The financial sector plays a vital role in any economy. It advances loans to businesses so they can grow, grants mortgages to people looking to buy homes, and helps individuals save money for their future. The financial services industry also includes insurance companies that protect people and property against loss or damage.
The line between the different sectors within the financial services industry is blurring more and more. For example, banks used to stick to one specialty before the 1970s, but then they started offering more and more products. Today, a bank can offer checking and savings accounts, provide investment opportunities with mutual funds or stocks, and even offer credit cards.
This is a good thing for consumers because it allows them to shop around for the best rates. But it can be challenging for regulatory agencies to keep up with the different specialties and ensure that all players in the financial services industry are following rules to protect consumers.
In addition, a vibrant capital market is an indicator of a healthy economic situation. And that’s another important function of financial services — to enable corporations to obtain the necessary funds they need to boost production and reap profits in the long run. If a country has a weak capital market, then it can slow down the growth of businesses and, ultimately, the economy.