Chaneling savings toward Investment

• Banks and other financial institutions are called “financial intemediaries” since they provide an indirect like (intermediate) between those who wanna save and those who need finance. Finance comes in different forms:

• Secured loans - loans secured by a specific form of collateral

• Unsecured loans - loans that don’t require any type of collateral

ANALYSIS

Commercial banks distributes funds from savers to borrowers in an efficient manner

This provides liquidity in an economy

Consumers use banks as a safe store for their money and earn interst on their deposits

Banks lend this money to other consumers and firms

This creates demand in the economy

It also provides firms with the finance required for capital investment