Question

In many poor countries, the banking system just isn’t advanced enough to lend money for many large investments. Based on this single fact, where would you expect to see more entrepreneurs coming from rich families rather than poor families: in the rich countries or the poor countries? Why?

Answer 1

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Question:

Answer:

According to the question, In many poor countries, the banking system just isn’t advanced enough to lend money for many large investments. Based on this single fact, where would you expect to see more entrepreneurs coming from rich families rather than poor families: in the rich countries or the poor countries. Banking system is the back bone of the economy and financial system of a country. A bank play an important role in the economy. The important functions and roles of the banking system are: receiving deposits, lending and advancing, card services, creation of transactions and money, wealth management services, M &A services, foreign exchange, guarantee, LOC etc. Bank help individuals, government and corporation/companies/firms in financial activities.

Definitely bank is the primary and popular source of fund every one. When banking system is advance, efficient and stable then its make the economy more healthy and vice-versa. To be a entrepreneur is not easy and entrepreneur play an important role in the economy. Money is blood for the business and you cant start a start-up or any business without money. There are many sources of fund for a entrepreneur like, personal fund, bank or NBFCs, angel investors, venture capitalist, relatives or friends etc. But in the most of the poor nations has not advance financial system so, in this case bank play an important role in funding to a business. So, a poor banking system creat a big problem for the entrepreneurs to funding their businesses. In the poor countries bank is not so strong to financing a large project because of short of lendable fund. Bank do not want to take a big risk and lending their big lendable fund in a big project.

An entrepreneur may be comes from a poor family or a rich family. If family is UHNI or HNI or billionaire or millionaire then funding is not a big issue because family has sufficient fund and network to funding the new ventures. But a poor guy has not a rich father or relatives or friend so, he/she highly dependent upon the bank to funding its new venture and if bank do not support them venture get failure or unsuccessful.

In rich and advanced countries the situation is different. in rich countries there are multiple sources of funding like, like, personal fund, bank or NBFC, angel investors, venture capitalist, relatives or friends etc and people also support to the entrepreneur. So, an entrepreneur get help from the external sources in case of not getting help from bank. But in the most of the advance countries have strong banking system and interest rate is also very low and government also help them through different types of development schemes.

All the major base industry like, infrastructure, construction, manufacturing have need of big amount of fund and no one individually capable to funding itself without external funding support. These sectors are the back bone of the economy and a main sources of job creation. If these sector grow fast the more and more opportunities are created people get jobs and unemployment decrease. Its also increase the production and make the supply side more strong and promote export and more consumption. Increasing consumption, investment, government spending, net export and production increase GDP, price level, employment, income level and confidence of consumers and investors. These all these things increase income level of the people and also helpful in proper wealth distribution and decrease income inequality in the economy.

You can see the GDP and GDP per capita of advanced economy is comparatively higher than poor nation because of have strong banking system, industrialization, strong infrastructure etc. The standard of living, HDI of the people of advance economies are comparatively very high compare to poor nation.

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