Every person has a different understanding of the term “lending”. In simpler terms, lending is the process where a lender (a person) who has surplus money gives a loan to a borrower (who is in need of money) and the borrower pays interest to the lender in the form of consideration. Then, the borrower has to repay the loan with a specified amount of interest to the lender within a stipulated time period. Lending mobilizes the money in the economy from those who have surplus money or are willing to give loans to those who are in need of money. Borrowers are good at money lending in Tanjong Pagar in the economy.Money lending helps the country reach the heights of prosperity and growth. It is a well-established fact that every person needs credit for development and no individual is self-sufficient in credit for development purposes. This article gives a general overview of how money lending is important for an economy.
Interrelation between Money lending and Economy
Money lending is a necessary process in the modern economy. Banks and financial institutions are the main sources of availing the facility of money lending. The rationale behind this is that banks act as a bridge between those who have surplus money (a saving function) and those who are in need of credit to fulfil their purposes. In this way, money circulates in the economy.
People who have surplus money keep their money in the bank in the form of fixed deposits and savings accounts, and those who need or are in need of money approach financial institutions and banks to avail of credit in the form of a loan. People have different purposes for availing of credit, like some people need money for business expansion and some for their personal needs like home, educational loans, etc.
Therefore, banks and financial institutions act as the biggest support for corporations, industrialists, and small businessmen with reference to their financial needs, and this ultimately leads to growth in the economy.
Money Lending Helps the Economy
Money lending helps the economy to increase its growth rate, GDP, and standard of living. For instance, if a person wants to start a business and has enough money to start, and if there is no money lending, then how will he start the business, and it leads to unemployment and a decrease in the growth rate of money? So one cannot imagine their lives without money lending. Also benefits when he provides a loan to the borrowers; his money multiplies with time and he also charges interest on the loan.
Money lending is an essential process in the economy. An individual cannot survive in the economy without credit. Money lending increases the growth rate of the economy by availing credit to those who are in need of money.