and producers. Various types of risks are covered, offering protection from the fluctuating business conditions and risks caused by natural calamities. Minimizing risks creates more business investment opportunities.
Insurance is not only a source of finance but also a source of savings, besides minimizing the risks. Taking this aspect into account, the government has not only privatized life insurance but also set up a regulatory authority for the insurance companies known as IRDA, 1999 (Insurance Regulatory and Development Authority).
Maximizing the Returns
The presence of financial services enables businessmen to maximize their returns. This is possible due to the availability of credit at a reasonable rate. Producers can avail various types of credit facilities for acquiring assets. In some instances, they can even go for leasing certain assets of very high value.
Factoring companies enable the seller and producer to increase their turnover, which also increases the profit. Even under stiff competition, the producers will be in a position to sell their products at a low margin. With a higher turnover of stocks, they can maximize their return.
Ensures Greater Yield
As seen already, there is a subtle difference between return and yield. The yield attracts more producers to enter the market and increase their production to meet the consumer's demands. The use of financial services enables the producer to earn more profits and maximize their wealth. Greater yield creates more business investment opportunities for investors.
Financial services enhance their goodwill and induce them to go in for diversification. The stock market and the different types of derivative markets provide ample opportunities to get a higher yield for the investor.
Financing small and medium companies
Financial institutions assist small and medium-sized businesses with self-organization throughout the early stages of operation. They give these businesses both short- and long-term funding. The transaction advisory services daily operating capital needs are met by short-term funds, while the long-term fund aids in capital formation.
Conclusion
The financial sector is the foundation of the economy. Without these institutions, the economy would falter and be unable to recover. The government oversees these institutions through the central bank, insurance regulators, pension fund regulators, etc. because of their crucial role in the growth and development of the economy. They now provide a wider range of services in addition to taking and lending money over time.
Partnering with an transaction advisory service provider like Pantomath Advisory Services Group, will augment your investment planning strategies and help you achieve your individual financial goals!
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