Question

a) What is the interrelationship among financial

i) inclusion

ii )financial deepening

iii) financial intermediation?

b) Why are these concepts so important?

Answer 1

ANSWER 1

The three words Financial inclusion, financial deepening and financial intermediation are interrelated. We can check the meaning of financial inclusion.

It refers the efforts to make financial products and services accessible and affordable for all people as well as the businesses. It is saying that the all products and services have to be accessible for each individual at the reasonable cost.

Eg : The banking services are available for most of the people.

Now we can move to the term Financial deepening.

This term is used by the Economists as increasing the provision of financial services. All we kno the financial sevices are accessible for everyone. There are defferent types of investors like Institutional investors, individual investors, Active investors, passive invesors.etc But some other reasons are prevailing people for entering the financial services like Risk factor, Lack of knowledge, Lack of time and money.etc

Now it is the time for financial intermediation.

As we know there are defferent types of financial intermediaries such as Central Banks, Depositories, Financial brokers.etc

They are the institutions or individuals who acts as a middle man amoung defferent parties in order to facilitate financial transactions. they may be commercial banks, investment banks, stockbrokers, pooled investment funds, and stock exchanges. The activities fulfilled by these intermediaries is called as financial inermidiation. They are channeling funds between the investor and borrower.

These words are inerrelated bacause without one the all others are meaningless and which will affect grouth the whole financial services industry. Because while financial inclusion widening the scope of financial services industry, financial deepenig trying to widening the scope of the industry and the financial intermidiatiors are educating the people and facilitating the whole growth.

ANSWER 2

These concepts are important because these concepts are inter related and interdepended. While financial inclusion make accessible the financial services, Financial deepening increases the provision of financial services and at the same time the financial intermediation will help to facilitate the transactions by channeling the investors and borrowers.