What is the importance of financial intermediation to the growth and development of an economy?

Question

What are the problems associated with the role banking plays in the ecomomy and how are the banks faring in the face of these problems

Answer 1

Financial intermediation refers to the banking system. This provides a place where entrepreneurs and established businesses can go to obtain capital in order to grow and expand their businesses. If these institutions did not exist, then these businesses would be forced to deal directly with potential investors. Instead, the bank takes the money of individuals and invests it for them in their local economies. Thus, it helps the economy by getting the money to individuals who need it from those who have the extra to spare.