The Role of a Banking System in Nation-Building

This essay proffers the proposition that a banking system is more than background noise. A banking system functions as the heart and lifeblood of any functioning economy. A banking system is the key to economic growth and development. It is essential to unlocking wealth, creating opportunities, providing jobs, and facilitating commerce. It provides a mechanism for individuals and businesses to participate in the global economy. Importantly, banks, when they do their jobs correctly, allow their customers to have a vested interest in a strong and stable society. However, one no more builds a nation by establishing a banking system than one builds a nation by writing a constitution. A banking system is important in part because of the elements required to make it function: a legal system that respects contracts and agreements, honoring the rights of both debtors and creditors; an independent central bank; a judiciary that follows the rule of law; and a government that understands the importance of strong, healthy banks and provides sound supervision and a legal framework within which they can operate. Only then can the banking system accomplish its primary roles-that of providing a safe haven for the funds of the public and a means to devote those funds in productive loans to build the economy. A healthy banking system, then, not only helps build a nation for what it does, it helps build a nation for what it requires.

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