Economic Development

Role of Commerce Bank in Economic Development

The banking sector has for centuries now formed one of the pillars of economic prosperity. Indeed history provides us with some starting information regarding how banks provided finance for imperialist ventures in newly acquired colonies. Over time banks have formed and important part in providing an avenue for both savings and investment.

Land, labor, capital and entrepreneurs are the basic economic resources available to business. However, to make the use of these resources a business requires finance to purchase land, hire specialist skills. In a country like Pakistan, the people suffer from lack of savings to set up business. This gap has to be filled by the massive resources of the banking sectors.

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Trade Development:

The commercial banks provide capital, technical assistance and other facilities to businessmen according to their need, which leads to development in trade.

Agriculture Development:

Commercial banks finance the most important sector of the developing economies i.e. agriculture. Short, medium and long-terms loans are provided for the purchase of seeds & fertilizer, installation of tube wells, construction of warehouse, purchase of tractor and thresher etc.

Industrial Development:

The countries which concentrated on industrial sector made rapid economic development. South Korea, Malaysia, Taiwan, Hong Kong and Indonesia have recently developed their industrial sector with the help of commercial banks.

Capital Formation:

Commercial banks help in increasing the rate of capital formation in a country. Capital formation means increase in number of production units, technology, plant and machinery. They finance the projects responsible for increasing the rate of capital formation.

Transfer of Money:

Commercial banks provide facility of transferring funds from one place to another, which lead to the growth of trade.

Increasing in Saving:

Commercial banks persuade the people to save more. Different saving schemes with attractive interest rates are introduced for this purpose. Number of bank branches is opened in urban and rural areas.

Construction of House:

Commercial banks provide credit facilities to their customers for the purchase or construction of house.

Assistance of Govt.:

By providing funds to government for development programs, the commercial banks share the government for economic stability.